I’m confused. Should I save for retirement with RRSP or TSFA?

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This topic contains 6 replies, has 1 voice, and was last updated by  Thomas 5 months ago.

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    It’s been 2 years since I graduated and started working. I want to start saving for retirement early but should I invest in RRSP or TSFA? I’m looking to invest about $4000-$6000 a year

    Thanks in advance!



    First of all, great choice choosing to save for retirement early! Good on you


    For you should read up on TSFA and RRSP. Find out what they are:


    Both are tools that allows you to grow your savings through tax savings. All else equal, both will save you the same amount so there is no difference in terms of potential growth. But there are significant differences between the two. RRSP will save you more if your expected retirement tax rate is lower than at time of deposit. RRSP is less flexible as it’s intended for you to keep the money deposited over a long period of time. A TSFA is much more flexible, it allows you to withdraw at any point with minimal penalty (Just be careful not to over contribute) and it’s very simple to use.


    Unless you’re very high in the income tax bracket, the difference between the two in terms of growth potential is minimal. I would choose a TSFA due to it’s greater flexibility and simplicity. At your age, I would invest in index ETF funds for greatest long term return.



    So TFSA works like a savings account? That’s pretty cool.

    I personally plan to buy a house in 7 years and it sounds like TFSA is better than RRSP for that reason since I can withdraw with no penalty



    Actually RRSP has a specific rule for withdrawing money to buy a house called a Home Buyers Plan. But there’s a limit you can withdraw and you have to pay it back within a certain amount of time. Last I checked the limit was 25k and you have to repay it within 15 years



    Interesting…that’s not a lot of money and not that flexible. TFSA sounds like the better option



    Yup seems like RRSP is good if you’re currently in a high tax bracket and can control yourself from touching the money. TFSA is better otherwise. But the TFSA limit isn’t that high, so eventually you’ll need to use both anyways!



    Wow great answers! I’ll spend a few more hours looking into your links and decide what’s best for me.

    Thanks again

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