Like RRSPs, investments in a TFSA grow tax-free. That’s a huge benefit. They’re also a powerful tool for long-term investing—like retirement.
TFSAs also have contribution limits, but unlike RRSPs, these limits aren’t tied to your income. They’re flat annual amounts determined by the government. Every Canadian over 18 receives this room, regardless of how much they earn.
Unlike RRSPs, there’s no tax deduction for TFSA contributions—you’re contributing after-tax dollars.
But TFSAs have three big advantages over RRSPs:
- Withdrawals are completely tax-free and can happen at any time.
- If you withdraw money, your contribution room is restored the following year.
- Withdrawals don’t affect income-tested government benefits like Old Age Security (OAS) or the Guaranteed Income Supplement (GIS).
