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Comparing the TFSA, RRSP, and FHSA
| Feature | TFSA | RRSP | FHSA |
| What is it? | A flexible registered investment account that allows Canadians to earn tax-free investment income. | A registered retirement savings plan that is tax-deferred until withdrawal. | A tax-advantaged registered account designed to help Canadians save for their first home. |
| What is it typically used to save for? | Anything from emergency funds to retirement. | Retirement, but it can be helpful for other goals. | The purchase of a first home. |
| Who can open one? | Any Canadian resident at least 18 or 19 years of age (age of majority in your province) or older with a valid Social Insurance Number (SIN). In Saskatchewan, the age is 18. | Any Canadian resident under age 71 with earned income and a SIN. | Canadian residents with a Social Insurance Number (SIN) and are aged 18 or older (but not younger than the age of majority in their province) and below 71, and either you, your spouse, or common-law partner have not owned and lived in a home during the current calendar year or in any of the four previous calendar years. |
| What types of investments can I hold in it? | Stocks, bonds, mutual funds, ETFs, GICs, and more. | Similar to TFSAs: stocks, bonds, mutual funds, ETFs, GICs, etc. | Similar to TFSAs and RRSPs. Some investment types may not be available yet, however. |
| Can the plan be opened jointly? | No, TFSAs cannot be held jointly; they can only be held in your name. | No, your name only. But you can contribute to a spousal RRSP. | No, they can only be held in your name. |
|
Tax Treatment
|
TFSA
|
RRSP | FHSA |
| Are contributions tax deductible? |
No.
|
Yes. |
Yes (annual and lifetime limits apply). |
| Do my savings grow tax-free or tax-deferred? |
Tax-free.
|
Tax-deferred. |
Tax free if you use funds for a qualifying first home. |
|
Contributing Money
|
TFSA | RRSP | FHSA |
| How much can I contribute each year? | The government sets the annual TFSA contribution limit. For 2024, it is $7,000, plus any unused contribution room and any amounts you've withdrawn from previous years. Depending on your age and prior contributions, this cumulative 2024 amount could be as high as $95,000. | 18% of your previous year's earned income up to a maximum limit (for 2024, $31,560), minus any pension adjustments. | Up to $8,000 per year plus up to $8,000 of your unused contribution room, with a lifetime limit of $40,000. |
| Is there an over-contribution penalty tax? | Yes, 1% per month on the excess contribution. | Yes, on contributions exceeding your limit by more than $2,000. | Yes, 1% per month on over contributions. |
| Can I carry forward unused contribution room? | Yes. | Yes. | Yes, any contribution room that isn't used can be rolled over to the following year, with a cap of $8,000. |
| Do I have to earn income to get contribution room? | No. | Yes. | No. |
| Can I contribute after age 71? | Yes. | No, you must convert your RRSP to a Registered Retirement Income Fund (RRIF) or annuity by December 31 of the year you turn 71. | No, the money in your First Home Savings Account (FHSA) must be used by either the 15th anniversary of the account's opening or by December 31 of the year in which you reach 71 years of age, depending on which comes first. If you don't use your funds by this deadline, they may be moved tax-free into your Registered Retirement Savings Plan (RRSP) or your Registered Retirement Income Fund (RRIF) without affecting your RRSP contribution limit. Otherwise, any withdrawal will be subject to taxation. |
|
Withdrawing Money
|
TFSA | RRSP | FHSA |
| Can I take my money out for any reason? |
Yes, at any time and for any reason
(subject to specific investment limitations).
|
Yes, but with tax implications, except for specific programs like the Home Buyers' Plan or Lifelong Learning Plan (subject to specific investment limitations). | You'll have to use the funds to purchase your first home in Canada. Your withdrawal will be taxable if you use the funds for anything other than a qualifying first home (subject to specific investment limitations). |
| If I withdraw money, do I get my contribution room back? | Yes, the following calendar year. | No. | No, because the account is intended for one-time use. |
| Do withdrawals affect government benefits? | No, because withdrawals are not considered taxable income. | Most likely, yes, because withdrawals are considered taxable income. | The impact on government benefits varies based on the nature of the withdrawal: Withdrawals made to purchase a qualifying home will not influence government benefits. Withdrawals that do not qualify can increase your income, potentially affecting government benefits such as Old Age Security (OAS) payments. |
Use our summarized Product Comparison Chart to compare these products quickly.
When choosing between a TFSA, RRSP, and FHSA, consider your financial goals, current and future income levels, and potential tax implications. Each account has unique features designed to benefit different aspects of your financial life, from saving for a first home to building a retirement nest egg. Also, if you have a spouse, they can open up an account under their name (assuming they qualify) to achieve the benefits as well.
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