Features | TFSA | RRSP |
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Who’s eligible | TFSA Canadian residents who are at least 18 years old are eligible, regardless of income. You must have reached the age of majority in your province or territory to open an account. | RRSP Canadian citizens who are less than 71 years old with earned income. |
Tax advantages | TFSA Investment earnings in a TFSA are tax-sheltered, but amounts invested in a TFSA are not tax-deductible. | RRSP Amounts invested in an RRSP can be deducted from your income, up to the annual allowable limit. Investment earnings in an RRSP are tax-sheltered. |
Access to funds | TFSA Funds can be withdrawn from a TFSA, depending on the type of investments you hold. The amount withdrawn is tax-free. There are no restrictions on withdrawals – you can take out any amount for any reason. | RRSP Funds can be withdrawn from an RRSP, depending on the type of investments you hold. The amount withdrawn is taxable at the time of the withdrawal and must be claimed as income on your taxes. |
Income-based benefits affected by withdrawals | TFSA Withdrawals don’t affect how your income is calculated for tax purposes. That means, amounts taken from a TFSA won’t be considered when determining if you qualify for government benefits like the Old Age Security pension, Guaranteed Income Supplement, Employment Insurance benefits and the Canada Child Benefit. | RRSP Withdrawals are considered taxable income in the year that they’re made. The various benefits are then calculated. |
Contribution limit | TFSA $7,000 in 2024, regardless of income. The annual limit will be indexed to the inflation rate and rounded yearly to the nearest $500.
Learn more about TFSA contributions. | RRSP The annual contribution limit is equivalent to 18% of your earned income from the previous year, up to a limit defined by law for that year, less any pension adjustment.
Learn more about RRSP contributions. |
Unused contribution room | TFSA If you contribute less than your annual allowable limit, the difference will automatically be carried forward to the next year, and again the following year, and so on. What’s more, any amount you withdrew last year will be added to your contribution room this year, so you never lose your contribution room. | RRSP If you contribute less than your annual allowable limit, the difference will automatically be carried forward to the next year. Any amount you withdraw from your RRSP won’t be added to your contribution room. |
Excess contributions | TFSA Excess contributions are subject to a tax of 1% per month, for each month the excess remains in the account. | RRSP Excess contributions can’t be more than the lifetime cumulative limit of $2,000. The tax on the surplus is 1% per month, and applies until you withdraw the surplus from the RRSP. |
Account conversion | TFSA You can contribute to a TFSA throughout your lifetime. There’s no need to convert it to another type of account. | RRSP You can contribute to an RRSP until the end of the year when you turn 71. At that point, it must be converted to a Registered Retirement Income Fund (RRIF) or used to buy an annuity. With a RRIF, you’re required to take an annual minimum withdrawal, and all RRIF withdrawals are considered income for tax purposes. You can also cash in the entire amount of your RRSP. |
