Final answer:
People with low incomes benefit more from saving for retirement in a TFSA instead of an RRSP due to the after-tax contributions, tax-free withdrawals, and the potential drawbacks of low tax refunds.
Step-by-step explanation:
When it comes to saving for retirement, people with low incomes often find it more beneficial to save in a Tax-Free Savings Account (TFSA) instead of a Registered Retirement Savings Plan (RRSP).
The main advantage of a TFSA is that contributions are made with after-tax income, which means that withdrawals from the account are not taxed.
This is particularly advantageous for individuals with low incomes because they are typically in a lower tax bracket and may not benefit as much from the tax deductions offered by an RRSP.
Additionally, if individuals with low incomes were to contribute to an RRSP, the tax refund they receive may be small due to their lower tax rate. On the other hand, by using a TFSA, they can enjoy tax-free growth on their savings without worrying about potential taxes on withdrawals in retirement.