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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?

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

When are you contributing?

TFSA RRSP
Deadline: December 31, 2016 Deadline: March 1, 2017
Minimum age: 18 Minimum age: There is no minimum age, but you must have employment or business income in order to accumulate contribution room
Maximum age: None Maximum age: 71 (you can contribute until the end of the year in which you turn 71)

How much are you contributing?

TFSA RRSP
Annual contribution limit:
  • 2009 to 2012: $5,000/year
  • 2013 to 2014: $5,500/year
  • 2015: $10,000
  • 2016: $5,500
  • 2017: $5,500
Annual contribution limit: 18% of the income you earned the previous year, up to an annual maximum (e.g., $25,370 in 2016 and $26,010 in 2017)

If you contribute to an employer-sponsored plan, that will reduce your contribution room.
Contribution room: Any unused portion of your annual limit, which is cumulative dating back to 2009 Contribution room: Any unused portion of your annual limit, which is cumulative dating back to 1991
Excess contributions: Not permitted Excess contributions: Cumulative lifetime limit of $2,000 over your available contribution room
Spousal contributions: Not permitted

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

The contributing spouse gets to claim the deduction on their taxable income for the year, even if they’re not the beneficiary.

What happens when you withdraw your money?

TFSA RRSP
If you’re receiving government pension benefits, withdrawing money from your TFSA will have no impact. If you’re receiving government pension benefits, money withdrawn from your RRSP is considered taxable income, so it may reduce your benefits.
Any money you withdraw will free up new contribution room the following year.1 In other words, withdrawals can be recontributed. Withdrawals cannot be recontributed.

Imposition

TFSA RRSP
Withdrawals are not taxed. Withdrawals are taxed.
Investment income is not taxed. Investment income is not taxed.
If you die: If you have a surviving spouse, your balance can be transferred to their TFSA tax-free, without affecting their contribution room. If you die: Your RRSP savings will be taxed, unless they are transferred to a spouse with unused contribution room, to a minor child or to a dependent disabled child.
Contributions are not deductible from your taxable income. Contributions are deductible from your taxable income.
Get a TFSA Get an RRSP
  1. According to proposed amendments by the Department of Finance Canada, 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.

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