TFSA vs. RRSP

Purpose TFSA RRSP
Main purpose

Meets your savings needs throughout your life (not only after retirement)

Mainly meets retirement needs

Tax treatment

Both savings vehicles offer tax advantages
but there are some minor differences between them

Eligibility TFSA RRSP
Minimum age

18

None

Maximum age None

71

Maturity date (termination)

None

December 31 of the year in which you turn 71 years of age1

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Contribution Room TFSA RRSP
Annual contribution limit
 

$5,000 (2011)
$5,000 (2012)
$5,500 (2013)
$5,500 (2014)
$10,000 (2015)

$22,450 (2011)
$22,970 (2012)
$23,820 (2013)

Contribution limit as
a % of earned income

No matter how much you earn, the contribution limit is $5,000

18% of earned income
(Subject to the annual contribution limit)

Excess contributions

Penalty of 1% per month

Penalty of 1% per month (Up to $2,000 in excess contributions are allowed without penalty)

Unused contribution room carried forward


From year to year


From year to year

Contribution room restored after withdrawals


Starting the following year

Contribution limit indexed?

According to the Consumer Price index (CPI), rounded to
the nearest $500

Based on the increase in the Average Industrial Wage (AIW)

Spousal contributions?

No, but one spouse can give the other spouse the funds needed for his/her contribution
without being subject to
income attribution rules

Transfer to spouse in the event of relationship breakdown / death?


Without affecting
contribution room


Without affecting
contribution room

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Tax rules TFSA RRSP
Tax deductible contributions?


TFSA contributions cannot be deducted from income.

Taxable income

Withdrawals taxable ?


You can withdraw2 funds from your TFSA at any time for any purpose without having to pay tax on the withdrawals.


You can withdraw2 funds from your RRSP at any time for any purpose but you have to pay tax on the withdrawals.

Minimum withdrawal


After you convert your
RRSP into a RRIF

Impact on income-tested government retirement benefits and tax credits
(clawback of Old Age Security and Guaranteed Income Supplement)


Does not reduce benefits or tax credits.


May reduce benefits and tax credits

Tax impact in the event of death


If transferred to the spouse. The value of the TFSA is never taxable.

- If the TFSA is left to a person other than your spouse, the TFSA will be terminated and the investments will become non-registered assets.
- The income generated by those non-registered assets will be taxable.


If rolled over to the spouse

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1 You have to withdraw the amount accumulated in your RRSP and invest it in a Registered Retirement Income Fund (RRIF) before December 31 st of the year in which you turn 71.
2 Subject to the terms and conditions of the selected investments.
3 Attribution rules are income tax provisions that apply to an individual who transfers assets to a third party. Under these rules, income earned on the transferred assets has to be included in the individual's own income