Saving Money: RRSP or TFSA?

Reviewed: January 2023

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 follow. We also invite you to review our Terms and Conditions for the information provided.


RRSPs are retirement savings accounts that financial institutions register with 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 income (up to a maximum yearly amount) to their RRSP. RRSP contributions potentially reduce the amount of tax you pay. Each year can be made up to March 31 of the following year.

Eventually, you will retire, and your RRSP becomes an income source. When that happens, you must convert your RRSP to a Registered Retirement Income Fund (RRIF) and begin taking withdrawals, which are taxed as income (you will receive a T4RIF in February). You must do this by age 71 at the latest. There are rules about how much must be withdrawn yearly, and a good accountant such as KATA Accounting Solutions can help you manage this.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.


A TFSA is a savings account that is registered with, but not taxed by, 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, CRA increases the amount you can invest in your TFSA. The contribution room for 2019 to 2022 was $6,000. The annual TFSA dollar limit for the year 2023 is $6,500.

The TFSA allows for a lot of flexibility. Unlike RRSPs, you can withdraw from your TFSA and replace the money the following calendar year. For instance, if you build up to a balance of $100,000 through contributions, you can withdraw that amount this year and replace it next year PLUS your annual contribution. 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…

Banks salespeople have sales targets to meet and put themselves first regarding RRSP and TFSA transactions. Expert accountants at KATA Accounting Solutions put you first.


Whoever you’re working with, your RRSP’s or TFSA’s 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 investing your RRSP’s and TFSA’s.

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 better.

2 – Do I have the contribution room? If not, no contribution should be made.

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.

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