Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

TFSA vs RRSP: Which investment is better in 2023?

Compare the pros and cons of TFSAs vs RRSPs to find the best fit for your financial situation.


Invest with CIBC Investor's Edge

CIBC Investor's Edge logo
  • Free trades for Young Investors
  • Low trading fees
  • Easy to use app
Go to site
Finder Rating: ★★★★★ 3.8 / 5

Tax-free savings accounts (TFSAs) and registered retirement savings plans (RRSPs) are two types of Canadian investment and savings products. Both products function a bit like a bank account in that you can use them to hold other investments and earn a set rate of interest on your savings. The major appeal of these types of accounts is that any interest you earn on them will be tax-free.

The main differences between TFSAs and RRSPs boil down to the way you can claim them on your taxes and how much you’ll be taxed to withdraw money from them. There are also more technical differences to consider such as the amount you can contribute annually with each account.

TFSA vs RRSP: Quick comparison




Tax-free interest


Tax-free withdrawals


No. You’ll pay between 10% and 30% interest before 65 (and it will be taxed as income after 65)

Tax-deductible contributions


Holds other investments


Contribution amount

$6,000 per year (in 2019) or $63,500 total

18% of earned income or up to $27,230 in 2020

Expiry date


Must be converted to a registered retirement income fund (RRIF) at the age of 71

TFSA vs RRSP: Which investment should I choose?

TFSAs and RRSPs are both government-registered plans that let you earn tax-free interest on your savings. The investment that’s best for you will depend on a number of factors like what you want to save up for and when you intend to take your money out.

Registered retirement savings plan (RRSP)

RRSPs can be a good choice if you’re saving up for your retirement and you don’t plan to access your money anytime soon. The biggest benefit of these types of investments is that you can deduct the amount you put in each year from your taxes. The downside is that you’ll be taxed heavily on your savings if you need to withdraw them earlier than anticipated. This type of investment is a particularly good fit for high-income earners.

Tax-free savings account (TFSA)

TFSAs can be a good choice if you want to save money in the long term, but you still want to be able to access it in an emergency. The biggest benefit of these types of investments is that you can take your money out whenever you want without being penalized. The downside is that you won’t be able to claim any money you put in as a tax deduction. This type of investment is a particularly good fit for those who are in a lower tax bracket or don’t have much to invest.

Can I hold both types of investments at once?

You can definitely hold a TFSA and an RRSP at the same time. This could be a good solution for you if you want to save for retirement, but you’d also like to stow away an emergency fund that you can use at any time, without penalty.

You may even want to go so far as to max out your contribution for both types of investments each year. This will let you take advantage of tax breaks while still earning the maximum amount of tax-free interest on your investments.

RRSP vs TFSA: Which offers better returns?

The return you’ll earn with TFSAs vs RRSPs will depend less on which investment you choose and more on which financial institution you put your money with. The provider that offers the highest interest rate on your investment will typically net you the highest returns overall.

Your returns will also be influenced by your risk appetite and what type of investments you hold in your TFSA or RRSP. Both accounts are designed to hold a number of investments like stocks, bonds, mutual funds, guaranteed investment certificates and precious metals. You’ll likely earn a higher return if you mix and match these investments to create a balanced portfolio within your TFSA or RRSP.

TFSA vs RRSP: Which earns you more flexibility?

TFSAs offer much more flexibility than RRSPs because they let you take your money out of your account whenever you want, without penalty. That said, you won’t be able to take advantage of special benefits like tax deductions which can help to bring down your taxable income and save you money at tax time.

RRSPs, on the other hand, give you higher contribution amounts and give you tax deductions. That said, once your money is invested, you can’t really take it out because you’ll lose a huge chunk of your savings to taxes.

How much will I pay in taxes to withdraw from my RRSP?

The current rate of RRSP withholding tax is 10% for withdrawals up to $5,000, 20% for withdrawals between $5,000 and $15,000, and 30% for withdrawals over $15,000. There are only two exceptions that allow you to withdraw money from your RRSP for purposes other than retirement.

  • Home Buyers Plan. You can take out up to $35,000 for a down payment on your first home, but you’ll need to repay it over 15 years.
  • Lifelong Learning Plan. You can use between $10,000 and $20,000 for school but you’ll have to repay it over 10 years.

TFSA vs RRSP: Which allows you to contribute more?

RRSPs let you contribute more over the lifetime of your investment, though this may depend on how much money you earn. Your RRSP contribution limit for 2019 is 18% of the earned income you reported on your tax return in the previous year, up to a maximum of $26,500.

