One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?
Here’s the good news – it doesn’t have to be an either or choice. Why not do both? Below are the features of both plans to help you understand the differences.
Tax Free Savings Account (TFSA)
- Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income. There is no maximum age for contribution.
- Maximum contribution is $5,500 per year starting in 2013 ($5,000 per year for the period of 2009-2012). In 2015, the maximum contribution was increased to $10,000 by the Harper government. This increase may be short lived as the Liberals have stated they will reduce the maximum back to the previous limit. In the meantime, you can take advantage of the $10,000 limit. The contribution must be made by December 31st.
Many of us set New Year’s resolutions for ourselves and often those resolutions have to do with finances. January is the month we say, “Ok, this year I am going to save more and spend less”. This article won’t tell you how to spend less, but it will outline two government sponsored programs available to help you save for retirement or even just a rainy day! Of course these are not the only vehicles you can accumulate money with – those include anything from putting dollars under the mattress to the most sophisticated tax shelter schemes – but these two are the most popular. Read more