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 | Yes, withdrawn amounts can be contributed in future years | Yes, if you have available contribution room in the year you wish to recontribute | Yes |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 |