A plain-English comparison of Canada's two most powerful tax-sheltered accounts — and which one to prioritize.
| Feature | RRSP | TFSA |
|---|---|---|
| 2025 Contribution Limit | 18% of prior year income, max $32,490 | $7,000/year |
| Lifetime contribution room | Based on earnings; no lifetime max | $95,000 (if 18+ since 2009) |
| Tax on contributions | Deductible (reduces taxable income) | Not deductible (after-tax dollars) |
| Growth inside account | Tax-deferred (taxed on withdrawal) | Tax-free (never taxed) |
| Withdrawals | Fully taxable as income | Always tax-free |
| Withdrawal room | Permanently lost when withdrawn | Restored the following January 1 |
| Age limit to contribute | Must convert to RRIF by Dec 31 of year you turn 71 | No age limit |
| Affects income-tested benefits? | Yes — RRSP withdrawals are income | No — TFSA withdrawals are tax-free |
| First Home Buyers Plan | Withdraw up to $35,000 for first home | FHSA is separate and better for this |
| Spouse contribution | Yes — spousal RRSP available | No — each person has their own TFSA |
| Your Situation | Prioritize | Reason |
|---|---|---|
| Income below $50,000/year | TFSA first | Small tax refund from RRSP; TFSA protects income-tested benefits |
| Income $50,000–$100,000 | Both equally | RRSP gives meaningful refund; TFSA provides flexibility |
| Income above $100,000 | RRSP first | Large tax deduction now; expect lower income in retirement |
| Saving for a house | FHSA (new 2023), then RRSP | FHSA is best of both worlds for first-time buyers |
| Near retirement (within 5 years) | TFSA | RRSP must convert to RRIF by 71; TFSA is more flexible |
| On GIS or income-tested benefits | TFSA only | RRSP withdrawals count as income and reduce GIS/benefits |
| Early retirement (FIRE) | TFSA first, then RRSP | RRSP withdrawals in low-income years; TFSA for flexibility |
A powerful strategy for Canadians in higher tax brackets: contribute to your RRSP and use the tax refund to immediately contribute to your TFSA. This is sometimes called "double-dipping" — you get the RRSP tax deduction AND grow TFSA money tax-free.
Example: $20,000 RRSP contribution at a 40% marginal rate generates an $8,000 refund. Put that $8,000 in your TFSA. You've now sheltered $28,000 of investments with a net out-of-pocket cost of only $12,000.
| Year Turned 18 | Cumulative TFSA Room (2025) |
|---|---|
| 2009 or earlier | $95,000 |
| 2010 | $90,500 |
| 2015 | $64,500 |
| 2020 | $29,000 |
| 2024 | $7,000 |
| 2025 | $7,000 |
To find your exact TFSA room: log in to My CRA Account at canada.ca. Any over-contributions are subject to a 1%/month penalty tax.