Tax planning is a very important component of financial planning. A dollar saved in taxes is much more than a dollar earned
The decision about allocating your income towards RRSP/TFSA/Non-registered accounts is critical to fulfillment of your goals
Do you have the right investments for the kind of goals you want to accomplish?
Let's compare RRSPs and TFSAs
Both these vehicles are savings plans that allow you to accumulate money tax-free.
RRSPs: Save for retirement
An RRSP is a registered savings plan that allows you to build tax-deferred retirement savings while also reducing your tax load at the time of contribution. It is useful for:
saving for retirement
buying or building your first home
financing your education
TFSAs: Save for a specific goal
A TFSA is a savings plan that allows you to put money aside & grow tax-free to reach short-term goals throughout your life. It is useful for:
renovating your home
buying a car
starting a business
taking a trip
Determining which plan is better for you can be complex because it depends on your tax bracket and when you may need to withdraw the savings
For example, if you are saving for an intermediate goal in Life (like a house/children's marriage), TFSA may be better because you are going to withdraw when your income is still coming; maybe even more than earlier! While if the savings is for retirement, it may be better to go for RRSP. Further, the type of income needs to be looked at.
Investment income within an RRSP/TFSA or Non-registered is treated differently when withdrawn. Interest income, Dividend income or Cap gains are taxed differently with each account