TFSA vs. RRSP: Which Is Right for You?

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• Sharp Asset Management Inc.

• TFSA vs. RRSP Choosing the Right Savings Vehicle
  for You

• 416-722-9009

• Contact_at_sharpasset.com

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• What Is a Tax-Free Savings Account (TFSA)?

• A Tax-Free Savings Account (TFSA) is a registered
  savings account available in Canada that allows
  you to set aside money and grow it tax-free.
  Features include
• Defined contribution limit each year (indexed to
  inflation)
• Contributions are not tax-deductible
• All growth and withdrawals are tax-free
• Flexible use for any goal (retirement, down
  payment, etc.)
• Unused contribution room carries forward
  indefinitely

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• Considerations before Opening a TFSA

• Financial goals Align your TFSA contributions
  with your goals. It's ideal for long-term
  objectives like retirement or a down payment but
  consider other options for short-term needs like
  an emergency fund.
• Risk tolerance Assess your comfort level with
  investment risks. TFSAs offer various investment
  options, allowing you to choose a risk level that
  suits your preferences.
• Tax situation If you're in a high tax
  bracket, the tax-free benefits of TFSAs can be
  more valuable compared to someone in a lower
  bracket. Consider your expected tax situation in
  retirement as well.

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• What Is a Registered Retirement Savings Plan
  (RRSP)?

• A Registered Retirement Savings Plan (RRSP) is
  another type of registered account in Canada,
  similar to a TFSA, but designed specifically for
  saving for retirement. Features include
• Contributions are tax-deductible, reducing your
  taxable income
• Growth is tax-deferred (taxed upon withdrawal)
• Mandatory withdrawals begin at age 71
• Can be used for a Home Buyers' Plan (HBP) or
  Lifelong Learning Plan (LLP)

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• Things to Consider before Opening an RRSP

• Current income Are you in a high tax bracket? If
  so, RRSP contributions offer immediate tax
  deductions, lowering your current tax bill.
• Expected retirement income Will you likely be in
  a lower tax bracket in retirement? The tax
  benefit might be smaller if you pay less tax
  later.
• Consider both factors Analyze your current and
  projected tax situations to weigh the long-term
  value of RRSP tax deductions.

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• Comparing RRSPs and TFSAs

Feature TFSA RRSP
Contributions Not tax-deductible Tax-deductible up to your contribution limit
Growth Tax-free Tax-deferred (taxed upon withdrawal)
Withdrawals Tax-free, anytime (excluding over-contributions) Taxable, mandatory withdrawals begin at age 71
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• Comparing RRSPs and TFSAs

Feature TFSA RRSP
Contribution Limit Annual limit indexed to inflation (currently 7,000 in 2024) 18 of earned income (maximum 31,560 in 2024) or lower, minus unused RRSP room from previous years
Unused Contribution Room Carries forward indefinitely Carries forward indefinitely
Flexibility Use for any financial goal Primarily for retirement savings
Early Withdrawal Penalties 1 per month on over-contributions, plus income tax on amount over limit Income tax on withdrawn amount, plus 10 penalty tax (except for HBP, LLP, or disability)
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• Additional Points to Consider

• TFSA contributions do not affect your eligibility
  for government benefits, while RRSP contributions
  can.
• Both accounts have contribution deadlines.
• There are income restrictions for contributing to
  a TFSA.

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• Contact us

• 21 Greenwin Village Road Toronto, ON M2R 2R9

• P.O BOX 74539 Humbertown Centre,
• 270 The Kingsway Toronto, ON M9A 5E2

• 416-722-9009

• contact_at_sharpasset.com

• www.sharpasset.com

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• Thank you