TFSA vs Roth IRA: What Are the Differences?
- Tiffany Woodfield
- Nov 18
- 9 min read
Updated: Dec 4
Are you moving across the Canada/US border and planning for the future?
Well then you may be wondering what the different government savings plans are. As a cross-border financial advisor, one of the most common questions I get is about the difference between a TFSA vs a Roth IRA.
Since there are so many similarities, my clients who are retiring to Canada often want to know what the differences are. When you contribute to a tax-free savings account (TFSA) or a Roth IRA, you make contributions with after-tax dollars, so you don’t receive a tax deduction in the year you contribute. However, beyond that, there are plenty of distinctions.
Written by Tiffany Woodfield, CRPC®, CIM®, TEP®, Senior Financial Advisor
Tiffany Woodfield specializes in advising clients who live in Canada or the United States and have IRAs/401(k)s, RRSPs/TFSAs, or who have inherited assets across the US-Canada border.
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Table of Contents
Summary of Key Points:
You cannot transfer a Roth IRA to a TFSA.
You need to follow certain rules when you bring your Roth IRA to Canada. Not following these rules can cause you to pay tax.
Make sure you do not contribute to a Roth IRA after you have moved to Canada.
Withdrawals from your Roth IRA are not taxed in the US as long as they are qualified distributions. You must be over 59.5 and have held the Roth IRA for more than 5 years.
A TFSA is a good option for Canadians. But if you are a US person, you should check with your cross-border accountant before opening a TFSA.
If you work with a cross-border financial advisor, you can have your Roth IRA managed while living in Canada.
Watch Video: Is a Roth IRA the Same as a TFSA?
Differences Between TFSA and Roth IRA
The main differences between a TFSA and Roth IRA are as follows:
You can carry unused contribution room for a TFSA forward. So if you do not contribute to a TFSA one year, you can use that "room" in a future year. With a Roth IRA, you cannot carry the contribution room forward.
With a TFSA, you can contribute any savings as long as you are older than age 18 and a Canadian resident. But with a Roth IRA, you can only contribute earned income.
A TFSA is not based on earned income. Therefore, you can't reach an income level where you are no longer eligible to contribute. With a Roth IRA, if you earn too much, you are not eligible to contribute.
With a TFSA, you do not gain extra contribution room as you age. But with a Roth IRA, you have an increase in contribution room of $1000 after you turn 50.
With a TFSA, you can generally withdraw funds at any time without penalty and without losing contribution room (subject to rules). With a Roth IRA, you must have held the account for at least five years and be age 59½ or older for withdrawals of earnings to be tax-free and penalty-free.
Note: For the 2025 tax year, to make the full contribution to a Roth IRA as a single filer, your Modified Adjusted Gross Income (MAGI) must be under approximately US$150,000. For those married and filing jointly, your MAGI must be under approximately $236,000 to contribute the full amount.
Source: Roth IRA Contribution Limits
Similarities Between TFSA and Roth IRA
The similarities between a TFSA and Roth IRA are as follows:
For the 2025 tax year, the annual contribution limit for a TFSA is $7,000, with any unused contribution room carried forward. The maximum contribution room for a Roth IRA is $7,000 or $8,000 if you are of age 50 or over.
Neither the deposits made to a TFSA nor a Roth IRA are tax-deductible. So, you do not get a tax reduction in the year you contribute.
You don't pay tax on TFSA withdrawals or Roth IRA withdrawals as long as it is a qualified withdrawal.
Both a TFSA and a Roth IRA are government plans designed to encourage people to save money—unlike a high-interest savings account, which offers flexibility but no tax advantages.
A TFSA and Roth IRA can hold investments such as mutual funds, stocks, bonds, and cash.
You will not be taxed on the gains from the investments in a TFSA. You will also not be taxed on the gains from the investments in a Roth IRA as long as you make a qualified withdrawal.
If you were eligible to contribute to a TFSA since 2009, when the program was created, your cumulative contribution room as of January 1, 2025, is approximately $102,000 (assuming you’ve been a Canadian resident each year). To be eligible to contribute, you must be age 18 or older and a resident of Canada.
Also, if you bring your Roth IRA to Canada, you need to file a one-time declaration. And you cannot continue to contribute.
Note: A qualified withdrawal is when you have held a Roth IRA account for at least five years, and you are older than age 59.5. If this is the case, you can make a withdrawal, and the earnings will not be taxed.
Sources: CRA - Tax Free Savings Account
Watch Video: TFSA vs. ROTH IRA - What are the differences?
Can You Transfer Roth IRA to TFSA If You Retire to Canada?
You cannot transfer your Roth IRA to a TFSA if you retire to Canada. These accounts are not interchangeable under Canadian or US tax law.
However, once you are a permanent resident of Canada, you can contribute to a TFSA. But if you are considered a US person (green card holder or US citizen), a TFSA may not be the best solution. For tax purposes, the IRS doesn't treat a TFSA the same way as the Canadian government. Speak to your cross-border accountant about this before you open an account.
Also, if you want to have your Roth IRA managed while you live in Canada, you can work with a cross-border financial advisor. A financial advisor licensed in Canada and the US can help you manage your Roth IRA in Canada.
If you lived in Canada previously and want to determine how much room you may have in your TFSA, go to your MyCRA account at Contributions Canada.
