Saving for retirement or a rainy day? Choosing whether to invest the savings in either an RRSP or TFSA is a common question. Age, income and wealth all factor in to the choice that is right for you. The most important thing is to start saving!

The following chart lists the differences between the two plans.

Tax deductible contributions Non-deductible contributions
Taxable withdrawals Tax exempt withdrawals
No minimum age, contribution room is determined by earned income Must be 18 to contribute
Must be withdrawn or converted to a RRIF by age 71 No upper age limit
Contribution limit is lost once funds are withdrawn Contribution room replenishes a year following withdrawal
Contribution room is determined by earned income – 18% of prior year, up to the CRA annual limit Contribution room is the same for all taxpayers regardless of their income


Now, Which is Better for You?

  1. Do you want to reduce your taxable income?
  2. Well, who doesn’t want to reduce their taxable income? The second part to this question is – what is your tax bracket? The higher the tax bracket the more beneficial an RRSP contribution is.

    RRSPs are best suited to high income earners and those planning to use either the First Time Home Buyers Plan or Life Long Learning Plan.

  3. Do you have taxable investment income?
  4. TFSA’s can include many types of investments, not just a traditional savings account. If you have investment income, it may be beneficial to move some of your investments into a TFSA.

    TFSAs are best suited to those with excess cash or those with short term savings goals such as a car, vacation or wedding.


Contact us to discuss your tax situation in more detail.

Your referrals are welcome. Each year we accept a limited number of new personal tax clients. If you know someone who would like to work with us, please suggest they call early to avoid disappointment.