TFSA (Tax-Free Savings Account)
- You put in money you have already paid tax on.
- Growth inside the account is tax-free.
- Withdrawals are tax-free, and you can use the money for anything.
- Room you do not use carries forward to future years.
RRSP (Registered Retirement Savings Plan)
- What you put in can lower the income tax you pay this year.
- Growth is tax-sheltered while it stays in the plan.
- Money is taxed when you take it out, ideally in retirement when your income may be lower.
Which one first?
A simple rule of thumb: if you expect your income to be lower in retirement than it is now, an RRSP can make sense. If you want flexibility or your income is lower now, a TFSA is often a good start. Many people use both.
Yearly limits change. Always check your personal limit on the Canada Revenue Agency website or your CRA My Account before you contribute.
Learn more from the Government of Canada
This guide is general education, not personal advice. Rules can change, so check the official sources above.