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04/12 - W. Michael Thomas

Should I contribute to an RRSP, a TFSA or both?

The question on many people’s minds, especially at this time of year, is whether they should contribute to a Tax Free Savings Account (TFSA), an RRSP, or possibly even both?

With either of these options, there are tax implications, so it’s important to understand how your total savings will be affected.

The following chart summarizes some of the major differences and similarities of each:

Generally speaking, a TFSA may be the better fit for short term goals (i.e. saving for a major purchase), as there is no tax on withdrawals. However, for long term goals, RRSPs are generally the preferred choice.

Of course, there are a large number of variables that need to be taken into consideration when deciding where your money should go. Your personal savings strategy needs to be taken into account, as well as your short and long term goals.

W. Michael Thomas is a Partner at The Investment Guild (the Investment Guild is a People Corporation company)

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