RRSP (Registered Retirement Savings Plan)

An RRSP is an account which is registered with the federal government and can be used to save money for retirement purposes. This saving would be tax-sheltered until withdrawal. RRSP contributions help you reduce the total amount of your annual tax. In another word, you will hit two birds with one stone. Paying less tax today and boost your future retirement saving.

Here is a RRSP refund calculator, you can clearly notice the unbelievable relation between RRSP contributions and the tax saving.

Who is eligible for RRSP?

Anyone who files an income tax return and has earned income can open and contribute to an RRSP. There are limits on how much you can contribute to an RRSP each year. Your RRSP contribution limit for 2021 is 18% of earned income you reported on your tax return in the previous year. You can find your limit on your latest notice of assessment.

TFSA (Tax-Free Saving Account)

A tax-free savings account is an account available in Canada. The growth of the money in a TFSA is not taxed in most cases, even when withdrawn.

Who is eligible for TFSA?

Any individual that is a resident of Canada who has a valid SIN and who is 18 years of age or older is eligible to open a TFSA. Any individual that is a non-resident of Canada who has a valid SIN and who is 18 years of age or older is also eligible to open a TFSA.