RRSP vs. TFSA: a Newfoundland household’s version of the debate

Every winter the country rediscovers the RRSP. The better question is which account (RRSP or TFSA) does the next dollar of this household the most good.

An RRSP is a deferral. You deduct the contribution at today’s marginal rate and you pay tax when you take the money out. It shines when you are in a high bracket now (a good offshore year, a dual professional household, a profitable corporation paying a salary) and expect a lower bracket in retirement. It is a poor place to park money you may need at forty-two, because the withdrawal is income.

A TFSA is the opposite shape. No deduction going in, no tax on growth or withdrawals. It is the better first account for many younger clients, for anyone who might buy a house, and for households already sitting on a generous pension who do not need another stack of taxable income at seventy-two. It is also the cleaner extra savings vehicle beside a Public Service Pension.

We run the actual brackets, the pension, the corporation if there is one, and the date you might need the cash. That is the debate. Not a slogan. If you have contribution room in both and a lump of overtime coming, bring the notice of assessment and we will assign the dollar.