I often see questions on the differences between RRSPs and TFSAs in various internet forums and blogs. To help sort of the differences I have compiled a quick cheat sheet that compares the two investment vehicles.
| RRSP | TFSA | |
| Is There An Annual Contribution Limit? | Yes ($5,000 + any unused contributions from previous years) | Yes (Based on your RRSP deduction limit *) |
| Can Unused Contribution Be Carried Forward? | Yes | Yes |
| Are Investment Returns Earned Tax Free Within The Plan? | Yes | Yes |
| Are Withdrawals Tax Free? | No (Taxed at your marginal rate) | Yes |
| Is There An Age Limit on Contributions? | Yes (Age 71) | No |
| What Types of Investments Can Be Held Within The Plan? | Stocks, Bonds, Cash, Mortgages, Cash or Mutual Funds | |
| Are Contributions Tax Deductible? | Yes | No |
| Are Capital Losses Within The Plan Tax Deductible? | No | No |
| Are Excess Contributions Charged A Penalty Fee? | Yes | Yes |
Your RRSP deduction limit is based on your previous year earned income, Pension Adjustments (PAs), Past Service Pension Adjustments (PSPAs), Pension Adjustment Reversals (PARs), and your unused RRSP deduction room at the end of the previous year.
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Carrie
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