Chartered Investment Manager (CIM) Practice Exam · Question
Which statement accurately distinguishes between a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA) in Canada?
RRSP contributions are tax-deductible, reducing taxable income in the year of contribution, while TFSA contributions are made with after-tax dollars.
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Question: Which statement accurately distinguishes between a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA) in Canada?
Answer options: ✅ Contributions to an RRSP are tax-deductible, while contributions to a TFSA are not.
- Withdrawals from an RRSP are always tax-free, whereas TFSA withdrawals are taxed at marginal rates.
- An RRSP has a lifetime contribution limit, but a TFSA does not.
- Only a TFSA allows for tax-deferred growth; RRSP growth is immediately taxed.
Correct answer: Contributions to an RRSP are tax-deductible, while contributions to a TFSA are not.
Explanation: RRSP contributions are tax-deductible, reducing taxable income in the year of contribution, while TFSA contributions are made with after-tax dollars.
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