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In Canada, which account is better to invest in - Tax Free Savings Account or RRSP?

+9 votes

When it comes to investing it can quite tough to make the right decision. Some people say that Tax Free Savings Account is good for investing in, while others say that RRSP is the better way to invest our money. I find that both types of investment has good and bad points and it all comes down to personal preference. However, it doesn't harm to get some opinion from other people on which investment to go for.


asked in Kamloops by Steve Martin (184 points)

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1 Answer

+1 vote
If you are looking to save and invest in short term goals such as a new car, marriage expense, mortgage down payment, then Tax Free Savings Account is the way to go. Otherwise if you invest in RRSP then you can't withdraw your savings to buy a new car or use as a down payment for a new mortgage. You can withdraw a certain amount from RRSP but then you will have to contribute back the same amount within a specific period of time as required by your bank guidelines.

In TFSA, you can invest your savings in GICS, Bonds or mutual funds and whatever interest that you earn will not be taxed by the government. Whereas in RRSP, although the interest and profits you earned by investing in Mutual funds or bonds will not be taxed initially but when you withdraw your savings at your retirement time, you will be taxed by the government. However, the tax percentage will be much lower because at your retirement age you would considered under the lower income bracket.
answered by Scott Smith (203 points)

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