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Classic question: RRSP, RESP or TFSA??

on Sat, 10/05/2013 - 11:35
*Updated: Nov 28, 2018 (TFSA annual contribution room increasing to $6,000 a year from 2019)
We all have limited resources... Lots of people asking the same question over and over again, among retirement savings, education saving for kids and tax free savings, which is the better way to save?
The answer is: it depends. I know, I know, you hate this answer. However, you need to understand everyone has a different situation so there is not ONE right answer to everybody.
Here is a list of things help you to decide which way is best for you:
- if you have lots of RRSP room and have no pension plan from your work place, RRSP might be a good choice;
- if you have less than $40K income a year, and will foresee your income will grow in the future, do not take the tax deduction while you contribute into your RRSP (contributed RRSP can be deducted anytime, wait till you have higher income to get the most out of it);
- if you have kids (under 17), RESP is always the better way to go (because of the grants you will get, only if you think your kids will NOT continue their studies);
- if you have low income and don't have much RRSP contribution room, go for TFSA;
- if you have already maxed out your RRSP, TFSA is a must for you;
- if you have been maxing out your RRSP, I suggest you stop it and turn to TFSA, better for you down the road;
- if you are retired, TFSA is best for you;
- bear in mind RRSP is mainly for retirement, TFSA can be saving for short term spending, like a trip or even emergency fund...
image credit: Manulife Investments
**TFSA contribution limit increased to $5,500 a year in 2013 & 2014, $10,000 in 2015, and back to $5,500 in 2016, then increasing to $6,000 in 2019, if you had never done any contribution, your TFSA contribution room will be $63,500 in 2019 (if you were over 19 in 2009)
**Financial institutions normally do not let anyone younger than 16 to open accounts. 
At the end of the day, what is better for you depends on your goal and your current situation. Contact us to find out how to choose between the best suitable strategy for you.


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