Deciding between a TFSA and an RRSP or an eSavings account? Compare to see what's right for you.
- Tax-Free Savings Account (TFSA)
- Registered Retirement Savings Plan (RRSP)
Maximum RRSP contribution limits for 2013-2020
Feature | TFSA | RRSP |
---|---|---|
What is it? | A registered investment plan where your investment earnings and withdrawals are tax-free. | A registered investment plan where your investment earnings are tax-deferred and your contributions are tax-deductible. |
How can I use it? | Save for anything you want—short or long-term goals | Save for retirement |
Account ownership? | Individual only | Individual only |
Tax Treatment | ||
2016 | $25,370 | Save for retirement |
Tax-deductible contributions? | No | Yes |
Savings grow tax-free or tax-deferred? | Tax-free (never taxed) | Tax-deferred (taxed upon withdrawal) |
Taxed withdrawals? | Tax-free (never taxed) | Taxed (added to taxable income the year the money is withdrawn) |
Contributions | ||
Annual contribution limits? | $6,000 for 2021 (subject to change) plus previous years' unused contribution room | 18% of previous year's earned income, less any pension adjustment, up to maximum annual contribution limit |
Over-contribution penalty tax? | Yes, 1% per month on excess contributions | Yes, 1% per month on excess contributions (if you exceed $2,000 lifetime over-contribution amount) |
Carry-forward of unused contribution room? | Yes, indefinitely | Yes, until the year you turn 71 |
Need earned income to contribute? | No | Yes |
Ability to contribute after age 71? | Yes | No, must convert to a RRIF or annuity by the end of the year you turn 71 or close the plan |
Withdrawals | $27,230 | Save for retirement |
2020 | $27,230 | Save for retirement |
2020 | $27,230 | Save for retirement |
Withdrawals
If you withdraw funds from your RRSP, you will face withholding taxes. This amount must be held back by the RRSP provider and sent to the government on your behalf. Withdrawals must also be declared as income on your tax return at the end of the year.
Withholding Tax Rates
Effective January 1, 2018, the following withholding tax rates apply:
Amount of RRSP Withdrawal | All Provinces Except Quebec | Quebec |
---|---|---|
Up to and including $5,000 | 10% | 20% |
$5,000.01 to $15,000 | 20% | 25% |
More than $15,000 | 30% | 30% |