RRSP vs. TFSA vs. Mortgage Lump Sums
Category : blog
Where should you put your savings? It’s a common question. People are unsure if they should invest in a RRSP, TFSA or reduce their mortgage. There are a number of factors that can help you determine which route to take, such as:
- Income today versus income in the short term future
- Interest rates
- Type of investment vehicle
The main difference between RRSPs and TFSAs is that RRSPs allow for a deduction of your contribution amount from income while the investment grows on a tax deferred basis. A TFSA allows you to grow your investment without paying taxes on the growth. RRSPs have an annual limit of up to a maximum of $24,930 whereas TFSAs have a limit of $10,000 per year. With low interest rates, many Canadians are taking advantage of putting lump sums on their mortgage liabilities to reduce the interest in the future, when rates will be higher. Generally, we look at each client’s situation to determine the optimal structure to reduce their tax liabilities.
Let me know if you have any questions on Tax Planning with respect to RRSPs, TFSAs or any other accounting, tax or Canada Revenue Agency related questions. I can be reached at ajaffer@arjcpa.ca or 905-629-7720
Ali Raza Jaffer, CPA, CGA, MBA, BComm
President, AR Jaffer Professional Corporation
Chartered Professional Accountant
(T) 905-629-7720 (F) 905-629-1947