TFSA or RRSP? It Depends on Your Financial Plan.

Every year around this time, the question comes up over whether to invest in a Registered Retirement Saving Plan (RRSP) or a Tax-Free Savings Account (TFSA). The debate will continue because both vehicles have great features and benefits, and the answer depends on your plans for the future.

A Registered Retirement Savings Plan, as the name suggests, is generally used for saving for retirement. Contributions are tax-deductible and investments grow tax-free within the account. Both the contributions and investment earnings are taxable upon withdrawal (by age 71), but the idea is that these withdrawals will happen after retirement, when your income and tax rate is expected to be lower than when you contributed. Withdrawals are included in income and affect eligibility for federal benefits and tax credits, such as child tax benefits and Old Age Security. Once you withdraw funds from your RRSP, the contribution room is gone, unless you participate in the federal Home Buyers’ Plan or Lifelong Learning Plan.

While your contributions to a Registered Retirement Savings Plan help you save for retirement, a Tax-Free Savings Account is a great way for you to accumulate wealth and plan for your financial goals, both short and long-term. The Canadian government introduced TFSAs in 2009 to encourage people to save money. Since you’ve already paid tax on the portion of your income you put into your TFSA, you won’t have to pay anything when you take money out. Nor will you have to pay tax on the investment growth within the plan. Unlike an RRSP, you’re free to withdraw at any time without penalty, but there are limits to how much you can contribute every year. The maximum you’re allowed to put into a TFSA each year is known as the contribution limit, and it varies from year to year.

For 2023, the annual TFSA contribution room has been boosted to $6,500

Amounts withdrawn from a TFSA are not subject to tax and there is no age limit as to when funds must be withdrawn. Withdrawals are added back to your available TFSA contribution room in the following calendar year, so there is no real downside to using TFSA savings for large purchases.

Where You Are in Your Life

If you’re a student or just starting out in your career and presumably in a lower tax bracket, you might consider putting your money into a TFSA to help build up your capital to purchase a home or practice. Then, as your career advances and as you enter higher income brackets, you can withdraw your TFSA funds and make contributions into your RRSP to help lower your income taxes.


If you are in a middle- or higher-income tax bracket, there may not be a clear advantage or an either/or decision.  An RRSP is great long-term, tax-deferred retirement savings strategy while a TFSA is a flexible way to invest for short- and long-term goals. Both types of plans offer tax advantages and allow you to invest in mutual funds, stocks, segregated funds, bonds, and Guaranteed Investment Certificates (GICs); but deciding which account is more appropriate for you depends on several factors, including your current circumstances, future dreams, and your financial plan.


Find out more about when you should contribute to an RRSP, TFSA, or both, by talking to an Investment Advisor from CDSPI Advisory Services Inc. Investment solutions from CDSPI include professional investment management and strong long-term performance under a highly competitive fee structure. Our certified financial planner® professionals can show you how TFSAs and RRSPs form part of a comprehensive financial plan that can provide you with the flexibility you need in terms of savings opportunities and can help determine the best tax-advantaged investment strategy to help you achieve your financial goals.

Next Steps

Book a meeting

Book a meeting with an advisor at a time that suits your schedule.


Get started by applying for a TFSA, or if you already have one, make a deposit today.

Learn more

Read about our six tips for tax savvy dentists, or learn more about CDSPI Investments.