Both the TFSA and RRSP are powerful tools for Canadians, but they serve different purposes. In 2025, understanding how to use each to your advantage can maximise tax efficiency and support your financial goals.
TFSA (Tax-Free Savings Account)
- Contribution Limit 2025: $7,000
- Contributions are not tax-deductible, but withdrawals (including gains) are tax-free.
- Ideal for flexible, long-term investing and short-term savings.
Best for:
- Lower-income earners (less tax relief benefit from RRSP)
- Emergency funds or large future purchases
- Investments with high growth potential
RRSP (Registered Retirement Savings Plan)
- Contribution Limit 2025: 18% of 2024 income, up to $32,490
- Contributions are tax-deductible, and taxes are deferred until withdrawal.
- Ideal for retirement savings, especially if you’ll be in a lower tax bracket later.
Best for:
- Higher-income earners (get more tax savings upfront)
- Long-term retirement planning
- Reducing taxable income today
2025 Strategy Tip:
Maximise your RRSP if you’re in a high tax bracket and reinvest your refund into your TFSA. This double benefit strategy can accelerate wealth growth while managing tax efficiently.