What's the difference between an RRSP and a TFSA?

What's the difference between an RRSP and a TFSA?

Whether you go for an RRSP, a TFSA, or both, contribute every season to reach your goals—big and small

RRSP vs. TFSA: How do they compare?

Registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs) are attractive because they allow you to build your savings in a tax-sheltered environment. RRSPs can help you save for retirement and reduce your taxable income when you contribute. TFSAs are a flexible way to save for any type of project and cover any unexpected expenses. Combine both plans to maximize their benefits all year long.

RRSP

For life's milestones

  • Plan for retirement
  • Buy your first home
  • Finance a return to school
Learn more about RRSPs

TFSA

For projects and unexpected expenses

  • Achieve your goals
  • Build an emergency fund
  • Top up your retirement savings
Learn more about TFSAs
Age limits
  RRSP TFSA
Minimum age No minimum age, as long as you earned income during the previous year Age 18
Maximum age Age 71 None

Contribution limits

RRSP

Contribution deadline

For the 2020 tax year: March 1, 2021

Annual contribution limit

18% of the income you earned the previous year, up to the maximum for the current tax year:

  • 2020: $27,230
  • 2021: $27,830

Participation in an employer-sponsored pension plan reduces your RRSP contribution room.

Unused contribution room

This is the unused portion of your maximum annual contribution that has accumulated since 1991 and that you can carry forward to future years.

Excess contributions

Limit of $2,000 over your available contribution room.

Penalties apply beyond this amount.

TFSA

Contribution deadline

December 31 of the current year

Annual contribution limit

  • 2009 to 2012: $5,000
  • 2013 and 2014: $5,500
  • 2015: $10,000
  • 2016 to 2018: $5,500
  • 2019 to 2021: $6,000

Unused contribution room

This is the unused portion of your maximum annual contribution that has accumulated since 2009 and that you can carry forward to future years.

Excess contributions

Not permitted.

Want to contribute to your spouse's plan?

For RRSPs, you can contribute to your spouse's plan and have the contribution deducted from your taxable income, even if you aren't the beneficiary.

For TFSAs, you can't contribute to your spouse's account. But you can give your spouse money to invest in their TFSA.

Ready to contribute?

Go to AccèsD to make a contribution and set up automatic transfers.

Contribute online - to an RRSP or TFSA. This link will open in a new window.
Tax implications
  RRSP TFSA
Contributions are deductible from your taxable income Yes No
Withdrawals are taxed Yes No
Investment income becomes taxable when withdrawn Yes No
Taxation at death Yes. Unless your RRSP is transferred to your spouse, to a minor dependent child or to a dependent disabled child, through your will or otherwise. No. Your spouse can add your balance to their TFSA after your death without affecting their contribution room.

Impacts of withdrawal

RRSP

Since withdrawals are included in taxable income, they can reduce government benefits and credits that are based on income.

Funds withdrawn from your RRSP cannot be paid back, except under the Home Buyer's Plan (HBP) or Lifelong Learning Plan (LLP).

TFSA

Since withdrawals are not included in taxable income, they have no impact on government benefits and credits that are based on income.

TFSAs are more flexible and allow you to withdraw money when you want. Any money you withdraw will free up new contribution room the following year.

RRSP or TFSA: Ready to choose?

Registered retirement savings plans

Find out more about the benefits of RRSPs and how you can use them to meet your goals.

Learn more about RRSPs

Tax-free savings accounts

See how the flexibility of TFSAs can help you complete your projects in the short and medium term.

Learn more about TFSAs

3 advantages of contributing all year long

Adopt good savings habits to put money aside all year long without breaking a sweat!

Stick with your budget

Make small monthly contributions instead of a big annual one. Scheduling regular contributions is a great way to start a good habit and keep your budget on track.

Save little by little

What counts most is not how much you save, but how soon you start saving and then how regularly you contribute. Small amounts accumulated over time make a difference in the long run and allow you to reach your goals more easily.

Don't get caught by surprise

With automatic transfers, your contributions are taken directly out of your account. Choose how much and how often you want to save, and you're covered for the whole year.

Let's talk

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FAQRRSP vs. TFSA

  1. Withdrawals from an RRSP are subject to tax deductions, and withdrawal fees may apply.
  2. 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.