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In addition to helping clients with their investments, our Portfolio Advisory team at RBC InvestEase frequently fields questions from clients about the various registered account types available to them. As we head into a new year, we thought it would be helpful to provide a guide to these three account types.
Canadians have access to several types of investment accounts that offer the opportunity to protect their investment income from taxation. Understanding the differences between these account types and the unique advantages they offer can help you achieve your goals–whatever they may be!
Three popular account types are the Registered Retirement Savings Plan (RRSP), the Tax-Free Savings Account (TFSA) and the First Home Savings Account (FHSA), which was introduced in March 2023. As you may consider making contributions to these accounts, let’s review the features and benefits they each present.
For each of these accounts, you generally do not pay taxes on gains, interest, or dividends when the funds are held within the account.
RRSP
With an RRSP, you can reduce your taxable income when you make contributions to the account. Additionally, you do not pay any taxes until you withdraw your funds (at which point, the withdrawn funds are subject to taxation). This is known as tax deferral.
An RRSP is generally well suited to those in the higher earning years of their career who are looking to save for retirement. RRSPs can also be used to save towards a home purchase through the Home Buyers’ PlanLegal Disclaimer 1 and can be tapped tax-free to be used towards an education for you or your partner through the Lifelong Learning PlanPlanLegal Disclaimer 2.
TFSA
A TFSA does not offer tax deferral benefits; however, withdrawals from a TFSA are entirely tax-free. This makes it more flexible than the RRSP and therefore is generally better suited for saving for a major purchase or providing additional income in retirement. Furthermore, any funds you withdraw from the TFSA can be re-contributed the following calendar year, whereas RRSP withdrawals cannot generally be re-contributed.
FHSA
FHSAs share features of RRSPs and TFSAs. Like a TFSA, you typically do not pay taxes on returns earned within the account, and withdrawals are not taxed (provided the funds are used towards a qualifying home purchase). An FHSA is similar to an RRSP in that contributions can be deducted against your taxable income which can potentially reduce your tax bill. As a bonus, you can combine withdrawals from both your FHSA and your RRSP (following the existing rules under the Home Buyers’ Plan) when making a home purchase.
When deciding which account to prioritize contributing to, it is important to consider your liquidity needs, potential tax savings, and how much of your current income you are able to contribute to each account type.
Looking to learn more? RBC has also published a table comparing the three account types.
Lastly, we’ve addressed some frequently asked questions posed by our clients regarding contribution limits, deadlines and tax documents.
March 3rd, 2025 is the last day to make RRSP contributions for the 2024 tax year. Contributions made to your RBC InvestEase RRSP account before 11:59 pm on March 3rd, 2025 will be eligible to receive a contribution receipt for the 2024 tax year. Making your contribution well in advance of the deadline helps ensure that your RRSP contribution can be used towards your 2024 tax return.
To make your RRSP contribution from the RBC InvestEase dashboard, select Move Money, then New Deposit, and select From Bank account. If you are contributing directly from another financial institution, please indicate “RBC Direct Investing Inc.” as the payee and include your 10-digit RBC InvestEase account number (which can be found on your most recent account statement). It may take 2-3 business days for a contribution to be received from another financial institution and credited to your RBC InvestEase RRSP account.
If you have submitted an application for a new RRSP account before midnight, March 3, 2025 and if you have made an initial pre-authorized deposit in the account application, we will process the initial deposit as a contribution towards the 2024 tax year and issue a contribution receipt, provided: (i) the information provided in your account application is complete, accurate and matches the records maintained by the CRA; (ii) we are able to verify your identity; (iii) and funds are available to be drawn from the bank account indicated in your account application for the initial deposit.
If you are in position to invest, a volatile market climate alone should not dissuade you from investing your funds. By investing at regular intervals, which can be achieved by setting up pre-authorized contributions, you avoid decision fatigue which could lead to long delays in investing your funds and missed opportunities. Instead, you can implement a dollar-cost averaging strategy and use market volatility to your advantage.
TFSALegal Disclaimer 3: The annual TFSA limit is indexed to inflation and rounded to the nearest $500. For 2025, the TFSA contribution limit is $7,000. If you have been eligible to contribute to the TFSA since the inception of the account type and have never contributed, your total contribution room would be $102,000.
RRSPLegal Disclaimer 4: The RRSP contribution limit for 2025 is 18% of your preceding year’s earned income up to a maximum of $32,490 for 2025 (up from $31,560 for 2024). As always, any unused contribution room from previous years would carry forward.
FHSALegal Disclaimer 5: The 2025 FHSA contribution limit is $8,000. If you opened an FHSA in 2024 and you did not contribute the maximum $8,000 to it, you can carry forward your unused contribution rooms from 2024.
You can track your contribution room for your TFSA, RRSP and FHSA through your online account with Canada Revenue Agency (CRA).
The CRA will reflect contributions and withdrawals for your TFSA made in the prior year shortly after the end of February.
There are no tax documents issued for TFSA accounts.
For RBC InvestEase RRSP accounts, contributions made between March and December will be summarized in one RRSP contribution slip that will be mailed to you or posted on the RBC InvestEase dashboard (depending on your document preferences, which can be updated on your dashboard by selecting ‘Account Settings, then Document Settings by mid-January. A contribution slip will be issued for every contribution made in January and February and will be generated approximately 2-5 business days afterwards. RRSP contributions made in January and February can be used to claim an income tax deduction in either the current or the preceding year (or unused and carried forward)
For 2024 RRSP withdrawals, T4RSP/R2 tax slips will be posted online or mailed to you by early March. Any amounts that you withdrew from your RRSP in 2024 will be included in your overall income and taxed at your marginal tax rate. Your marginal tax rate may be higher or lower than the withholding taxes that were applied to your RRSP withdrawal.
For FHSAs, a T4FHSA/RL-32 annual information returnLegal Disclaimer 6 will be mailed to you towards the end of February. This slip will summarize the totals of the transactions made in your FHSA in 2024 which you would report on your tax return.
If you are planning on opening a registered a plan, keep in mind the amount of time your money is invested can have a substantial positive impact on your long-term investment returns. It’s a good idea establish an investment plan to ensure that you’re on track to achieve your financial goals.
If you have questions about RRSPs, TFSAs and FHSAs, how to decide which one to prioritize, or which portfolio is right for you, please reach out. Our Portfolio Advisors would be happy to share their advice.
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