Once again, tax season for Canadians is drawing near. As the past 12 months have been financially challenging for most people, choosing the right financial tax options are especially important this year. The deadline for getting a Registered Retirement Savings Plan (RRSP) is coming up; many people now have to decide whether or not an RRSP is the right choice for them.

Canadians can now choose between a RRSP and a Tax Free Savings Account (TFSA). Each option offers its own advantages, as well as disadvantages. Having detailed knowledge about both choices is vital for making the best financial decision for your situation. As financial situations can fluctuate, what was the best choice last year may no longer be the best choice for this year; don’t simply rely on what has worked in the past.

The TSFA has become a popular financial planning tool since it was introduced. The TFSA is being recommended for those who make forty thousand a year and under; at this income rate there won't be very much saved on taxes. As well, there is a possibility of being penalized later on when a large amount is withdrawn from this retirement savings. The TFSA does not penalize any withdrawals at any time, making the money much easier to access if it is needed. The government declares how much can be withdrawn from a RRSP; these withdrawals are then considered income; money withdrawn from a TSFA is not.

When making under forty thousand the TFSA is considered the better savings plan; however when the yearly income grows past this point, this money can be withdrawn and then invested into a RRSP. Conversely, for those making the higher income now with the understanding of making significantly less in the retirement years, the RRSP can be the better savings tool then; it can later be withdrawn and then deposited into a TFSA.

It is important to remember that a healthy financial plan includes the fact that your planning must be flexible in order to accommodate the financial fluctuations that occur. Different financial savings products do become available; research your options every year to find out what is now available that would be beneficial for you. As well, during different stages of life, a different financial plan and budgeting will be needed. Such things as buying a home, starting a family, etc. can all have a major impact on our finances, as well as our financial savings strategy. Consult with a financial advisor or another professional who is educated and well versed in the financial field.