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Strategizing Your Savings: RRSP vs. TFSA and Introducing FHSA

As experienced tax accountants, we often advise clients on optimizing their savings strategies. The choice between a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA) largely depends on your current and anticipated future income levels. Additionally, for potential first-time homebuyers, the new First-Time Home Savings Account (FHSA) offers another avenue for tax-efficient saving.

RRSP: Maximizing Tax Benefits Over Time

Immediate Tax Relief: Contributions to your RRSP provide immediate tax deductions, beginning at your highest tax bracket due to Canada’s progressive tax rate system. This can result in substantial tax savings, especially if you’re in a higher income bracket.

Cumulative Contribution Limits: Your RRSP contribution room accumulates each year, up to 18% of your previous year’s earned income, with maximum limits of $31,560 in 2024 and $30,780 in 2023. It’s crucial to track your limit to maximize benefits and avoid over-contribution penalties, which are 1% per month.

Strategic Withdrawals: Withdraw funds during lower-income years, such as retirement, to benefit from lower tax rates. This requires forecasting your future income levels to determine the most opportune time for contributions and withdrawals.

Timing with Tax Rate Changes: Be mindful of changes in tax rates, as they can affect your savings. Contributions made in January or February can be deducted in the current or previous tax year, offering flexibility in planning.

TFSA: Flexible and Tax-Efficient Growth

Contribution History: Since its introduction in 2009, the TFSA annual contribution limit has varied, reaching $7,000 in 2024. The cumulative contribution limit up to 2024 is $95,000 for those who were 18 in 2009 and haven’t contributed.

Tax-Free Growth and Withdrawals: While contributions aren’t tax-deductible, all earnings and withdrawals are tax-free. This makes TFSAs ideal for saving in lower tax brackets, as it preserves RRSP room for when a higher tax deduction is more beneficial.

Investment Considerations: Be cautious with foreign income-generating investments in TFSAs due to withholding taxes. Canadian interest-generating investments are typically more tax-efficient within a TFSA.

First-Time Home Savings Account (FHSA): A New Avenue for Homebuyers

Purpose and Benefits: The FHSA, introduced recently, is designed to aid first-time homebuyers. Contributions to an FHSA are tax-deductible, and withdrawals for a first home purchase are tax-free, similar to a combination of RRSP and TFSA benefits.

Contribution Limits and Regulations: Introduced in 2023, the contribution limit is $8,000 per year, with a lifetime contribution limit of $40,000.  The plan is intended for first-time home buyers, through specific eligibility criteria should be met.

Conclusion: Tailored Advice for Your Financial Goals Choosing between an RRSP, TFSA, and now FHSA depends on your individual financial situation and goals. At Shajani CPA, we offer personalized consultations to determine the most tax-efficient strategy for you, whether you’re planning for retirement, a first home, or other financial objectives. Let us help you navigate these options to maximize your financial well-being.


Year  Contribution
2009  $                   5,000  $      5,000
2010  $                   5,000  $    10,000
2011  $                   5,000  $    15,000
2012  $                   5,000  $    20,000
2013  $                   5,500  $    25,500
2014  $                   5,500  $    31,000
2015  $                 10,000  $    41,000
2016  $                   5,500  $    46,500
2017  $                   5,500  $    52,000
2018  $                   5,500  $    57,500
2019  $                   6,000  $    63,500
2020  $                   6,000  $    69,500
2021  $                   6,000  $    75,500
2022  $                   6,000  $    81,500
2023  $                   6,500  $    88,000
2023  $                   7,000  $    95,000

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2024 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.


Nizam Shajani, Partner, LLM, CPA, CA, TEP, MBA

I enjoy formulating plans that help my clients meet their objectives. It's this sense of pride in service that facilitates client success which forms the culture of Shajani CPA.

Shajani Professional Accountants has offices in Calgary, Edmonton and Red Deer, Alberta. We’re here to support you in all of your personal and business tax and other accounting needs.