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Difference between TFSA and RRSP

Difference between TFSA and RRSP

When it comes to saving for retirement, there are a few different options available to you. Two of the most popular options are the TFSA and RRSP account. Both accounts have their pros and cons, so it can be difficult to decide which one is right for you. In this blog post, we will compare and contrast the TFSA and RRSP account, so that you can make an informed decision about which one is best for you.

What is TFSA?

TFSA Tax-Free Savings Account is an investment account that allows you to save money and earn interest without being taxed on the money you earn. TFSA was introduced in 2009 by the Canadian government as a way to help Canadians save for their future. TFSA accounts are offered by banks and financial institutions, and they are available to all Canadian residents who are 18 years of age or older. TFSA contribution limits are set by the government and they change every year. The TFSA contribution limit for 2019 is $6,000. You can withdraw money from your TFSA at any time, and you can re-contribute the money you withdraw in the same year without affecting your contribution limit. TFSA is a great way to save for your future, and it’s also a great way to save on taxes.

What is RRSP?

RRSPs are a type of savings plan that is registered with the government. RRSPs allow Canadians to save money for their retirement on a tax-deferred basis. This means that money invested in an RRSP can grow tax-free until it is withdrawn. RRSPs are available to all Canadian residents who have earned income and are 18 years of age or older. There are two types of RRSPs: individual and spousal. Individual RRSPs are registered in the name of a single person, while spousal RRSPs are registered in the name of two people (usually a husband and wife). Both types of RRSPs offer the same tax benefits. The main difference is that contributions to a spousal RRSP may be eligible for a deduction on the contributor’s tax return, even if the contributor does not claim the RRSP as an asset on their own return. Contributions to RRSPs must be made by the end of the year in order to be eligible for a deduction on that year’s taxes. RRSPs can be used to invest in a variety of assets, including stocks, bonds, and mutual funds. Withdrawals from RRSPs are taxed as income in the year they are

Difference between TFSA and RRSP

TFSA and RRSP are both financial saving tools with their own advantages and disadvantages. TFSA account is best for those who are young and have a long time horizon for their savings, while RRSP account is better suit for older individuals who are closer to retirement. TFSA account offers more flexibility since you are able to take out the money without any penalties, while RRSP has stricter rules and you will be taxed if you withdrawal the money before retirement. TFSA account also allows you to re-contribute the money you withdrawal back into the account, but this is not the case for RRSP. Lastly, TFSA grows tax-free while RRSP is taxed when the money is withdrawn.


Have you decided which account is best for you? If not, hopefully this article has helped clear up some of the differences between a TFSA and RRSP. Remember, it’s important to consult with an accountant or financial advisor to see what will work best for your unique situation. Both accounts have their own benefits, so it ultimately comes down to what will make you the most money in the long run. Thanks for reading!

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