RRSP or TFSA: What's the difference?

RRSP or TFSA: Which one to choose?

Grow your savings tax-free in an RRSP or TFSA to reach your goals.

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

Registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs) allow you to grow your money tax-free throughout the year. RRSPs are designed mainly to help you save for retirement. TFSAs are ideal for saving for any type of project or building an emergency fund.

Choose the one that best suits your needs and goals or combine them to maximize their benefits.

Reasons to open an RRSP

  • Plan for retirement

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

How RRSPs work

Who can contribute?

Anyone who earns income in Canada.

You can contribute until December 31 of the year you turn 71.

Contribution deadline

For the 2022 tax year: March 1, 2023

Contribution room

18% of the income you earned the previous year, up to a maximum of $29 210 for the 2022 tax year.

Plus unused contribution room accumulated since 1991.

Tax implications

Contributions are deductible from taxable income.

Withdrawals are taxable.

Excess contributions

You can go over your annual contribution limit by $2,000.

Anything beyond this is subject to a 1% per month penalty.

Reasons to open a TFSA

  • Save for a project
  • Build an emergency fund
  • Top up your retirement savings
Learn more about TFSAs

How TFSAs work

Who can contribute?

Anyone who is 18 or older and has a valid social insurance number.

There is no maximum age to contribute.

Contribution deadline

December 31 of the current year

Contribution room

Maximum annual contribution and 2022: $6,000

Plus unused contribution room accumulated since 2009 and withdrawals made the previous year.

Tax implications

Contributions are not deductible from taxable income.

Withdrawals are tax-free.

Excess contributions

A 1% per month penalty applies to every dollar over the limit.

RRSP or TFSA: Which should I prioritize?

Your decision will depend on multiple factors such as your age, family situation, income, plans and needs.

  • For your retirement savings plan, first consider contributing to an RRSP. The same is true when buying a home as you'll be eligible for a Home Buyers' Plan (HBP).
  • If you plan to withdraw from your savings before retirement for any reason, consider contributing to a TFSA.

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How to reach your savings goals more easily

Here are 3 practical tips to help you build your savings all year round.

Start contributing as soon as possible

Don't wait to start saving. Small amounts add up and make a real difference in the long run. Plus, you won't have to step up your efforts as you near retirement.

Make monthly contributions

Make small contributions each month instead of one big annual one. This is a good habit that will help keep your budget on track.

Set up automatic transfers

With automatic transfers, your contributions are taken directly out of your account. Choose how much and how often you want to contribute and you won't have to think about it all year!

Learn more about automatic transfers

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Further reading


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