Taking a Closer Look at the RRSP and TFSA
12 Pages Posted: 3 Oct 2015
Date Written: July 1, 2008
Abstract
The Tax-Free Savings Account (TFSA) is the new savings vehicle proposed under the 2008 federal budget. Most existing analyses find the TFSA to be comparable to the Registered Retirement Savings Plan (RRSP) as a retirement savings vehicle. However, given Canada’s progressive tax rates and the specific attributes of each account, such as the mandatory withdrawal provision of the RRSP, the two vehicles are not necessarily equally advantageous for all savers. A careful consideration of the vehicles’ unique attributes shows that different savers with varying income levels, contribution levels, and savings goals (such as making bequests) may benefit differently from these vehicles.
Keywords: TFSA, RRSP, Pension
JEL Classification: G11, G13
Suggested Citation: Suggested Citation