While having the benefit of OTPP or OMERS should, in theory, provide you with financial security in your after-school years, just under half of you (47%) don’t think your pension will actually be enough to fund your retirement (according to those surveyed as part of the Educators Financial Kickstart Challenge).
That’s where the Registered Retirement Savings Plan (RRSP) comes in to fill the gap—or does it?
A survey conducted by the Canadian Imperial Bank of Commerce has discovered that 67% of Canadians believe the Tax-Free Savings Account (TFSA) trumps the RRSP when it comes to saving for retirement because of its ‘tax-free’ status.
That’s not entirely the case.
While the TFSA makes a great investment vehicle to save for goals where you plan on taking the money out sooner rather than later (because you’ll be able to withdraw that money tax-free), making it your sole investment vehicle for retirement may not be your best option. This is particularly true as you move higher up the pay grid, since the more money you make, the higher rate you’ll be taxed.
This is where RRSPs offer you your biggest tax break because every RRSP contribution you make is tax deductible.
TFSA contributions, on the other hand, are not tax-deductible.
Besides getting an instant tax deduction the year you make your RRSP contribution, another RRSP advantage is the fact that by the time you start withdrawing funds (once you’ve retired), you will likely be in a lower tax bracket—which means getting a better after-tax rate of return.
Fact: Your RRSP can be transferred, tax-deferred, to a beneficiary spouse should you pre-decease them.
Fact: With the Canadian Home Buyers’ Plan, you can withdraw up to $35,000 from your RRSP, tax-free, to put towards your first home. If you’re buying your first home with your partner or another first-time homebuyer, you can withdraw a combined maximum of $70,000 (withdrawals must be paid back to your RRSP within 15 years to avoid a tax penalty)
Fact: You can withdraw up to $20,000 from your RRSP, tax-free, to use towards furthering your education under the Lifelong Learning Plan. It must be paid back to your RRSP within 10 years.
No matter where you are on the pay grid, or how far (or close) you are to retirement—we can put you on the right track to achieving your ultimate financial goals.
* Terms and conditions apply. Minimum $5,000 investment required in an RRSP, TFSA, or non-registered account. One winner will be selected to win $1,000. Offer ends March 31, 2024. Visit