Which is the better way to save for the future and get a tax break: an RRSP, a TFSA – or both? Comparing the two can help you decide.

What’s the contribution limit?

18% of your previous year's earned income to a maximum amount set each year by the Income Tax Act and Regulations, plus any unused contribution room carried forward from prior years.

What kind of investments can be part of it?

A variety of investments, such as treasury bills, guaranteed interest productsmutual funds, segregated fund contracts, bonds and equities. Some types of investment contracts, such as registered guaranteed investment fund contracts, are themselves RRSPs. Your investment growth will depend on the performance of the investments you choose.

Are contributions tax deductible?

Yes

Are withdrawals taxable?

Yes

Do withdrawals count as part of my taxable income?

Yes

Is investment growth taxable?

Not until it’s withdrawn.

Do you need to be earning an income to contribute?

No. You only need RRSP contribution room.

Is there an opening age limit?

You can open an RRSP as soon as you start earning an income.

Is there an age limit for making contributions?

Yes.

When does it have to be converted into income?

By the end of the year you turn 71

Can you regain contribution room after you make a withdrawal?

No. Withdrawals may only be redeposited if you have sufficient additional contribution room (once withdrawn, you never get the contribution room back).

Can you carry forward unused contribution room?

Yes

When might this be right for you?

  • You want a tax-efficient way to save money for your retirement.
  • You’re looking for a tax deduction from this year’s income.
Learn more about RRSPs

What’s the contribution limit?

2016: $5,500
2015: $10,000
2014: $5,500
2013: $5,500
2012: $5,000
2011: $5,000
2010: $5,000
2009: $5,000

What kind of investments can be part of it?

A variety of investments, such as treasury bills, guaranteed interest productsmutual funds, segregated fund contracts, bonds and equities. Your investment growth will depend on the performance of the investments you choose.

Are contributions tax deductible?

No

Are withdrawals taxable?

No

Do withdrawals count as part of my taxable income?

No

Is investment growth taxable?

No

Do you need to be earning an income to contribute?

No

Is there an opening age limit?

You have to be at least 18 to open a TFSA.

Is there an age limit for making contributions?

No.

When does it have to be converted into income?

There is no requirement at any age to take the cash or convert your plan to an income payment option – for most investment products. Some insurance products such as deferred annuity products, however, do have a maturity date that you need to be aware of and plan for with your advisor.

Can you regain contribution room after you make a withdrawal?

Yes. Any withdrawals may be redeposited the same calendar year if you have sufficient contribution room left, and in subsequent calendar years if you don’t.

Can you carry forward unused contribution room?

Yes

When might this be right for you?

  • You have a major savings goal or you want to start an emergency fund, but you don’t want to pay tax on the investment growth you hope to see.
  • You’ve contributed the maximum allowed to your RRSP and are looking for another tax-efficient way to save for retirement.
  • You want to stop paying taxes on the investment growth on the money you currently have in a regular savings account.
Learn more about TFSAs