RRSP or TSFA

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RRSP or TFSA: Which to choose?

An RRSP is a long-term retirement savings fund that is tax deductible and taxable on withdrawal. A TFSA is multi-purpose, non-deductible and non-taxable on withdrawal. Unlike an RRSP, it does not reduce your government benefits.

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Bring your ideas to life with a TFSA

Grow your funds without being taxed on your withdrawals. TFSAs are your savings reserves. Click on a project to discover savings tips.

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TFSA: Top 10 Questions and Answers

Prepare for your future with an RRSP

Get more value on your money, tax-free. Your RRSP is an additional source of income, particularly during retirement. Discover our savings tips and tricks.

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Retirement

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Contributing to an RRSP to pay less in taxes: Four real-life cases

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Tip!

Contribute to your RRSP or TFSA only once a year? Automate your contributions without having to think about it: systematic savings.

What you need to know about the two large registered savings plans.

	Tax-Free Savings Account (TFSA)	Registered Retirement Savings Plan (RRSP)
Which to choose?	Use your TFSA to help finance projects: vacations, wedding, a car, a getaway home, or even just a financial cushion.	Use your RRSP like a second source of revenue during retirement. You can also become a homeowner through the Home Buyers' Plan (HBP). Or go back to school with the Registered Education Savings Plan (RESP).
Deductible or taxable?	Contributions to your TFSA are non-deductible, nor are they taxable at withdrawal.	Your RRSP contributions are deductible, but withdrawals are taxable. Perfect if you have a lower tax rate in retirement.
Maximum contribution?	Contribute up to $6,000 in 2019 and 2020 to your TFSA. Or up to $63,500 by claiming your unused contributions from previous years. You must be of age and a Canadian resident¹.	Contribute up to 18% of your income to your RRSP. Or up to $26,500 in 2019. Your unused rights from previous years can increase your investment capacity.
	Explore the TFSA	Explore the RRSP

Tip!

Are you 71 years or older? Continue saving by putting your unused retirement income in a TFSA.

Do you have children? Plan for their post-secondary education with an RESP.

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 2018 – $5,500 2019 - $6,000	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 2018 – $26,230 2019 - $26,500
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	Annually.	Annually.
Contribution limit indexed	Effective the following year.
Index of the contribution limit	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.

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