RRSP and TFSA comparison

RRSP and TFSA comparison

RRSPs and TFSAs are 2 types of registered savings plans that let you grow your money tax-free, each with their own advantages.

Compare them to see which one is right for you – or choose both!

What are you saving for?

RRSP TFSA
Savings goal: Put aside money tax-free to save for retirement, while also reducing your taxable income in the years you make contributions. Savings goal: Put aside money tax-free to save up for anything you want.
Use it to:
  • Save for retirement
  • Buy or build your first home
  • Pay for your education
Use it to:
  • Renovate your home
  • Buy a car
  • Start a business
  • Travel
  • Plan for retirement
Cannot be used as collateral for a loan. Can be used as collateral for a loan.

When should you contribute?

RRSP TFSA
Contribution period: For the 2019 taxation year, the deadline is March 2, 2020. Contribution period: December 31 of the current year.
Minimum age: there is no minimum age. You must have earned income for the previous year to accumulate contribution room. The earned income includes, among other things, employment and business income. Minimum age: 18.
Maximum age: until the end of the year in which you turn 71. Thereafter, itís possible to contribute to the spouse's RRSP, if the latter is under 72. Maximum age: None.

How much can you contribute?

RRSP TFSA
Annual contribution limit: 18% of the income you earned the previous year, up to an annual maximum (e.g., $26,500 in 2019 and $27,230 in 2020)

If you contribute to an employer-sponsored plan, it will reduce your contribution room.
Annual contribution limit:
  • 2009 to 2012: $5,000
  • 2013 and 2014: $5,500
  • 2015: $10,000
  • 2016 to 2018: $5,500
  • 2019 and 2020: $6,000
Contribution room: Any unused portion of your annual limit, which is cumulative dating back to 1991. Contribution room: Any unused portion of your annual limit, which is cumulative dating back to 2009.
Excess contributions: Cumulative lifetime limit of $2,000 over your RRSP contribution room. Excess contributions: Not permitted.
Spousal contributions: Permitted

The contributing spouse gets to claim the deduction on their taxable income for the year, even if theyíre not the beneficiary.
Spousal contributions: Not permitted

However, you can give money to your spouse, which they can invest in their TFSA, without breaking any attribution rules.

What happens when you withdraw your money?

RRSP TFSA
If youíre receiving government benefits or credits, money withdrawn from your RRSP is considered taxable income, so it may reduce your benefits. If youíre receiving government benefits or credits, withdrawing money from your TFSA will have no impact on your eligibility for income-tested.
Withdrawals donít give new contribution room. Any money you withdraw will free up new contribution room the following year.1. In other words, withdrawals can be recontributed.

What are the tax implications?

RRSP TFSA
Withdrawals are taxed.2 Withdrawals are not taxed.
Investment income is taxed when you withdraw. Investment income is not taxed.
Upon your death. Unless the RRSP is sent by will or otherwise to the surviving spouse, to a minor child or to a dependent disabled child. Upon your death. If the spouse is the heir, your balance can be transferred to their TFSA tax-free, without affecting their contribution room.
Contributions are deductible from your taxable income. Contributions are not deductible from your taxable income.

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  1. Withdrawals of deliberate over-contributions, non-qualified investments and asset transfer transactions, and any income attributable thereto, do not create additional TFSA contribution room. Some of these types of income may be subject to a 100% taxation rate.
  2. Withdrawals from an RRSP are subject to tax deductions, and withdrawal fees may apply.