XEQT in TFSA vs RRSP: Where Should You Hold It? Complete Guide for 2025

One of the most common questions Canadian investors ask is: “Should I hold XEQT in my TFSA or RRSP?” The answer isn’t always straightforward and depends on your financial situation, tax bracket, and investment timeline.

Both TFSA and RRSP offer significant tax advantages, but they work very differently. Understanding these differences is crucial for maximizing your XEQT investment returns and minimizing your tax burden.

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In this comprehensive guide, we’ll break down everything you need to know about holding XEQT in TFSA vs RRSP, including tax implications, contribution limits, withdrawal rules, and real-world examples to help you make the best decision.

Quick Overview: TFSA vs RRSP for XEQT

Feature TFSA RRSP
Tax Treatment Tax-free growth Tax-deferred growth
Contributions After-tax money Pre-tax money (deductible)
Withdrawals Tax-free Taxable as income
Contribution Limit (2025) $7,000 18% of income (max $32,490)
Age Restrictions 18+ 18+ (must convert at 71)
Best For Tax-free growth, flexibility Tax deduction, high income

Understanding TFSA and RRSP Basics

What is a TFSA?

TFSA (Tax-Free Savings Account) is a registered account where:

What is an RRSP?

RRSP (Registered Retirement Savings Plan) is a registered account where:

XEQT in TFSA: The Complete Picture

How XEQT Works in TFSA:

Tax Treatment:

Contribution Limits:

Withdrawal Rules:

Advantages of XEQT in TFSA:

✅ Tax-free growth - All gains are yours to keep
✅ Flexibility - Withdraw anytime without penalty
✅ No age restrictions - Keep investing indefinitely
✅ Simplified taxes - No complex reporting
✅ Emergency fund - Can withdraw for unexpected expenses
✅ No forced withdrawals - Unlike RRSP/RRIF

Disadvantages of XEQT in TFSA:

❌ No tax deduction on contributions
❌ Lower contribution limits than RRSP for high earners
❌ Foreign withholding tax still applies
❌ Opportunity cost of not getting tax deduction

XEQT in RRSP: The Complete Picture

How XEQT Works in RRSP:

Tax Treatment:

Contribution Limits:

Withdrawal Rules:

Advantages of XEQT in RRSP:

✅ Tax deduction on contributions
✅ Higher contribution limits for high earners
✅ Reduced foreign withholding tax on US dividends
✅ Tax-deferred growth until retirement
✅ Income splitting opportunities with spouse

Disadvantages of XEQT in RRSP:

❌ Taxable withdrawals - Pay tax when you take money out
❌ Age restrictions - Must convert at 71
❌ Less flexibility - Withdrawals have tax consequences
❌ Complex rules - More complicated than TFSA

Tax Implications: TFSA vs RRSP for XEQT

TFSA Tax Treatment:

Contributions:

Growth:

Withdrawals:

RRSP Tax Treatment:

Contributions:

Growth:

Withdrawals:

When to Choose TFSA for XEQT

Choose TFSA if:

Income Level:

Investment Timeline:

Tax Strategy:

Life Stage:

Real-World Example - TFSA Winner:

Sarah, 25, Marketing Coordinator:

TFSA Benefits:

When to Choose RRSP for XEQT

Choose RRSP if:

Income Level:

Investment Timeline:

Tax Strategy:

Life Stage:

Real-World Example - RRSP Winner:

Mike, 35, Software Engineer:

RRSP Benefits:

Hybrid Approach: XEQT in Both Accounts

The Best of Both Worlds:

Many investors choose to hold XEQT in both TFSA and RRSP, optimizing for different goals:

TFSA Strategy:

RRSP Strategy:

Allocation Strategy:

Young Investor (25-35):

Middle-Aged (35-50):

Peak Earning (50-65):

Pre-Retirement (65+):

Contribution Room Management

TFSA Contribution Room:

2025 Limit: $7,000 Cumulative Room: $95,000 (if 18+ since 2009)

How to Check:

Important Notes:

RRSP Contribution Room:

2025 Limit: 18% of 2024 income (max $32,490)

How to Calculate:

Important Notes:

Foreign Withholding Tax Considerations

TFSA - Foreign Tax Drag:

US Dividends (45% of XEQT):

International Dividends (30% of XEQT):

RRSP - Reduced Foreign Tax:

US Dividends:

International Dividends:

Winner: RRSP for US dividend optimization

Real-World Scenarios and Examples

Scenario 1: Young Professional (28 years old)

Profile:

Recommendation:

Scenario 2: High Earner (42 years old)

Profile:

Recommendation:

Scenario 3: Near Retirement (58 years old)

Profile:

Recommendation:

Common Mistakes to Avoid

Mistake 1: Not Maxing Out TFSA First

Problem: Contributing to RRSP when TFSA room available Solution: Always max out TFSA first (unless very high income)

Mistake 2: Over-Contributing to TFSA

Problem: Contributing more than available room Solution: Check CRA My Account before contributing

Mistake 3: Withdrawing from RRSP Early

Problem: Taking money out of RRSP before retirement Solution: Use TFSA for flexibility, keep RRSP for retirement

Mistake 4: Not Considering Tax Brackets

Problem: Contributing to RRSP when in low tax bracket Solution: Consider current vs. future tax rates

Mistake 5: Ignoring Foreign Withholding Tax

Problem: Not considering tax drag on foreign dividends Solution: Consider RRSP for US-heavy ETFs like XEQT

How to Set Up XEQT in TFSA and RRSP

Step 1: Open Your Accounts

🎁 Open TFSA and RRSP accounts on Wealthsimple

Wealthsimple Trade offers:

Step 2: Fund Your Accounts

TFSA:

RRSP:

Step 3: Buy XEQT

The Bottom Line: TFSA vs RRSP for XEQT

General Rule of Thumb:

Max out TFSA first, then RRSP - unless you’re in a very high tax bracket (>40%)

Choose TFSA if:

Choose RRSP if:

Best Strategy:

Use both accounts strategically based on your income, goals, and timeline.

Ready to Optimize Your XEQT Strategy?

🎁 Get $25 of XEQT for free on Wealthsimple

The key to maximizing your XEQT returns is choosing the right account for your situation. Whether you choose TFSA, RRSP, or both, the important thing is to start investing and stay consistent.

Remember: Both TFSA and RRSP offer significant tax advantages over non-registered accounts. The “perfect” choice depends on your individual circumstances, but any registered account is better than none.

Start building your wealth today with XEQT in the account that makes the most sense for you!

Disclosure: This post contains referral links. I may receive compensation if you sign up through these links, but this doesn’t affect my honest assessment. I genuinely believe XEQT is an excellent choice for Canadian investors in both TFSA and RRSP accounts.