One of the most common question I get as a financial advisor is

“Should I invest in a TFSA or RRSP”.

The truth is, there is no straight forward answer. Everyone’s situation is different, and each account type has its advantages.

Below is an overview of each account type, the benefits and when they should be used.


Registered Retirement Savings Plan

RRSP contributions lower your personal income tax. The contributions you make reduce your taxable income. For example, if you make $100,000 this year and add $10,000 to your RRSP throughout the year, you’ll be taxed as if you made $90,000 of income that year.


Lowers taxable income

Tax deferred growth (You do not pay taxes on the gains of the funds while held in the account.)

Great retirement planning tool – this is the primary source of retirement savings for Canadians

When you may need this:

Saving for retirement

Saving to buy a house

High income and need tax relief

No other savings (RRSP often first point of savings)

Terminated from job and received severance pay (which is taxable)

Typically, high income earners with retirement as their long-term goal would have RRSP’s as part of their investment portfolio.


Tax Free Savings Account

The TFSA is a more flexible account than the RRSP that allows your investments to grow tax-free but doesn’t provide the tax advantage/relief of the RRSP for income taxes. It’s ideal for saving goals with a shorter time horizon however it can also be used for retirement. It is more flexible than an RRSP because you do not get charged a withholding tax on withdrawals (The withdrawal amount does not get added to your taxable income like an RRSP). For low-income earners a TFSA is a good option.

A general rule of thumb is to max out your TFSA before contributing to a Non-registered account to avoid capital gains taxes. To view your TFSA room, click here to view thewisewealthcoach on Instagram


Tax deferred growth (No requirement to pay taxes on the gains of the funds while they are held in the account.)


You do not get taxed on withdrawals from the plan

When you may need this:

Investing towards a short-term goal (a home, wedding, vacation, car, etc.) or last withdrawal in retirement

Need a flexible savings plan

Already maxed out your RRSP

Lower income earner

Interested in stocks (take advantage of tax-sheltered growth)

Typically, a recent grad who has just started working and has a lower income or is expecting a significant pay bump in the near future would benefit from a Tax-Free Savings Account.

Part of proper financial and tax planning is to factor in your goals and personal situation to determine how to best utilize different accounts. That’s where we come in as Advisors to help you work through the scenarios to find the best option to meet your needs.

Feel free to email or call me anytime with questions or to book a meeting by using the following link.

Click Here to book your meeting with Michael Bonomo.