How does my income level affect the decision to invest in a TFSA versus an RRSP?
How does my income level affect the decision to invest in a TFSA versus an RRSP?
Your income level significantly impacts whether you should favor investing in a TFSA or an RRSP. The basic rule of thumb is this: If you earn a lower income, the TFSA grants you tax-free growth and withdrawals, which can be beneficial for short-term access to funds. Conversely, those with higher incomes can take advantage of RRSP contributions to reduce their taxable income now, saving more on taxes in the present.
Should your income fluctuate, integrating both savings vehicles can be the most effective strategy, allowing for tax-efficient growth while enabling access to tax benefits.