Comparing TFSAs, RRSPs and RESPs

Account type

TFSA

RRSP

RESP

Useful to:

Save for any goal with tax-free growth of your investments and easy access to your money

Save for retirement with tax-deductible contributions and tax-deferred growth of your investments

Save for a child's education and benefit from tax-deferred investment growth

Annual contribution limit

The federal government determines the amount individuals can contribute to a TFSA each year

Unused contribution room is carried forward indefinitely

Find your available contribution limit by logging in to My Account on the Canada Revenue Agency website*

18% of the previous year's earned income, less any pension adjustment, up to the maximum annual contribution limit for the year

Unused contribution room is carried forward until the end of the year you turn 71

Find your available contribution limit on your most recent Notice of Assessment, or log into My Account on the Canada Revenue Agency website

No annual limit; lifetime limit of $50,000 per beneficiary

Unused contribution room can be carried forward

Through the Canada Education Savings Grant (CESG), the federal government matches 20% of your contribution, to a max of $500 per year (per beneficiary) – until the end of the year the beneficiary turns 17

Lifetime maximum for the CESG is $7,200 per beneficiary

British Columbia also offers the British Columbia Training and Education Savings Grant (BCTESG), a grant of $1,200 per eligible beneficiary with no contribution necessary. The account subscriber can apply for this grant from the day the beneficiary child turns six years old until the day before they turn nine. Both subscriber and beneficiary must be residents of British Columbia to be eligible for the grant

The Quebec Education Savings Incentive (QESI) with a lifetime maximum amount of $3,600 per beneficiary is available to Quebec residents

Tax treatment for contributions

Contributions are not tax-deductible.

Excess contributions subject to a 1% per month penalty; a 100% penalty tax may be charged on any income connected to deliberate over-contributions

Contributions are tax-deductible

Excess contributions subject to a 1% per month penalty if you exceed the $2,000 lifetime over-contribution amount 

Spousal RRSPs can be used to reduce household taxable income

Contributions are not tax-deductible

Excess contributions above the $50,000 lifetime contribution limit subject to a 1% per month penalty

Tax treatment for withdrawals

Withdrawals are tax-free

Withdrawal amount is added to contribution room starting the following calendar year

Withdrawals (except Home Buyers' Plan and Lifelong Learning Plan) are subject to withholding tax and added to taxable income

Educational assistance payments (plan earnings and grants) are taxable to the beneficiary (student); return of original contributions is tax-free

Special features

No requirement to close the plan at a certain age

Foreign dividend and interest payments received on investments may be subject to non-recoverable, non-resident withholding tax

By the end of the year you turn 71, you must convert an RRSP to a retirement income option such as a Registered Retirement Income Fund (RRIF)

Can withdraw funds tax-free to buy or build a first home or for lifelong learning, as long as the funds are returned to the plan within a specified time

You can contribute to an RESP until 31 years after you first opened it. The plan must be closed at the end of the 35th year following the year the plan was opened

With a family RESP, if a child doesn't pursue post-secondary education, a sibling can use the funds for their education

Foreign dividend and interest payments received on investments may be subject to non-recoverable, non-resident withholding tax