The study additionally reveals that:
- Two-thirds (67 per cent) of Canadians have an RRSP and 39 per cent have a TFSA.
- The most attractive TFSA benefits cited were that investments are tax-free (36 per cent) and that funds can be withdrawn at any time (20 per cent).
TFSAs allow Canadians to earn tax-free investment income to meet their savings needs. Key benefits of the plan include:
- No minimum contribution required to open an account
- Investors pay no income tax on investment returns earned in the account
- There are no taxes on funds that are withdrawn
- TFSAs can hold a wide range of investments
- The Canadian federal government recently raised the annual contribution limit for a TFSA to $5,500 from $5,000
An RRSP, a tax-deferred retirement savings vehicle, includes the following features:
- Investment growth is tax-free until withdrawn, meaning retirement wealth has the potential to grow faster than if invested outside an RRSP
- Contributions to an RRSP are typically tax deductible, lowering annual taxable income and income taxes payable
- RRSPs can hold a wide range of qualified investments
- Funds can easily transition to retirement income
- Spouses can split income to reduce their combined taxes payable