Updated: October 2026

Should you invest in a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA)? Our answer is always, “It depends on the situation.” Contact us today if you need expert advice on your specific situation.

In this blog post, we review some general guidelines to follow. We also invite you to review our Terms and Conditions for the information provided.

RRSPs

RRSPs are retirement savings accounts that financial institutions register with the Canada Revenue Agency (CRA). You can hold as many RRSPs as you want at several different banks, but we recommend keeping the number of accounts small.

Each year, an individual may contribute up to 18% of their earned income (up to a maximum yearly dollar amount) to their RRSP. RRSP contributions are tax-deductible, which potentially reduces the amount of tax you pay for that year. Contributions for a specific tax year can be made up to 60 days after the end of the year (which normally falls on March 1, or February 29 in leap years).

Eventually, you will retire, and your RRSP becomes an income source. You must close your RRSP by December 31 of the year you turn 71 at the latest. When that happens, you have a few options. Most commonly, people convert their RRSP to a Registered Retirement Income Fund (RRIF) and begin taking withdrawals, which are taxed as income (you will receive a T4RIF in February). Alternatively, you can purchase an annuity or withdraw the funds as a lump sum (though a lump sum will trigger heavy immediate taxation). If you choose a RRIF, there are rules about how much must be withdrawn yearly, and a good accountant such as KATA Accounting Solutions can help you manage this.

Will I Get a Refund if I Contribute to My RRSP?

It depends on your situation. RRSPs are weighed against your income, so you may still have a balance owing. A refund is not guaranteed in any situation.

TFSAs

A TFSA is a savings account that is registered with, but not taxed by, the CRA. Like RRSPs, you can have multiple accounts at different banks, but your total contribution room is the same regardless of how many accounts you have. Each year, the CRA announces the amount you can invest in your TFSA. The contribution room for 2019 to 2022 was $6,000, and $6,500 for 2023. For the years 2024 through 2026, the annual TFSA dollar limit is $7,000 per year.

The TFSA allows for a lot of flexibility. Unlike RRSPs, you can withdraw from your TFSA and the CRA will add that exact withdrawal amount back to your available contribution room on January 1 of the following calendar year. For instance, if you build up to a balance of $100,000 through contributions and investment growth, you can withdraw that amount this year and put it back next year PLUS your new annual contribution room. This is a great way to save for fun stuff like a house, a car, or a vacation.

Note that, generally speaking, transferring a “regular” investment account to a TFSA or RRSP should be handled with care. Such transfers can create tax-payable situations and preclude some tax benefits to help offset the taxes payable.

But My Bank Says…

Some financial institution representatives have sales targets to meet, which means they might not always put your unique tax needs first regarding RRSP and TFSA transactions. Expert accountants at KATA Accounting Solutions put you first.

Invest!

Whoever you’re working with, your RRSPs or TFSAs need to be invested. A common trap people fall into is making the contributions, but not paying attention to what happens after. A tiny interest rate on a TFSA Savings account is not going to grow enough for you to retire with sufficient financial security. Make sure you are planning for your retirement by actually investing the money inside your RRSPs and TFSAs.

CRA My Account

Don’t want to hire an accountant? We respect your commitment to DIY finance. You can check your TFSA and RRSP contribution room yourself on your My CRA online account. If you haven’t already, sign up today. It only takes a few minutes.

To TFSA or to RRSP?

This will always depend on your situation. Some factors to consider are:

1. Do I have taxable income? If not, TFSA is generally better.
2. Do I have the contribution room? If not, no contribution should be made to avoid penalties.
3. Will I need the money at some point in the near future? If so, TFSA is often better.
4. Do I want to have extra income on top of my pension when I retire? If so, RRSP may be better.

Contact KATA today. We would love to help you get the most from your savings.