Q: Could you explain how a Tax-Free Savings Account (TFSA) compares to a Registered Retirement Savings Plan (RRSP)?
A: Both provide tax-sheltered growth. The difference is RRSP contributions are tax-deductible, while TFSA contributions are not. Your RRSP contribution is based on earned income while anyone over 18 can contribute $5,500 into a TFSA every year. RRSP withdrawals are taxable while TFSA withdrawals are not. RRSP contribution room is lost if money is withdrawn while TFSA withdrawals can be recontributed.