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Businessman in glasses looking at window and deciding between TFSA vs RRSP.

TFSA vs RRSP: What they are, differences, and how to choose

When it comes to saving and investing, choosing between TFSA and RRSP is a common scenario for many Canadians. The truth is, both the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) offer tax advantages and are great investment vehicles.

To make your decision-making easier, we’ve prepared a comprehensive guide on how each account works, their unique benefits, and how they can fit into your financial goals.  

Amur Capital offers a simple way to grow your money and receive a stable and consistent return. Contact us now, and we’ll help you start in a few minutes.  

Key Takeaways:  

  1. TFSA and RRSP are registered accounts in Canada that offer tax advantages, providing tax-sheltered or tax-deferred investment returns, making them valuable tools for saving and investing. 
  2. The choice between TFSA and RRSP depends on individual circumstances and financial goals. There are various scenarios where one account may be more advantageous, such as education, down payment, retirement, and personal income levels. 
  3. Amur Capital’s Mortgage Investment Corporations (MICs) are eligible for both TFSA and RRSP, making them a versatile option that can utilize the tax advantages of both accounts while earning a stable and consistent return. 

TFSA vs RRSP: The basics 

Both Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) are considered registered accounts, which are specially created accounts that are given unique tax advantages by the Canada Revenue Agency (CRA). Your investment returns, whether interest, capital, or dividends, can be tax-sheltered, i.e., not subject to tax or tax-deferred until withdrawal. 

Other types of registered accounts in Canada include the Registered Retirement Income Fund (RRIF), Registered Education Savings Plan (RESP), and First Home Savings Account (FHSA). 

What is a TFSA?

Tax-Free Savings Account Features for 2024

Adapted from Canada Revenue Agency. Illustration from Amur Capital. 

The Tax-Free Savings Account (TFSA) was introduced in 2009 as a registered account designed to encourage people to save and invest money without paying tax on the interest or investment income earned within the account. While you can withdraw money tax-free, they are not tax-deductible like RRSPs. 

For 2024, the federal government set the TFSA limit (contribution room) at $7,000. If you contribute more than your available contribution room, you will be subject to penalties. Any unused contribution room can be carried forward at the start of the following calendar year.  Since inception, any Canadian who was over 18 years of age in 2009 has a lifetime contribution limit of $95,000.  

Eligibility of TFSA 

Any Canadian resident with a valid Social Insurance Number (SIN) and 18 years of age or older is eligible to open a TFSA. Non-residents are also eligible as long as they satisfy some requirements. However, they will be subject to a 1% tax for each month the contribution stays in the account.  

Benefits of TFSA 

  1. Tax-free investment growth: A TFSA is often called a “tax-advantaged” account because you can avoid paying income taxes on your contributions or investment income earned within the account. 
  2. Contributions made with after-tax dollars: Since the government has already taxed the money you contribute to the account; the returns won’t get taxed further, even if you withdraw them. 
  3. Tax-free withdrawals: You can make tax-free withdrawals at any time without any amount limits. However, withdrawals in any calendar year cannot be replaced within the same calendar year. 

What is an RRSP? 

Registered Retirement Savings Plan Features for 2024

Adapted from Canada Revenue Agency. Illustration from Amur Capital. 

The Canadian government introduced a Registered Retirement Savings Plan (RRSP) in 1957 to promote saving for retirement. Any money you put within the contribution limit of the RRSP will be exempt from income taxes the year you made the deposit, which can reduce your taxable income. 

RRSPs also allow you to invest up to 18% of your annual income tax-free from the previous year, plus any unused contributions from previous years. Since they are designed for long-term retirement savings, there are significant penalties for withdrawing early. 

Eligibility of RRSP 

Any Canadian resident who has earned income and files a tax return can set up an RRSP. While no minimum age is required to open an account, financial institutions may require customers to be the age of majority. Once set up, contributions can be made until 71 years old. 

Benefits of RRSP 

  1. Tax-free investment growth: Similar to the TFSA, holding investments in an RRSP account will not be taxable. This tax-free growth will be beneficial in generating higher compounded returns. 
  2. Contributions are tax-deductible: Any RRSP contribution reduces your net taxable income. Also, you don’t always have to claim the RRSP contributions in the same year they’re made since deductions can be deferred. 
  3. Tax-deferred savings: Money contributed, and investment returns earned within an RRSP is tax-sheltered until you withdraw the funds. Taking out the funds when you are likely to be in a lower tax bracket, e.g. retirement, can give you considerable tax savings. 

TFSA vs RRSP: How do contributions and withdrawals work?  

TFSA vs RRSP: Tax-free or tax-deferred?  

Simply put, both TFSAs and RRSPs offer tax-free growth in the investments held in these accounts. The main difference is in withdrawals: 

  • TFSAs offer tax-free withdrawals; RRSPs do not. 
  • RRSPs offer tax-deductible contributions; TFSAs do not. 

