One debate that seems to come up over and over again in retirement savings discussions is which is the better investment: a tax-free savings account (TFSA) or retirement savings plan (RSP). And the simple answer is: there isn’t one. It’s a convoluted, and therefore annoying, answer. Let’s start with a reminder on what each plan does and them we’ll take a look at some factors to consider.
Tax Treatment of Each Plan
We’ve talked about TFSAs (tax-free savings accounts) before as a great vehicle for savings, particularly growing your savings tax-free. But there is one issue to be aware of: over-contributions.
The annual limits for TFSA contributions have changed. They started at $5,000, moved as high as $10,000 under the previous Conservative government, then moved back down to $5,500 by the current Liberal government. The maximum anyone could have contributed into a TFSA by 2017 is $52,000. That’s a nice chunk of change, and your gains won’t be taxed.