Get flexibility and tax savings with a Tax-Free Savings Account (TFSA)
The TFSA was introduced in 2009 to give Canadians a new tax-advantaged way to invest. Like a Registered Retirement Savings Plan (RRSP), TFSAs can hold many kinds of investments. Unlike RRSPs, your TFSA contributions are not tax deductible, but you can withdraw as much money as you need from your TFSA tax-free at any time.
Annual contribution limits have varied since the introduction of the TFSA in 2009 (see table). Importantly, any room you don’t use in a given year gets carried forward indefinitely.
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Despite its name, the TFSA is more of an investment account than a simple savings account. A traditional savings account cannot hold investments and its income is taxed, while a TFSA can hold investments and all interest income, dividends and capital gains are tax-free.
Greater flexibility helps you meet your goals
You can use a TFSA to save for short-term goals, such as a vacation, or long-term goals, such as acquiring that new car.
There are advantages to using a TFSA to help save and invest for retirement. Since contributions to your TFSA are made using after-tax dollars, withdrawals aren’t considered taxable income. This means withdrawals will not impact your eligibility for benefits such as Old Age Security and the Guaranteed Income Supplement, or the amount you’re eligible to receive.
If you have never contributed to a TFSA, you have $102,000 of available room up to the end of 2025.
The main benefit of a TFSA is that you’ll never be taxed on your investment earnings or any withdrawals you make.
Maximize your TFSA tax advantage
To make the most of the tax advantages offered by TFSAs, your financial advisor may recommend equity or fixed-income mutual funds, which have the potential to earn higher returns than GICs and high-interest savings accounts.
iA Clarington offers a range of funds managed by skilled and experienced investment professionals. Your financial advisor can help you select the iA Clarington funds that are best suited to your needs, risk tolerance and investment time horizon.
Where should I save?
TFSAs, RRSPs and savings accounts can each play a role in helping you meet your short- and long-term financial goals.
| TFSA | RRSP | Savings Account | |
|---|---|---|---|
| What is the account for? | General savings, retirement savings, home purchase, continuing education | Retirement savings, home purchase, continuing education | General savings |
| How much can I contribute? | Up to $7,000 in 2025 | Up to 18% of the income you earned in the previous year (up to a maximum of $31,560 for the 2024 tax year and $32,490 for the 2025 tax year) | No limit |
| Can I delay contributions until a later date? | Yes, unused contribution room can be carried forward | Yes, unused contribution room can be carried forward | There is no contribution limit |
| Can I deduct contributions from my income tax? | No | Yes, an RRSP contribution can reduce the income tax you pay | No |
| What can I invest in? | A wide range of investments | A wide range of investments | Your financial institution pays interest on the money in your account |
| Will my investments be taxed as they grow? | No | No | Yes |
| Will I be taxed when I withdraw money? | No | Yes, on both your original contributions and the money you’ve earned; however, by the time you withdraw money from your RRSP, your income may be lower, so you’ll likely be taxed at a lower rate | No |
| Can I recontribute amounts that I withdraw? | Yes, withdrawn amounts can be contributed in future years | Yes, if you have available contribution room in the year you wish to recontribute | yes |
| At what age can I start saving? | 18 | Any age | Any age |
| When do I have to cash out? | No requirement | In general, your RRSP must be converted to a Registered Retirement Income Fund (RRIF), annuity or other income option at age 71, and you must make minimum taxable withdrawals; you can also simply deregister your RRSP savings, although this may result in unwanted tax consequences | No requirement |
| Will cashing out affect any of my government benefits? | No, because TFSA withdrawals don’t count as income | Maybe, because RRSP withdrawals count as income; the extra income could reduce the amount you receive from some “income-tested” benefits | No, because withdrawals don’t count as income |
Contact your financial advisor to learn how a TFSA from iA Clarington can help you achieve your financial goals.
For definitions of technical terms in this piece, please visit iaclarington.com/glossary and speak with your investment advisor. The information provided should not be acted upon without obtaining legal, tax, and investment advice from a licensed professional.
Commissions, trailing commissions, management fees, brokerage fees and expenses all may be associated with mutual fund investments, including investments in exchange-traded series of mutual funds. The information presented herein may not encompass all risks associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The iA Clarington Funds are managed by IA Clarington Investments Inc. iA Clarington and the iA Clarington logo, iA Wealth and the iA Wealth logo, and iA Global Asset Management and the iA Global Asset Management logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license. iA Global Asset Management Inc. (iAGAM) is a subsidiary of Industrial Alliance Investment Management Inc. (iAIM).