The differences between RRSPs and Tax-free savings accounts:
RRSPs:
- annual contributions are tax-deductible
- withdrawals are taxed as earned income
- maximum contribution, including pension plans, is 18 per cent of earned income or $22,970
- unused contributions can accumulate
- must be converted to a life annuity or registered retirement income fund by 71
- can affect government benefits
TFSAs:
- contributions are not tax deductible
- withdrawals are not taxed
- maximum contribution is $5,500 a year regardless of income
- unused contributions can accumulate
- TFSAs don't have to be converted to other investments
- won't affect other government benefits.