TFSA vs. RRSP – How much can be contributed?

Both the Registered Retirement Savings Plan (RRSP) and the Tax Free Savings Account (TFSA) have contribution limits, each with their own formula of calculation.

The RRSP contribution limit for a particular year is the contribution limit for the prior year less any contributions deducted in that prior year plus 18% of earned income in that prior year (up to a maximum amount, $22,970 for 2012). There are other adjustments for those who are members of a pension plan through work.

The TFSA contribution limit is the prior year’s contribution limit less any contributions made in that prior year plus any withdrawals made in that prior year plus $5,000. For 2009, the contribution limit was $5,000 because with TFSAs beginning January 1, 2009 there were no prior years. For subsequent years, the $5,000 in the calculation is to be indexed for inflation in $500 increments. For 2010 to 2012, the cumulative inflation was insufficient to allow for a $500 increase. It is only for 2013, that this amount bumps from $5,000 to $5,500.

For more information on the TFSA, see the Department of Finance Canada’s page on the TFSA at

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