Maximizing your TFSA and RRSP contributions is a cornerstone of tax-efficient investing in Canada. Both accounts offer distinct advantages, and knowing how to use them strategically in 2025 can help you grow and preserve more wealth.
TFSA (Tax-Free Savings Account)
- Contribution limit for 2025: $7,000 (if eligible and unused room exists).
- All gains, interest, and dividends earned are tax-free.
- Withdrawals are also tax-free and do not affect benefits like GIS or OAS.
RRSP (Registered Retirement Savings Plan)
- Contribution limit for 2025: 18% of prior year’s income, up to a maximum of $32,490.
- Contributions reduce your taxable income.
- Ideal for higher earners looking to defer tax and reduce their current-year liability.
Optimization Tips:
- Use TFSA for flexibility and short-to-mid-term goals, like a home down payment or emergency fund.
- Prioritize RRSP if you’re in a high tax bracket, then withdraw strategically in retirement when your income is lower.
- Contribute early in the year to allow for more compounding time.
- Avoid over-contribution penalties: Know your limits via CRA’s MyAccount.
Using both accounts in tandem—RRSP for retirement, TFSA for accessible growth—offers a powerful way to build tax-efficient wealth.