Taxation of TFSA vs Roth IRA
The contributions you make to a tax-free savings account (TFSA) in Canada and to a Roth IRA in the US are not deductible for income tax purposes, meaning they do not reduce your taxable income in the year that you contribute.
For example, when you contribute to a registered retirement savings plan (RRSP) or IRA, it is a deductible expense, which means it reduces your reportable income and, as a result, the income taxes owed. But with a TFSA or Roth IRA, the contributions are not deductible. So you do not get a tax break when you contribute to a TFSA or a Roth IRA. You are contributing with after-tax dollars.
But the good news is that the income and capital gains earned in the account from your investments are generally tax-free, even when you take them out of the account.
Taxation of Roth IRA in Canada
If you're moving to Canada, it's essential to understand how the CRA will tax your Roth IRA.
You also need to know what options you’ll have once you begin withdrawals from a registered retirement income fund (RRIF) or other Canadian retirement accounts.
First, once you are a Canadian resident, do not contribute to your Roth IRA. Doing so will cause a tax problem. You must file a one-time treaty election by April 30th of the year after becoming a permanent resident.
If you do this, the CRA will treat the Roth IRA as a pension. If you didn't contribute once in Canada and filed the one-time election, your Roth IRA will not usually be subject to taxation in Canada.
Keep in mind that to prevent US taxation on withdrawals from your Roth IRA in the US, you still need to ensure you're only making a qualified withdrawal.
A qualified withdrawal is if you have held a Roth IRA account for at least 5 years and you are older than the age of 59.5.
If so, you can take a withdrawal, and the earnings will not be taxed. The contributions are never taxed, as you are just taking out money you put in, which were after-tax dollars. If you bring your Roth IRA to Canada, you need to file a one-time declaration, and you cannot contribute any more to it.
Benefits of Having a TFSA
The benefits of having TFSA include the following:
You can grow savings and not pay tax on the earnings in the account.
A TFSA allows for flexibility. If you need to take money out of your account, you can do so without penalty. And you do not lose the contribution room.
However, if you over-contribute to a TFSA, you will be subject to a 1% per month penalty tax on the highest amount in that month.
A TFSA is an excellent tool for a Canadian resident. But if you are a US person, you will need to speak to a cross-border accountant before considering a TFSA. There are some implications of which you must be aware.
Benefits of Having a Roth IRA
The benefits of having a Roth IRA include the following:
It reduces your future tax liability.
You can pass on wealth to your heirs through an inherited Roth IRA.
There is potential for tax-free growth on the earnings in the account.
There are no required minimum distributions.
You have the flexibility to withdraw what you have contributed without penalty or taxes.
Retirement in Canada vs. the US
Many of our clients who retire to Canada have either grown up in Canada or spent a portion of their career here.
Moving back to Canada may feel like coming home to your roots, back to family and your connections. One of the major benefits of retirement in Canada vs the US is the healthcare system in Canada.
In the back of your mind, you may be thinking of just how much your medical costs will be in the US when you get older. From an emotional standpoint, you may be thinking about the political climate and hoping that you will feel comfortable in Canada.
Thanks to spending years working in the US and contributing to Social Security and your 401(k) plans, you are well-positioned for retirement in Canada with the added potential bonus of the favourable US/Canadian dollar conversion.
However, when you retire to Canada, you may be surprised by the difference in the average Canadian Pension Plan (CPP) cheque and the average Social Security cheque.
For 2025, CPP payments average around CAN$844.37 per month, and the maximum is CAN$1,433/month (July 2025). Meanwhile, in the United States, the average monthly Social Security benefit for retired workers has reached roughly US$2,008 (as of August 2025).
However, these small financial differences are not as important as your big life goals and plans.
Where do you really want to live?
How would you like to spend your retirement?
Are you ready for a change?
What kind of guidance do you want as you embark on your next big adventure?
These are the questions that really matter.
Once you decide where you want to live and when you want to move, you can work with an advisor to create a plan that will work for your specific situation and needs. There’s no need to worry about the small financial details when you have a team in place that works to ensure everything is covered.
Next Steps
If you’re a Canadian resident or are planning on moving to Canada or the US and need assistance with moving and optimizing your investments, estate planning, wealth management and portfolio management, please get in touch. At SWAN Wealth, we specialize in Canadian financial planning, cross-border financial planning and cross-border wealth management.
More Cross-Border Financial Planning Articles & Guides
If you’re planning a cross-border move, these articles and guides will help simplify your move and ensure everything is covered.
About the Author
TIFFANY WOODFIELD
Tiffany Woodfield is an Associate Portfolio Manager licensed in Canada and the United States, a Chartered Investment Manager (CIM), a Chartered Retirement Planning Counselor (CRPC), a Trust and Estate Practitioner (TEP), and the co-founder of SWAN Wealth Management, along with her husband, John Woodfield. Tiffany advises clients who live in Canada and the United States and wish to simplify their cross-border financial plan, move their assets across the border, and optimize their investments to minimize their tax burden. Together, Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams that will keep their assets safe, whether they live in Canada or the US.
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Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, SWAN Wealth Management, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member - Canadian Investor Protection Fund. Raymond James (USA) Ltd., member FINRA/SIPC. Raymond James (USA) Ltd. (RJLU) advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered.
