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Choosing an RRSP or TFSA

Understand the differences

Two ways to save

The Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) are two ways to grow your savings tax-free.

Compare the tax advantages based on your needs, your age and your financial situation.

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A strategic approach: Combine RRSP and TFSA contributions

You don't have to choose between an RRSP and a TFSA. You can contribute to both! You can even invest your RRSP tax refund in a TFSA.

How is an RRSP different from a TFSA?

RRSP vs. TFSA – 7 things to consider


What's your savings goal? You can use your savings for retirement, to make a withdrawal for a downpayment (HBP) or to finance your education (LLP). Your savings can be used for anything you want: from taking a trip to funding your dream wedding to buying a car.
What's the main tax advantage? Your savings grow tax-free.
Your savings grow tax-free.
Does it affect your income taxes? Your RRSP contributions are deducted from your taxable income, which can be advantageous if you're in a higher tax bracket.
Your TFSA contributions do not affect your taxable income.
Are amounts withdrawn taxable? Amounts withdrawn from an RRSP after retirement are taxable. This often works to your advantage since retirement income is generally lower. Amounts withdrawn are not taxable and don't affect your eligibility for government programs.
How much can you contribute? Contribute up to 18% of your annual income (max. $26,010 in 2017). You can exceed this amounts if you have unused contribution room from previous years.
Contribute up to $5,500 in 2017. You could contribute up to $52,0001 if you have unused contribution room from previous years.
At what age can you start contributing? There's no minimum age, but you need employment or business income to earn contribution room. You must be at least 18 years old to make a contribution higher than $2,000..
You must be at least 18 years old to open a TFSA.
What's the age limit for contributing? You can continue contributing until the year you turn 71 years old. By December 31 of that year, the funds in your RRSP must be transferred to another investment solution, such as a RRIF or an annuity.
There's no age limit for contributing and your plan never expires. It's there for life!
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Why limit your RRSP and TFSA contributions to once a year? Make your life easier by using a systematic savings plan to save without effort.

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Little details that matter

Compare contribution room

Contribution room TFSA RRSP
Annual contribution room
  2009 – $5,000
  2010 – $5,000
  2011 – $5,000
  2012 – $5,000
  2013 – $5,500
  2014 – $5,500
  2015 – $10,000
  2016 – $5,500
  2017 – $5,500
  2009 – $21,000
  2010 – $22,000
  2011 – $22,450
  2012 – $22,970
  2013 – $23,820
  2014 – $24,270
  2015 – $24,930
  2016 – $25,370
  2017 – $26,010
Excess contributions None. Contribute up to the annual limit and watch your savings grow tax-free, regardless of your annual income. Contribute up to 18% of earned income (as long as you do not exceed the annual limit).
Unused contribution room carried forward 1% monthly penalty N.B.: If you withdraw funds then make another deposit the same year, you may exceed the contribution limit. 1% monthly penalty ($2,000 of penalty-free excess permitted).
Contribution room can be reused if funds are withdrawn



Contribution limit indexed

  Effective the following year.


Indexation de la limite du droit de cotisation Based on the consumer price index (CPI), rounded to the nearest $500. Based on the increase in the Average Industrial Wage.
Spousal contributions No, but one spouse can give the other spouse the funds required for a contribution without being subject to income attribution rules.2


Transfer to spouse in the event of separation or death

Does not affect contribution room.

Does not affect contribution room.

Comparison of tax rules

Tax rules TFSA RRSP
Contributions deducted from taxable income    
Tax on income generated    
Tax on withdrawals

You can withdraw3 funds from your TFSA at any time and for any reason without paying income tax.

You can withdraw3 funds from your RRSP at any time and for any reason, but withdrawals are taxed.

Minimum withdrawal  

Once your RRSP is converted to a Registered Retirement Income Fund (RRIF).

Affects income-based pension benefits and tax credits (Old Age Security (OAS), Guaranteed Income Supplement (GIS))

Does not reduce benefits or tax credits.

Can reduce benefits or tax credits.

Taxable after death

If the TFSA is transferred to a spouse, it is not taxable.

If inherited by a person other than a spouse, the TFSA is closed and the investments it contains will be converted to non-registered assets. Income generated by such investments will be taxable.

Not taxable if the RRSP is transferred to a spouse.

Legal Disclaimers

1. Since 2009, TFSA contribution room is earned for each year that you are at least 18 years old and a resident of Canada. You will not earn additional TFSA contribution room for any year in which you do not reside in Canada.

2. Attribution rules are a tax mechanism whereby an individual who transfers assets to a third party must include the income earned from these assets in his or her own income.

3. Subject to the terms and conditions applicable to the investments in question.

Understanding RRSPs and TFSAs

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