Each account has its advantages. RRSPs offer immediate tax relief by reducing taxable income and encouraging long-term savings. However, withdrawals are taxed as income and may affect government benefits such as Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).
TFSAs, on the other hand, offer unmatched flexibility. There are no penalties for withdrawals, and funds can be used for any purpose. Withdrawals do not impact eligibility for government benefits. That said, TFSA annual contribution limits are lower than RRSP limits, which may restrict tax-free saving potential.
For 2025, the TFSA contribution limit is $7,000, compared to $32,490 for RRSPs.
Helping employees maximize RRSP, TFSA savings
To help employees maximize the benefits of these savings vehicles, the government of Canada advises employers to follow this four-step process when contributing:
- Determine if the benefit is taxable
- Calculate the value of the benefit
- Withhold payroll deductions and remit GST/HST
- Report the benefit on a slip
Long-term employment does not guarantee comfortable retirement for many workers, based on findings from a recent study. That’s because financial stress is still the top worry for workers aged 40 to 60, according to Healthcare of Ontario Pension Plan (HOOPP).