RRSPs offer tax advantages - from tax deferment to reducing your taxable income - that’ll benefit almost all Canadians when savings or investing for future retirement. Aspiring first-time home buyers and those looking to pursue full-time career training or an advanced education are also poised to benefit greatly by funding an RRSP thanks to the Home Buyers’ Plan and Lifelong Learning Plan, which both allow for early, penalty-free withdrawals from your RRSP.
In certain cases, though, choosing a TFSA over an RRSP may be the better alternative. For instance, if you’re saving for short-or-medium term financial goals (like, say, a wedding, a new car, or a house renovation), a TFSA could be more beneficial as it allows for tax-free withdrawals at any time and for any reason. TFSAs may also be the better option if you’re in a lower tax bracket (earning below $50,000) or just starting your career with potential for income growth in the future; the reason being you might not be in the position to benefit as much from the tax deduction advantages offers by an RRSP.