TFSAs also let you contribute a significant amount if you don’t want to lock your money away over the long term. You can invest $6,000 per year (as of 2019) with up to $63,500 for the lifetime of your TFSA.

For both types of investments, you can carry your unused contribution amounts forward into future years. You’ll also incur penalties from the Canada Revenue Agency (CRA) if you exceed your maximum allowable contribution in any given year.

Pros and cons of RRSPs


  • Tax benefits. Workers contributing to an RRSP may deduct contributions against their income and their investments will be sheltered from taxes.
  • Large contribution amount. You can contribute up to 18% of earned income to a maximum of $26,500, and any unused amount can be carried over to future years.


  • Lack of liquidity. Withdrawing money from an RRSP before retirement carries hefty penalties as well as tax liabilities.
  • Tax complications during retirement. RRSPs must start paying out an income when you turn 71, which can burden you with taxes or interfere with Old Age Security benefits.

Pros and cons of TFSAs


  • Tax-free withdrawals. TFSAs let you take money out of your savings without having to pay taxes on it.
  • No expiry date. You won’t have to worry about your TFSA rolling over into a retirement income fund in the same way that an RRSP will.


  • Small contribution limit. You can only put around $6,000 per year into your TFSA so it will likely not be enough to pay for your whole retirement.
  • No tax refund. You won’t be able to claim your contributions on your taxes to reduce your taxable income.

How can I maximize my savings with an RRSP vs TFSA?

The best way to maximize your savings in your TFSA or RRSP is to hold investment products within them. These can include stocks, bonds, exchange-traded funds, mutual funds and GICs (to name a few). You can speak to a financial adviser for more information or if you’re not sure how to get started with these products.

You can also open an account with a robo-advisor if you’d like your portfolio to be managed virtually for low fees. All you’ll need to do to get started is answer a couple of questions about your finances and risk profile. Then you just set up a pre-authorized contribution and let the robo-adviser make investments and rebalance your portfolio as needed.

Compare online trading platforms

1 - 5 of 5
Name Product Finder Rating Available Asset Types Stock Trading Fee Account Fee Signup Offer Table description
National Bank Direct Brokerage
Finder Rating:
4.2 / 5
Stocks, Bonds, Options, Mutual Funds, GICs
$0 if conditions met, or $100
Get $0 commission on all transactions with promo code: finder
CIBC Investor's Edge
Finder Rating:
3.8 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs
$0 if conditions met, or $100
An easy-to-use platform with access to a variety of tools to help you trade with confidence.
Interactive Brokers
Finder Rating:
4.3 / 5
Stocks, Bonds, Options, ETFs, Currencies, Futures
min $1.00, max 0.5%
Winner for Best Overall Broker in the Finder Stock Trading Platform Awards.
Finder Rating:
4.3 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95 - $9.95
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio to take out some of the guesswork.
Qtrade Direct Investing
Finder Rating:
3.7 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$0 if conditions met, otherwise $25/quarter
Get up to $150 sign-up bonus. Use promo code BONUS150. Conditions apply. Ends June 30, 2023.
Low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options.
1 - 3 of 3
Name Product Min. Deposit Funding methods Management fee Available Asset Types
Wealthsimple Invest
Direct deposit, Bank transfer
Get a $25 bonus when you open and deposit $500 in your account – Trade and Cash accounts are not eligible.
Questwealth Portfolios
Direct deposit, Bank transfer
0.20% - 0.25%
Stocks, Bonds, ETFs, Commodities
A robo-advisor offering low fee portfolios that are actively managed and dynamically rebalanced when market conditions change.
Automatic bank withdrawals
The Moka app rounds up every purchase you make to the nearest dollar and invests the spare change into low-cost exchange-traded funds (ETFs).
1 - 1 of 1
Name Product Minimum Opening Deposit Commission Available Markets Platforms
Minimum US$25
Shares Desktop, Web Trading, Mobile Trading, MetaTrader 4
CFDs are leveraged products which involves greater risk than using cash resources only. You could lose all or more of your initial investment. Trade 80+ currency pairs and 220+ CFDs in equities, commodities and indices on

Bottom line

RRSPs and TFSAs let you earn tax-free interest on your savings and can be used to save for retirement. RRSPs may be the best fit for you if you’re looking for tax deductions and you won’t need to access your savings in the short term. TFSAs may be a more suitable choice if you’d prefer tax-free withdrawals or you want your savings to double as an emergency fund. For the best of both worlds, you can also look at investing in both products at the same time.


  • ]
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

More guides on Finder

Go to site