Benefits differ with RRSPs and TFSAs

The differences between RRSPs and Tax-free savings accounts:

RRSPs:

– annual contributions are tax-deductible

– withdrawals are taxed as earned income

– maximum contribution, including pension plans, is 18 per cent of earned income or $22,970

– unused contributions can accumulate

– must be converted to a life annuity or registered retirement income fund by 71

– can affect government benefits

TFSAs:

– contributions are not tax deductible

– withdrawals are not taxed

– maximum contribution is $5,500 a year regardless of income

– unused contributions can accumulate

– TFSAs don’t have to be converted to other investments

– won’t affect other government benefits.