As the RRSP deadline looms, most people know they should be looking at tucking away something. But many people are confused about whether it's better to invest in a tax-free savings account or an RRSP.

Dan Rhodes has an RRSP. He also has a tax-free savings account.

"You need the two of them to balance out how you are going to plan your retirement," he said.

He's right. Financial experts say contributing to both as part of an overall financial plan can give you the optimal combination of taxable and tax-free retirement income.

Mark Breakspear with BMO Financial Group says if you've been contributing a lot and making good returns on your RRSP, you may want to begin building up your TFSA to avoid paying too much tax when you retire.

"It absolutely depends on the person and what their situation is," he said.

So what's the difference?

• When you put money into an RRSP you get a tax refund.

• There is no tax refund for contributing to a tax-free savings account.

• Both an RRSP and TFSA grow tax free.

• Withdrawals from an RRSP are fully taxed.

• Withdrawals from a TFSA are tax-free.

And most people like the sound of that as it offers flexibility right now.

And once you retire, since TFSA withdrawals don't count as income, you will appear poorer than you really are to the government, and you will qualify for more government assistance -- like old age security or subsidized medical premiums and prescription drugs.

And you don't have to wait for retirement to use the money. You can use a TFSA for anything, whether you're saving up for a down payment on a home, doing that renovation five years from now or taking that trip five years from now.

But you need a financial plan and to make predictions of your future retirement income to get the mix right so you can optimize your retirement income.

"If you don't have a plan you are just shooting arrows in the dark," Breakspear said.

Tax-free savings accounts and RRSPs are not a financial plan: they are part of a financial plan.

You can't really decide what the best strategy for you is unless you know your overall financial picture now and long into the future.

With a report from CTV British Columbia's Chris Olsen