Although the initial purpose for the TFSA, differs from the Roth IRA, both allow earnings to grow tax-free.
The key distinction lies in the contribution regulations.
In Canada, the Federal government determines the yearly contribution limit for TFSAs, allowing Canadian residents to carry forward unused contribution rooms, regardless of their income level.
Withdrawals for TFSAs can be made at any time without incurring taxes or penalties.
Conversely, the Roth IRA requires that earnings be qualified to avoid being financially penalized, and contributions are contingent on having provable earned income.
Additionally, there are income thresholds that, if exceeded, prohibit contributions to a Roth IRA.
The TFSA is more flexible than a Roth IRA in terms of withdrawals; however, the ROTH IRA offers more contribution room than the TFSA.
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