RRSPs and TFSAs: separating fact from fiction

A registered retirement savings plan (RRSP)¹ can be used for more than just retirement. But tax-free savings accounts (TFSAs)¹ have their own unique advantages. Both of them deserve a place in your financial planning—when used strategically, they can help you reach your goals. Here’s what you need to know about these plans so you can get the most out of them.

Reminder: RRSPs and TFSAs are registered accounts. Your contributions can be invested in a wide range of investment vehicles.

Angela Iermieri, Financial Planner at Desjardins, clears up nine common myths about RRSPs and TFSAs.

False. You can also use your RRSP to help you buy your first home or go back to school. The Home Buyers’ Plan (HBP)¹ lets you withdraw up to $60,000 from your RRSP to help finance the purchase of your first home. The Lifelong Learning Plan (LLP)1 allows you to withdraw up to $20,000 tax-free from your RRSP so you or your spouse can go back to school.

Not quite. You can withdraw money from your TFSA when you need it, if your investments allow it. But the real advantage of a TFSA is tax-free growth. To maximize that growth, you should invest your money in a TFSA for the long term.

Withdrawals are added back to your contribution room the following year but keep track of your transactions to ensure you don’t overcontribute.

True. Think of an RRSP as a basket for contributions that you can deduct from your taxable income. But your contributions don’t just sit there. You can then grow this money by investing in products that match your investor profile, risk tolerance and timeline for achieving your goals. There are a lot of different investments that you can choose from. An advisor can help you decide which ones are right for you. This will help you grow your savings and generate returns tax-free. Time is on your side!

False. RRSPs offer a big advantage: They give you a tax break when you contribute. You can then invest that money in a wide range of investment products like term savings, market-linked guaranteed investments, mutual funds, stocks, and more.

Choose the products that are right for you and diversify your portfolio based on your goals and risk tolerance. The longer your investment horizon, the more investment options you’ll have—and the greater your potential returns. This means that, in addition to the taxes you save with every RRSP contribution, your money can grow tax-free until you withdraw it.

False. You can deduct your contributions from your taxable income when you file your annual tax return, which may even earn you a refund. Taxes are deferred until withdrawal. Your income is usually lower after you retire, so you won’t have to pay as much tax. Meanwhile, your money grows tax-free over the years.

As you get closer to retirement, you could even minimize the taxes you need to pay by working with your advisor and accountant to develop an RRSP withdrawal strategy.

Well, yes and no. It all depends on your income. Old Age Security is partly clawed back if your net income as an individual exceeds $93,454.² If you expect a high retirement income, or if you’re not sure about contributing to your RRSP, work with your advisor to put together a withdrawal plan using the strategies that are right for you.

True and false. It depends on your situation. Each of these plans has their advantages. You won’t have to pay any tax when you withdraw from your TFSA because you don’t get to deduct your contributions from your taxable income like you do with an RRSP. So TFSAs are better for short- or medium-term goals, though they can also be useful for long-term goals like retirement.

Contributing to your RRSP is a good idea if you’re in a high tax bracket now and expect to be in a lower one after retirement. It can also improve your eligibility for certain tax credits and government programs.

False. Anyone 18 or older with a social insurance number (SIN) can contribute to a TFSA, whether their income comes from work or their retirement savings, or even if they have no income at all. Each year, everyone gets the same contribution room. The annual contribution limit for 2025 and 2026 is $7,000. If you have never contributed to a TFSA before, were 18 or older in 2009 and have had a valid SIN since then, your contribution room in 2026 would be $109,000. Any amounts withdrawn are added to your contribution room the year after you make the withdrawal. But you’ll need to keep track of your transactions to make sure you don’t overcontribute.

False. As long as you don’t exceed your contribution room, you can contribute to your spouse’s RRSP and get the tax deduction. But the funds belong to your spouse. If the money stays in their RRSP for more than three years,³ they’ll be taxed on withdrawals. Otherwise, the amount withdrawn will be added to your taxable income and you’ll pay the taxes on it.

Contributing to your spouse’s RRSP allows you to split your income more evenly during retirement. If your spouse’s marginal tax rate is lower than yours, this will lower the overall tax bill for your household. This is what’s known as income splitting. Your advisor and your accountant can help you decide whether this is the right strategy for you.

¹ Certain terms, conditions and restrictions may apply. To find out more about each of these plans: 

- RRSP: https://www.desjardins.com/en/savings-investment/savings-plans/rrsp.html

- TFSA: https://www.desjardins.com/en/savings-investment/savings-plans/tfsa.html

- FHSAhttps://www.desjardins.com/en/tips/fhsa-frequently-asked-questions.html

- HBP: https://www.desjardins.com/en/mortgage/home-buyers-plan.html

- LLP: https://www.desjardins.com/en/savings-investment/savings-plans/llp.html

² $93,454 in 2025

³ Note: When we say, “three years,” we mean December  31 must have passed three times after the contribution was actually made. For example, if you contributed to your spouse’s RRSP on December 30, 2024, the money can be withdrawn in January 2027.