While TFSAs and RRSPs both help you save for the future, they do so in different ways. Which one you choose depends on your goals and financial situation.

TFSAs are tax-sheltered savings accounts that you can hold various interest-generating investments in (like cash, stocks, bonds, GICs etc.) Unlike an RRSP, the contributions you make to a TFSA don’t get deducted from your income. You can withdraw funds without penalty at any time, and income and gains you earn within your TFSA are not subject to taxes.  Source

This makes TFSAs better for short-term savings goals than RRSPs, which you’ll likely need to withdraw from in retirement and pay taxes on. It also means TFSA withdrawals won’t impact your ability to qualify for certain income-tested government benefits and credits such as Old Age Security, Guaranteed Income Supplement and child tax benefits and credits.

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On the other hand, RRSPs are a good choice for people in a higher income tax bracket because RRSP contributions are tax-deductible, which helps lower your overall taxable income for that year. But as you withdraw the money from your RRSP, it will be taxed at your regular marginal tax rate at that time.

In this article, we take a look at some of the key differences between tfsa vs rrsp to help you understand which option is right for your unique situation. Talk to a TD advisor today to learn more about both plans and how they can help you reach your financial goals.