Quote:
Originally Posted by V
He's saying if you don't use an RRSP you're investing with after tax dollars, and then also getting taxed when you withdraw. That's why RRSP and TFSA money is only taxed once. Either before you invest or after, but not both.
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OK, that's not entirely accurate. If you invest say $1000 in a non-registered account today and you earn some dividends or interest you pay tax on those as you receive them. Eventually then you receive your $1000 back (return of capital) and there is no tax on that $1000. Then you are taxed on the growth (capital gains).
For the TFSA you invest that $1000 and pay no tax at all on the growth, dividends or interest. Its far and away the most tax efficient.
For the RRSP you get a tax break on the $1000, so your taxable income is reduced by $1000 when you deposit it into the RRSP. When you withdraw you are taxed on that $1000 as well as growth, dividends and interest.
Hopefully that clarifies the differences between the three.