RRSP's (Registered Retirement Savings Plans) and TFSA's (Tax Free Savings Accounts) are two products designed as incentives to save for your future.  These accounts act as containers for your investments.  Inside them, your money can grow and accumulate tax-free.  Each account type works differently:

RRSP's are basically a tax deferral program.  You’ll pay tax on your savings when you withdraw them in retirement. The idea is that you’ll be in a lower marginal tax bracket in retirement than you are in your working years. However, this is not always the case.

TFSA's are not strictly for retirement savings—they can be used for any savings goal. TFSA's are flexible. Unlike RRSP's, you don’t need to have earned income to contribute to a TFSA, and there are no age restrictions for making contributions or withdrawals.

The chart below lists some of the similarities and differences:

RRSP	TFSA
Set up at a financial institution	Set up at a financial institution
$26,010 annual contribution limit	$5,500 annual contribution limit
Contributions are pre-tax	Contributions are after-tax
Contribution amounts may be deducted from your income tax return	Contribution amounts cannot be deducted from your income tax return
Withdrawls of investment income and contributions are taxable	Withdrawls of investment income and contributions are tax-free
Early withdrawls are subject to a withholding tax	Withdrawls can be made any time

The chart above is a simplified guide.  Full details and exceptions are not listed here.  To learn more, visit the Canada.ca website or talk to your credit union.

Interested in learning more about saving for retirement?  Watch the video below: