No matter how old you are, chances are you’re at least aware of the importance of saving for retirement via a TFSA or an RRSP. Previously, the only option available to you was to open an RRSP account (Registered Retirement Savings Plan). This meant that you could contribute a certain amount of your income each year to your RRSP account and would receive a refund cheque around tax time. It also meant that, as soon as you retired, the government would take back a huge chunk of your earnings, leaving you with considerably less than you thought you had (how much the government takes back from you depends entirely on which tax bracket you retire in – the higher the tax bracket, the more money you lose).
Recently, though, a new retirement savings option was introduced. In 2009, the TFSA (Tax Free Savings Account) was opened up to Canadians as a new way to save without the same restrictions as the RRSP.
Fundamentally, the two are mirror images of each other, but there are some concrete differences that are worth taking into account: