Choosing between an RRSP and a TFSA: Your guide to smarter savings decisions
Unsure whether to choose a Registered Retirement Savings Plan or Tax-Free Savings Account? This guide explains the key differences to help you make an informed savings decision.
GROW YOUR WEALTH
BY Moneytalk STAFF
January 2026
Two of the most popular savings plans available to Canadians are Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).1 These accounts allow your money to grow as you save for retirement or other goals, whether your aspirations are large or small. But since the hard-earned money that you've saved is finite, you may be wondering where it should go: RRSPs or TFSAs or both?
So, what exactly is a semiconductor?
Disclaimer
The Canada Revenue Agency sets no minimum age, but you must have earned income in the previous year. Some financial institutions may also require a parent or guardian to open an account for anyone under the age of majority — 18 or 19 — in their province.
The information contained herein has been provided by TD Wealth and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.
Commissions, management fees and expenses all may be associated with mutual fund and/or exchange-traded fund ("ETF") investments (collectively, "the Funds"). Trailing commissions may be associated with mutual fund investments. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. Please read the fund facts or summary documents and the prospectus, which contain detailed investment information, before investing in the Funds. The indicated rates of return (other than for money market funds) are the historical total returns for the period, compounded for mutual funds, including changes in unit value and reinvestment of distributions. The indicated rate of return for each money market fund is an annualized historical yield based on the seven-day period ended as indicated and annualized in the case of effective yield by compounding the seven day return and does not represent an actual one year return. Index returns do not represent ETF returns. The indicated rates of return do not take into account sales, redemption, commission charges, distribution or optional charges, as applicable, or income taxes payable by any securityholder that would have reduced returns. The Funds are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer and are not guaranteed or insured. Their values change frequently. There can be no assurances that a money market fund will be able to maintain its net asset value per unit at a constant amount or that the full amount of your investment will be returned to you. Past performance may not be repeated.
TD Wealth represents the products and services offered by TD Waterhouse Canada Inc., TD Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).
®The TD logo and other TD trademarks are the property of The Toronto‑Dominion Bank or its subsidiaries.
The semiconductor industry has returned to growth largely thanks to the rapidly rising popularity of generative AI. Generative AI can take information in the form of text, audio, video, or computer code and build new content almost instantaneously. As a result, there is growing demand for these advanced computer chips. According to McKinsey, the global market for semiconductors could top US$1 trillion by 2030, up from US$600 billion in 2021.1
AI and machine learning require highly powerful semiconductors called Graphics Processing Units (GPUs), which were initially designed to quickly render video game graphics but have evolved to perform complex calculations of large data sets. McKendry points out that “GPUs are very good at the calculations that AI relies upon.”
While semiconductors already power smartphones, laptops, medical devices, appliances, cars, and certain lightbulbs, most of the attention these miniscule chips are getting today is around how they power AI's complex computations. “To an extent, the hardware is sufficiently developed to allow these AI technologies to permeate,” says McKendry. Currently only a few companies supply the steep demand for semiconductors for generative AI purposes and the value of those chips — and the companies that manufacture them — has grown exponentially.
If you don't know the differences between the savings plans, or what's right for you at this time, don’t feel embarrassed! While they share some similarities — both are designed to offer tax planning opportunities to help you manage your money — there are also big differences.
Moreover, you may find that using both accounts for different reasons could be a good idea. To find out which plan of action is right for you, the questions and answers below break down the key differences to help you make informed decisions about your savings.
RRSPs
TFSAs
You don’t begin accumulating TFSA room until you're 18 years of age, but a financial institution could want you to be the age of majority depending on the province you live in.
If you are able, maximizing your contributions to both is often a good path forward. After all, RRSPs and TFSAs have different benefits and considerations. Generally, RRSPs are ideally suited for retirement saving and may be beneficial for individuals with a high income. On the other hand, TFSAs offer more flexibility when withdrawing funds, which can be helpful when saving for medium-term goals or if you need money in an emergency. But everyone’s situation is different. A chat with a personal banking representative could help determine which choice is the best for you.
So…which one is best for me?
Manager, Client Education Delivery at TD Direct Investing
Hiren Amin
You can take advantage of partial shares to allocate precise amounts of capital across a wider range of stocks.
When can I begin contributing?
The annual contribution limit is set by the federal government and is the same for everyone. For 2026 the maximum is $7,000. Keep in mind that for eligible Canadians, unused contribution room gets carried forward every year. For example, if you were at least 18 years old and eligible when TFSAs were introduced in 2009, and have never contributed, you would have $109,000 in contribution room in 2026.
TFSAs
Your annual contribution limit is tied to your earned income in the previous year. For the 2025 tax year, the RRSP contribution limit is 18% of your previous year’s earned income, up to a maximum of $32,490 (a number set each year by the CRA), plus any unused contribution room from previous years, and less any pension adjustments. In 2026, this figure will rise to $33,810.
RRSPs
How much can I contribute?
No. Contributions to your TFSA are not tax-deductible. Rather than a deduction, a TFSA allows your investments to grow tax-free inside the account. But everyone, and especially retirees, should know keeping investments within TFSAs can be a great way to shelter government benefits. TFSA withdrawals are not counted as income, which may allow you to keep more of your Canada Pension Plan (CPP) and Old Age Security (OAS), for example.
TFSAs
Yes. RRSP contributions are tax-deductible. This means any contributions you make can reduce your taxable income.
RRSPs
Do I get tax deductions on my contributions?
In most cases, no. The investments within your account grow tax-free and you won't need to pay tax on any investment income earned or when you withdraw the funds.
TFSAs
In most cases, yes. (Exceptions include the Home Buyers' Plan and Lifelong Learning Plan. More on those below.) When you withdraw funds from your RRSP, it gets taxed as income. That’s why it may make sense to wait until retirement to begin withdrawals, when your income and tax rate may be lower.
RRSPs
Will I pay tax when I withdraw the funds?
Your TFSA can hold the same types of qualified investments as your RRSP can, including GICs, mutual funds, ETFs, stocks and bonds.
TFSAs
You can invest your savings into a wide range of qualified investments, including Guaranteed Investment Certificates (GICs), mutual funds, Exchange-Traded Funds (ETFs), stocks and bonds, among others.
RRSPs
What kind of investments are eligible?
You can withdraw funds at any time (subject to any investment-specific restrictions). This can make TFSAs a flexible option for important short-term life goals like major purchases, renovations, vacations or even living expenses.
TFSAs
You can withdraw funds at any time (subject to any investment-specific restrictions). But, since the money will typically be taxed on withdrawal, usually it's often best to wait until you retire when your income could be lower.
RRSPs
Can I make withdrawals when I want to?
Yes. There is no upper age limit for contributions to a TFSA. You may make your maximum annual contribution every year without any age restrictions.
TFSAs
Yes, but only up to the end of the year you turn 71, at which point you will need to convert your RRSPs to either a Registered Retirement Income Fund (RRIF) or annuity. From there, you'll begin annual withdrawals. (If you have a spousal RRSP, you may be able to contribute past age 71.)
RRSPs
Can I keep contributing after I'm retired?
You never lose your contribution room. If you don't contribute for several years, you can make up those contributions at any time in the future. If you withdraw some funds one year, that amount will be added back to your contribution room on January 1 of the following year.
However, if you are a U.S. person, or have ties to the U.S., there may be additional tax implications. It can help to speak with a cross-border tax specialist.
TFSAs
The Home Buyers' Plan (HBP) allows you to withdraw up to $60,000 toward the purchase of your first home without triggering additional taxes. Likewise, you may withdraw up to $10,000 per year (or $20,000 in total) for education purposes under the Lifelong Learning Plan (LLP). Both these plans have eligibility requirements and conditions, and come with schedules for payback into the RRSP.
In 2023, the First Home Savings Account (FHSA) was introduced to make it easier to save for your first home. FHSAs and RRSPs can work in tandem: Money from an RRSP (up to $8,000 a year) can be transferred to your FHSA to take advantage of available FHSA contribution room. And, if a home is not purchased within the required 15-year time limit, funds from your FHSA can be transferred to an RRSP, without impacting RRSP contribution room. Here's more information on how FHSAs work.
RRSPs
Are there any other key features of these registered plans I should know about?
You can see how your TFSA savings could grow using a TFSA Calculator.
TFSAs
You can see how your RRSP savings might grow using a Retirement Calculator.
RRSPs
How can I calculate how my money can grow?
1 Table 1: Number of tax filers reporting RRSP and/or TFSA contributions, total value of contributions and median contribution amount, by income group of tax filers, Canada, 2023, Statistics Canada, Modified May 1, 2025, accessed Jan.8, 2026. https://www150.statcan.gc.ca/n1/daily-quotidien/250401/t001a-eng.htm
source
Put more money to work
The Canada Revenue Agency sets no minimum age, but you must have earned income in the previous year. Some financial institutions may also require a parent or guardian to open an account for anyone under the age of majority — 18 or 19 — in their province.
With partial shares, you can enter any dollar amount you want to trade, and you’ll receive a mix of full and partial shares to complete your order. That means you can invest in dollars instead of decimals and you won't leave money on the sidelines simply because the math doesn’t line up with pricing. “Time in the markets is key,” says Amin, and partial shares can help build a fully invested account.
RRSPs
The Canada Revenue Agency sets no minimum age, but you must have earned income in the previous year. Some financial institutions may also require a parent or guardian to open an account for anyone under the age of majority — 18 or 19 — in their province.
With partial shares, you can enter any dollar amount you want to trade, and you’ll receive a mix of full and partial shares to complete your order. That means you can invest in dollars instead of decimals and you won't leave money on the sidelines simply because the math doesn’t line up with pricing. “Time in the markets is key,” says Amin, and partial shares can help build a fully invested account.
RRSPs
You don’t begin accumulating TFSA room until you're 18 years of age, but a financial institution could want you to be the age of majority depending on the province you live in.
TFSAs
When can I begin contributing?
Your annual contribution limit is tied to your earned income in the previous year. For the 2025 tax year, the RRSP contribution limit is 18% of your previous year’s earned income, up to a maximum of $32,490 (a number set each year by the CRA), plus any unused contribution room from previous years, and less any pension adjustments. In 2026, this figure will rise to $33,810.
RRSPs
The annual contribution limit is set by the federal government and is the same for everyone. For 2026 the maximum is $7,000. Keep in mind that for eligible Canadians, unused contribution room gets carried forward every year. For example, if you were at least 18 years old and eligible when TFSAs were introduced in 2009, and have never contributed, you would have $109,000 in contribution room in 2026.
TFSAs
How much can I contribute?
Yes. RRSP contributions are tax-deductible. This means any contributions you make can reduce your taxable income.
RRSPs
No. Contributions to your TFSA are not tax-deductible. Rather than a deduction, a TFSA allows your investments to grow tax-free inside the account. But everyone, and especially retirees, should know keeping investments within TFSAs are a great way to shelter government benefits. TFSA withdrawals are not counted as income which may allow you to keep more of your Canada Pension Plan and Old Age Security for example.
TFSAs
Do I get tax deductions on my contributions?
In most cases, yes. (Exceptions include the Home Buyers' Plan and Lifelong Learning Plan. More on those below.) When you withdraw funds from your RRSP, it gets taxed as income. That’s why it may make sense to wait until retirement to begin withdrawals, when your income and tax rate may be lower.
RRSPs
In most cases, no. The investments within your account grow tax-free and you won't need to pay tax on any investment income earned or when you withdraw the funds.
TFSAs
Will I pay tax when I withdraw the funds?
You can invest your savings into a wide range of qualified investments, including Guaranteed Investment Certificates (GICs), mutual funds, Exchange-Traded Funds (ETFs), stocks and bonds, among others.
RRSPs
Your TFSA can hold the same types of qualified investments as your RRSP can, including GICs, mutual funds, ETFs, stocks and bonds.
TFSAs
What kind of investments are eligible?
You can withdraw funds at any time (subject to any investment-specific restrictions). But, since the money will typically be taxed on withdrawal, usually it's best to wait until you retire when your income could be lower.
RRSPs
You can withdraw funds at any time (subject to any investment-specific restrictions). This can make TFSAs a flexible option for important short-term life goals like major purchases, renovations, vacations or even living expenses.
TFSAs
Can I make withdrawals when I want to?
Yes, but only up to the end of the year you turn 71, when you will need to convert your RRSPs to either a Registered Retirement Income Fund (RRIF) or annuity. From there, you'll begin annual withdrawals. (If you have a spousal RRSP, you may be able to contribute past age 71.)
RRSPs
Yes. There is no upper age limit for contributions to a TFSA. You may make your maximum annual contribution every year without any age restrictions.
TFSAs
Can I keep contributing after I'm retired?
The Home Buyers' Plan (HBP) allows you to withdraw up to $60,000 toward the purchase of your first home without triggering additional taxes. Likewise, you may withdraw up to $10,000 per year (or $20,000 in total) for education purposes under the Lifelong Learning Plan (LLP). Both these plans have eligibility requirements and conditions, and come with schedules for payback into the RRSP.
In 2023, the First Home Savings Account (FHSA) was introduced to make it easier to save for your first home. FHSAs and RRSPs can work in tandem: Money from an RRSP (up to $8,000 a year) can be transferred to your FHSA to take advantage of available FHSA contribution room. And, if a home is not purchased within the required 15-year time limit, funds from your FHSA can be transferred to an RRSP, without impacting
RRSP contribution room. Here's
more information on how FHSAs work.
RRSPs
You never lose your contribution room. If you don't contribute for several years, you can make up those contributions at any time in the future. If you withdraw some funds one year, that amount will be added back to your contribution room on January 1 of the following year.
However, if you are a U.S. person, or have ties to the U.S., there may be additional tax implications. It can help to speak with a cross-border tax specialist.
TFSAs
Are there any other key features of these registered plans I should know about?
How can I calculate how my money can grow?
You can see how your RRSP savings might grow using a Retirement Calculator.
The information contained herein has been provided by TD Direct Investing and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.
TD Direct Investing is a division of TD Waterhouse Canada Inc. TD Wealth represents the products and services offered by TD Waterhouse Canada Inc., TD Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by The Toronto Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).
®The TD logo and other TD trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.
Disclaimer