What is a TFSA, RRSP, RRIF?
my65+ is a group retirement plan composed of a group Tax-Free Savings Account (TFSA), a group Registered Retirement Savings Plan (RRSP), and a group Registered Retirement Income Fund (RRIF).
TFSA
The TFSA was established by the Canadian government in 2009 as a “flexible savings vehicle” for Canadians. When you add funds to a TFSA, you are making contributions from income you’ve already paid tax on. Your contributions grow tax-free while they’re in the TFSA account, and you aren’t taxed on any withdrawals. For 2024, you can save up to $7,000 in your TFSA, regardless of your income. This contribution room grows each year if you don’t use it. The total potential contribution room since the TFSA was created in 2009 is $95,000.i
For those earning less than $50,000 per year, you are generally better off saving in a TFSA. Read more about the best way to save for modest earners.
RRSP
The Canadian government introduced RRSPs in 1957 as a way for Canadians without employer-sponsored pension plans to save money for retirement. When you add funds to save through an RRSP account, you are making contributions from pre-tax income (meaning the amount of your contribution is deducted from your current income before it is taxed). Your RRSP contributions grow tax-free while they’re in the plan but are taxed on withdrawals for retirement income. In 2024, the maximum you can contribute to an RRSP is 18% of your earned income to a limit of $31,560.
RRIF
A RRIF is the account type to which all RRSPs must eventually be converted to, so that you can set up a steady stream of income during your retirement. Your RRSPs must be converted to a RRIF no later than the end of the year you turn 71, at which time minimum payments must be made. You can elect to convert to a RRIF earlier than age 71 to meet your retirement needs.
Tax Treatment
Contributions | Investment Returns | Withdrawals | |
RRSP/RRIF | NO TAX | NO TAX | TAXED |
TFSA | TAXED | NO TAX | NO TAX |
A closer look at TFSAs and RRSPs
With my65+, you can choose how you want to split your savings between your TFSA and RRSP accounts, but the plan offers a suggestion based on your income. For those who earn $50,000 or less, the default option is for members to max out their TFSA on a monthly basis before contributing to an RRSP. This default is based on what is tax-efficient for these members, and considers a lifecycle approach, which prioritizes saving in a TFSA earlier on, when earnings may be lower, and then later on prioritizes adding savings in an RRSP as earnings — and thus tax deductions from RRSP contributions — increase over time.
TFSA | RRSP | |
History |
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Impact on Guaranteed
Income Supplement |
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Contributions |
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Investment earnings
(while your savings are in the plan) |
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Withdrawals |
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Maximum yearly
contribution |
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Maximum age allowed
for making contributions |
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Where to find your
contribution room |
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Know Your Limits
The amounts that you can contribute to a TFSA and an RRSP are set by Income Tax Act rules. This means that you need to ensure that you don’t exceed your available “contribution room” in all your TFSA and RRSP accounts. Overcontributions are subject to penalties. As a member of my65+, it is your responsibility to make sure you don’t exceed your contribution limits for each account type. The Government of Canada provides additional information about TFSAs, RRSPs, and RRIFs.