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TFSA vs. RRSP: What’s the Difference?

Can you save for the future and get a tax break? TFSAs and RRSPs both offer tax advantages that can help you achieve your saving and investing goals. So, which is right for you?

The truth is, how you should protect your income isn't always clear cut, but your savings plan can include a TFSA or an RRSP or both. But – if you must choose one over the other, it's important to understand how they differ.

Here are some important considerations to help you decide which option is right for you.

Comparing account features

  • Primary Use - RRSPs are typically used to save for retirement. TFSAs are typically used to save for any purpose.
  • Eligibility - You can contribute to an RRSP after you start earning income from employment or certain other sources. To open a TFSA at TD, you must be the age of majority in your province or territory of residence.
  • Contribution Limit - The 2022 contribution limit for a TFSA is $6,000. Your 2021 RRSP contribution limit, on the other hand, is 18% of your earned income reported on your 2020 tax return or $27,830 – whichever is lower, subject to certain adjustments.
  • Unused Contribution Room - Your unused contribution room is carried forward for RRSPs & TFSAs.
  • Withdrawals - RRSP withdrawals are taxable, subject to certain exceptions. With a TFSA, you can withdraw money any time, tax-free!1
  • Withdrawn Amounts - When withdrawing funds from an RRSP, your contribution room is lost for amounts you withdraw subject to certain exceptions. For a TFSA, withdrawn amounts are added back to your contribution room in the following year.
  • Taxation - Contributions made to your TFSA are not tax-deductible. RRSP contributions are tax - deductible. This means any contributions you make may reduce the amount of tax you pay on your personal income.
  • Plan Maturity - An RRSP matures at the end of the calendar year in which you turn 71. There is no upper age limit for a TFSA.
  • Spousal Plan - You can contribute directly to a spousal RRSP. There are no spousal TFSAs.

Saving for retirement

Smiling-couple-looking -out-of-glass-window

If you're saving for retirement, then an RRSP may be a great choice. When you contribute into an RRSP, you defer paying tax from your peak earning years to retirement, when your income and tax liabilities may be lower. Think of it as a strategy that can optimize your saving capabilities.

While a TFSA is not specifically designed as a retirement savings account, its flexibility potentially can make it an excellent complement to an RRSP. If you have already maximized your RRSP contributions, then a TFSA may be an option for you to save more money and get the benefits of tax-free growth and withdrawals.

Look at the different scenarios below. Both Albert and Golnoosh are saving for their retirement, but they have different strategies.

Saving for a home down payment


The Home Buyers' Plan (HBP) is a program that allows first-time home buyers to withdraw up to a maximum of $35,000 from their RRSP towards buying their first home2.

If you're saving for a new home, a good strategy can be to use the money from your RRSP to help pay for your down payment. The amount withdrawn can be paid back into the RRSP through instalments over a 15-year period.

Look at the different scenarios below. Both Samantha and John are saving for a down payment on a home, but they have different strategies.

See what types of RRSPs TD offers

Start saving for what’s essential to you.

Open a RRSP or TFSA with TD and start saving for your retirement.

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