When you decide to invest your money, the options can seem endless.
Among the choices are usually RRSPs and TFSAs – but what’s the difference between the two? More importantly, what are the benefits of each?
What’s an RRSP?
An RRSP is a Registered Retirement Savings Plan where you can contribute until you’re 71 . Here’s how you can benefit from an RRSP:
- You don’t pay tax on the money saved in an RRSP, until it’s withdrawn.
- You or your spouse/common law partner can contribute to your RRSP.
- Your RRSP contributions are deductions from your income resulting in a lower taxable income.
- You only pay tax on the money you withdraw from your RRSP. If you’re retired and ready to withdraw money often, your tax rates may be lower because your earned income may be less at that time.
RRSPs are for more than retirement
From borrowing money for a down payment to furthering your education, you can do more with an RRSP than just save for retirement.