Comparing RRSPs, TFSAs and savings accounts
Choose the right accounts for your saving and retirement goals
The table below compares the key features and benefits of RRSPs, TFSAs and savings accounts.
| Question | 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 $6,000 in 2020 | Up to 18% of the income you earned in the previous year (up to a maximum of $26,500 for the 2019 tax year and $27,230 for 2020) | 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 – currently at historically low rates |
| 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 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 | Yes, withdrawn amounts can be contributed in future years | Yes, if you have available contribution room in the year you wish to recontribute | Yes |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 get from some “income-tested” benefits | No, because withdrawals don’t count as income |
