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Dispelling seven myths about RRSPs and TFSAs

There are some persistent myths, especially when it comes to RRSPs and TFSAs. Misconceptions about the main benefits of these two savings vehicles are a major obstacle. FÉRIQUE Investment Services can help you get a clearer perspective by dispelling these 7 longstanding myths.

Myth #1    RRSPs and TFSAs are investments

They are savings plans, which are registered with the Canada Revenue Agency and enable you to earn a return on your money tax-free. In other words, they are tax-advantaged investment vehicles. 

With an RRSP or a TFSA, you’re free to select investments, whether you want to invest in individual stocks or mutual funds.

Myth #2    The RRSP can wait because I’m nowhere near retirement

The main purpose of the Registered Retirement Savings Plan (RRSP), as its name suggests, is to fund your retirement. If you’re still a long way from the day when you’ll stop your professional activities, does that mean contributing to an RRSP can wait?

you invest to achieve financial independence, time is your most powerful ally. Thanks to compound returns, namely the return you earn on past returns, your savings can snowball. To arrive at the same amount of savings, a person who starts saving at age 25 will need to contribute far less than someone who doesn’t begin until age 40.

If you have trouble visualizing the full force of compounding over time,
see for yourself with the FÉRIQUE planning tool.

Myth #3    RRSPs aren’t especially advantageous because withdrawals are taxable

It’s true that sooner or later you’ll have to pay taxes. But it’s a misunderstanding of how RRSPs and taxation work to think RRSPs aren’t appealing.

Contributing to an RRSP allows you to defer tax. Your RRSP contributions reduce your taxable income and allow you to reduce the tax payable on the basis of your marginal tax rate. You’ll have to add the withdrawals to your income when you take funds out of your plan. But, with proper planning, you can potentially take advantage of a lower marginal rate than you otherwise would have.


Talking about a “tax deferral” can, therefore, be an oversimplification because, with sound planning, you could pay less tax when you withdraw funds. In addition, by reinvesting your tax savings in your RRSP, you can increase your savings without any extra effort in addition to obtaining tax-sheltered returns.

Myth #4    I can withdraw from and contribute to my TFSA as I see fit

The Tax-Free Savings Account (TFSA) is renowned for its flexibility. The lack of taxation on withdrawals makes it an effective savings instrument to finance projects over the short, medium or long term.

But numerous, poorly planned withdrawals, in addition to depriving you of compound returns, can lead to unpleasant surprises. Take note that the value of the amounts withdrawn from your TFSA is added to your contribution limit in the following year. If you lose track of the amounts withdrawn and invested, you could exceed your contribution limit and have to pay a 1% tax penalty on the excess amounts put into your TFSA.

In addition, the Canada Revenue Agency and Revenu Québec could conclude that you’re using your TFSA to generate business income. The TFSA is an investment vehicle exclusively for individuals.

Myth #5    Money saved in a TFSA is taxable at death

In the event of your death, the amounts accumulated in your TFSA are not taxable, and your heirs will receive them. That being said, from death until the end of the rollover period, the returns are taxable for the estate.

Myth #6    You need employment income to contribute to a TFSA

The RRSP contribution limit is based on gross income, but the TFSA contribution limit is independent of income.

Any Canadian residents aged 18 and over may contribute to a TFSA, whether they have income or not. The annual contribution limit is determined by the Canadian government each year. In 2022, the cap is $6,000.

If you were 18 years old or older or older when this investment vehicle has been created in 2009, your maximum total contribution in 2023 is $88,000.

Myth #7    Opening an RRSP or a TFSA is complicated

With the many platforms and apps at your disposal, saving has never been easier. Opening an RRSP or a TFSA is quick and easy, and you can set up preauthorized contributions (PACs) to facilitate monthly savings.


At FÉRIQUE Investment Services, you can benefit from a user-friendly portal and an app to manage your investments, and you’re only a phone call away from getting help from an advisor and mutual fund representative. No appointment necessary!


service-conseilAdvisory Services Team
Monday to Thursday 8 am to 8 pm, Friday 8 am to 5 pm
T 514-788-6485 Toll-free 1-800-291-0337
[email protected]

FÉRIQUE is a registered trademark of Gestion FÉRIQUE and is used under license by its subsidiary, Services d'investissement FÉRIQUE. Gestion FÉRIQUE is an Investment Fund Manager and assumes management duties in relation to the FÉRIQUE Funds. Services d'investissement FÉRIQUE is a Mutual Fund Dealer and a Financial Planning Firm, as well as the Principal distributor of the FÉRIQUE Funds. Please note that for commercial purposes, Services d'investissement FÉRIQUE is also known in English as FÉRIQUE Investment Services.

There may be brokerage fees, trailing commissions, management fees and expenses associated with investment in the Funds. Management expense ratios vary from one year to another. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

The information contained in this article does not constitute an offer or a solicitation of any nature in any jurisdiction in which such an offer or solicitation would not be authorized or to any person to whom it would be illegal to make such an offer or solicitation. The information contained in this article does not constitute specific advice of a financial, legal, accounting or fiscal nature concerning investments. You should not act or rely on the information without seeking the advice of a professional.