How to choose between TFSA and RRSP 

Choosing between TFSA and RRSP shouldn’t be tricky. While they both have their own uses and advantages, the type of account you choose will ultimately depend on your goals and financial situation. Ideally, you can contribute to both at the same time. If you can contribute to only one account at the moment, here are a few scenarios where one account may be more advantageous. 

Choosing based on personal goals  

TFSA or RRSP for education 

If you are considering furthering your education, the RRSP’s Lifelong Learning Plan (LLP) can help. The LLP allows you to withdraw up to $10,000 from your RRSP per calendar year to finance full-time education for yourself, your spouse or common-law partner. However, any money you withdraw must be paid back into the RRSP within ten years. 

Considering that as a student, you might have to make school-related withdrawals in the short or medium term, then the tax-free withdrawals of TFSA could provide a better advantage. In addition, you can get tax-free growth on your investments with the TFSA account. 

TFSA or RRSP for downpayment

Suppose you already have an RRSP that you contribute regularly to. The RRSP’s Home Buyer Plan (HBP) will benefit from this goal. Like the LLP, the HP allows you to withdraw up to $35,000 tax-free for a downpayment on a new home. You’ll have 15 years to repay the funds, with the second year as the start of the repayment period. 

TFSA might be better if you are looking to purchase a home in the next 5 to 7 years, as that can give you tax-free growth and withdrawals. And while HBP can significantly save you upfront costs by allowing you to use your RRSP savings as a downpayment, once you factor in the mortgage payments along with the HBP repayments, the total cost might be higher overall. 

TFSA or RRSP for retirement

While you can use TFSAs for retirement, RRSPs are more advantageous than the former as they were primarily designed for this goal, especially if you expect the RRSP to be your only source of income by 71. You’ll be in a lower tax bracket at this time, even if you are forced to withdraw from the account as your income. 

Suppose you have multiple sources of income and want to retire early. In that case, TFSAs can work better than RRSPs since additional sources of income can put you in a higher tax bracket and TFSAs can enable you to grow and withdraw this money tax-free before retirement. Moreover, TFSA withdrawals are not considered taxable income, so they won’t impact the benefits you get from the government, like the Old Age Security (OAS) or the Guaranteed Income Supplement (GIS), unlike RRSP withdrawals.  

However, it is important to note that the TFSA lifetime limit of $95,000 may not be enough to fund your retirement.  

Choosing based on personal circumstances

TFSA or RRSP for students

If you are a student, your current earnings are significantly lower than when you retire, which means you’re likely in a lower tax bracket. By holding investments and savings in a TFSA account, you’ll get tax-free growth on the invested money and the ability to withdraw tax-free for emergency expenses or medium-term goals, such as buying a car or repaying student loans.  In addition, the tax benefits of an RRSP are the greatest when you are in the highest tax bracket. 

TFSA or RRSP for low-income families

Individuals and families in lower tax brackets might be more suited to use TFSAs over RRSPs. This is because the RRSP tax savings can be insignificant. As you progress with your career, you may be in a higher tax bracket when you withdraw. In addition, TFSA withdrawals will not impact income-based benefits and credits, such as child tax benefits, OAS, or GIS. 

TFSA or RRSP for high-income earners 

Conversely, individuals in the higher tax brackets can benefit from contributing to an RRSP and getting significant tax refunds. Moreover, the tax refunds can be reinvested into the RRSP, a TFSA, or a non-registered account while retaining the benefit of withdrawing from the RRSP during retirement. Ideally, using both accounts can provide a well-rounded approach to tax-efficient savings and investments. 

Amur Capital: Achieve your investment goals with any account

Happy African American couple shake hand with Amur Capital investor relations.

Whether you prefer the tax-free withdrawals of TFSAs or tax-deferred earnings of RRSPs, you can hold Amur Capital’s Mortgage Investment Corporation (MIC) shares in any registered account. Amur Capital’s MIC funds are a versatile option that can give you stable, consistent annual returns. 

With MICs, investors can tap into Canada’s thriving real estate market without buying or managing any property. MICs can also provide recurring dividend payments that can be cashed out or reinvested for compound growth. In the case of a TFSA, MIC returns can be withdrawn without tax penalties. Meanwhile, with RRSPs, earnings are tax-deferred until withdrawals. 

Ready to invest? Contact our Investor Relations team today to get started.  


The choice will depend on your personal circumstances and financial goals. When you contribute to an RRSP, you can deduct the contribution amount from your income, but you have to pay tax when you withdraw the money. With a TFSA, you can withdraw money tax-free at any time 

A TFSA can provide some advantages when your income is on the lower side, while an RRSP can have a few benefits if your income is on the higher side, and you expect to be in a lower tax bracket during retirement.  A TFSA can be used as a savings vehicle that you can withdraw from and replace. 

Both accounts are intended for saving. However, TFSA on its own cannot generate interest or returns. Depending on the type of investments held in a TFSA, it may or may not generate higher returns than regular savings accounts. 

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