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TFSA vs. RRSP: Over 30 Per Cent of Canadians Don't Know the Difference, Finds BMO Study
  • Close to a third of Canadians don't know the difference between a TFSA and RRSP
  • Over half of Canadians would choose a TFSA over an RRSP – the gap widens to nearly 70 per cent for those over 55


TORONTO, Feb. 21, 2019 /CNW/ - With the Registered Retirement Savings Plan (RRSP) deadline of March 1 approaching, Canadians are left deciding between whether to allocate money to their Tax Free Savings Account (TFSA) or RRSP. According to BMO's TFSA vs. RRSP report, there is one clear winner: TFSAs, with over half of Canadians indicating they would pick the investment vehicle. The challenge is that nearly a third do not know the difference.

TFSA and RRSP Primer (CNW Group/BMO Financial Group)

The report, conducted by Pollara Strategic Insights, also found:

  • 76 per cent of Canadians are knowledgeable about RRSPs.
  • Similarly, three quarters are knowledgeable about TFSAs.
  • Knowing the difference is a different story. Nearly a third (32 per cent) do not know the difference between TFSAs and RRSPs.


An RRSP is a tax-deferred savings vehicle that allows Canadians to help fund their retirement. Contributions are tax deductible, which means the individual's taxable income is reduced by the amount contributed in a given tax year. A TFSA is a flexible, registered general-purpose savings vehicle that allows Canadians to earn tax-free investment income to meet lifetime savings needs more easily.

"It's encouraging to see Canadians investing for longer term goals – buying a house or retirement – and putting more money into investments to get there," said Mathieu Lepine, Head, Term Investments, BMO Bank of Montreal. "What will be important going forward for Canadian investors is seeking financial advice so that they don't succumb to any of the downsides of either the TFSA or RRSP. Getting hit with tax penalties or being penalized for over contributing can start to eat away at the amount invested."

TFSA Keeps its Crown
The report also looked at which investment vehicles Canadians prefer and found:

  • Baby Boomers lead the charge on TFSAs: Since 2014, the gap between Canadians choosing a TFSA over an RRSP has risen to over 20 per cent. 69 per cent of those 55 and over would choose a TFSA over RRSP.
  • Demographic nuances: Millennials are the least likely to have an RRSP account, with 56 per cent claiming to not have one. By comparison, two thirds of Generation X and Baby Boomers have an RRSP (67 per cent for each).


Mr. Lepine noted that Baby Boomers have been consistently good, long-term savers, which could point to why they're turning to TFSAs. For Baby Boomers that have built up their RRSPs, the TFSA can be used to enhance their lifestyle and dipped into for discretionary purchases like travel.

"It's a positive indicator to see Canadians flocking to TFSAs – the savings vehicle provides a good amount of flexibility. Leveraging both accounts simultaneously can provide even greater value over the long term. As Millennials start earning more and turn their minds towards retirement, RRSPs will nicely supplement what is being built up in the TFSA," added Mr. Lepine.

TFSA and RRSP Primer:



- With a TFSA, you do not need to have any
earned income to accumulate the $6,000 per
year contribution room.

- With an RRSP, you must have earned
income in order to accumulate
contribution room.

- Over-contributing to a TFSA means you're
subject to a 1 per cent penalty tax per month,
but only on the amount that is above the limit.

- With an RRSP, you can over contribute
by $2,000. Anything contributed above
that subjects you to a one per cent
penalty tax for each month you are over

- Withdrawals from a TFSA are tax-free. Any
amount withdrawn is then added to your
contribution room in the following year, so
that you can later recontribute the amount
that you withdrew.

- Withdrawals from an RRSP are taxed in
the year of withdrawal (with the exception
of the Home Buyer's Plan and Lifelong
Learning Plan, which are not taxed provided
they are repaid on schedule). Any amount
withdrawn cannot be added to your
contribution room in the following year.

- Contributions to a TFSA are not tax-
deductible on your income tax return.

- Contributions to your RRSP are tax-
deductible on your income tax return.

- Investments held in a TFSA include cash,
stocks, ETFs, mutual funds, securities,
government and corporate bonds, and
term deposits.

- Investments held in an RRSP include cash,
stocks, ETFs, mutual funds, securities,
government and corporate bonds, and term

- There is no requirement to convert the
TFSA to an income payment option (e.g.
a RRIF or an annuity) at any age.

- An RRSP must be fully withdrawn or be
transferred to a RRIF or annuity by the
end of the year you turn 71.


For more information on BMO TFSAs or RRSPs visit,

The BMO Survey was conducted by Pollara Strategic Insights via an online survey between November 30 and December 5, 2018, with an online sample of 1,518 adult Canadians. Data has been weighted using the latest census information to be representative in terms of age, gender and region. The margin of error for a probability sample size of 1,518 is ± 2.5% 19 times out of 20.

About BMO Financial Group 
Serving customers for 200 years and counting, BMO is a highly diversified financial services provider - the 8th largest bank, by assets, in North America. With total assets of $774 billion as of October 31, 2018, and a team of diverse and highly engaged employees, BMO provides a broad range of personal and commercial banking, wealth management and investment banking products and services to more than 12 million customers and conducts business through three operating groups: Personal and Commercial Banking, BMO Wealth Management and BMO Capital Markets.


SOURCE BMO Financial Group

For further information: Media Contacts: James DeCosimo, Toronto, | (416) 867-3996; Kim Johnson, Toronto, | (416) 867-3996