Comparing RRSPs, TFSAs, and Voluntary Contributions to the STRP

December 23, 2020

Personal savings are one of the key pillars of the Canadian retirement system. Opening personal savings accounts like RRSPs, TFSAs, and making voluntary contributions to your pension plan are important steps to help you reach your retirement goals. But understanding the differences between these accounts can be tough, so let’s take a closer look.

RRSP

TFSA

STRP Voluntary Contributions

Typically used for long-term retirement goals.

Meant for short-term financial goals, for example: a down payment on a house. 

Used for long-term retirement goals.

Make contributions pre-tax

Make contributions post-tax

Make contributions pre-tax

Tax deductible

Not tax deductible

Tax deductible

Maximum annual contribution limit is 18% of your annual pre-tax income (minus your pension adjustment amount and any voluntary contributions you make to the STRP). 

Maximum annual contribution limit is $6,000 (2020 & 2021 respectively) of after tax dollars.

Maximum annual contribution limit of 18% of your annual pre-tax income (minus your pension adjustment amount). Submit a request for an estimate of your annual voluntary contribution limit.

Contribution room can be carried forward to future years.

Contribution room can be carried forward to future years. Withdrawals add contribution room.

Contribution limit is based on current year’s availability only.

You make your own investment decisions or pay stiff fees to have someone help you.

You make your own investment decisions or pay stiff fees to have someone help you.

Your contributions are pooled with the STRP and invested by the Plan’s professional investment managers. This significantly reduces investment fees.

Can be withdrawn at any time; tax is paid upon withdrawal.

Can be withdrawn at any time; no tax paid upon withdrawal.

Withdrawn only when you retire or terminate membership in the STRP. Tax is paid upon withdrawal or can remain tax sheltered if transferred to an RRSP.