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Not until it’s withdrawn.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No. Withdrawals may only be redeposited if you have sufficient additional contribution room (once withdrawn, you never get the contribution room back).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