RRSPs (Registered Retirement Savings Plans) and TFSAs (Tax-Free Savings Accounts) have a lot in common. You can hold a variety of investments in either one, including savings accounts, GICs, mutual funds and stocks. Both avoid taxation of investment income in the year it’s earned and they both have limits on how much you’re allowed to save. When it comes to the RRSP, every dollar you save in a year earns you a tax deduction for the same amount. When the money comes out of an RRSP, barring any special government programs, you will include the amount withdrawn in your taxable income for the year. A TFSA works opposite to an RRSP in these regards. You don’t get an immediate tax deduction for saving inside a TFSA but you don’t have to pay any taxes when you withdraw the money. So which is better? It truly depends on you and your unique situation. This is where your investment advisor can help determine the best course of action to keep your tax bill as low as possible.

Thomas Johnson, www.cascadefinancialgroup.com