Investors prefer Tax Free Savings Accounts to Registered Retirement Savings Plans

A new series of reports from Statistics Canada released early this month, in aggregate, discuss relative wages and the financial decisions made by the average Canadian tax filer in 2023.

During that year, tax filers reported earning a national median wage of $47,650, a 1.1 per cent increase over 2022’s figures after adjusting for inflation. Wages grew the most in Newfoundland and Labrador, rising four per cent to $40,000. The second largest increase was in Nova Scotia where the median wage rose 3.9 per cent to $42,490.

Median wages, salaries and commissions decreased the most in the Yukon, dropping 1.4 per cent to $59,950, followed by Alberta where wages declined 1.3 per cent to $50,670 and the Northwest Territories which saw median wages decline 1.1 per cent to $63,440. All told, median wages were lower year-over-year in five provinces: Saskatchewan, Alberta, Yukon, Northwest Territories and Nunavut. Statistics Canada says those between 65 and 74 years of age saw the largest increase in median wages, salaries and commissions, up 12.1 per cent to $20,960 in inflation-adjusted terms.

The statistics agency also released figures related to Canadian’s investing habits. They found that more tax filers contributed to a TFSA, and in larger amounts in 2023 than they did towards Registered Retirement Savings Plans (RRSPs).

They say 3.8 million people contributed only to an RRSP, with a median contribution of $3,420. Another five million contributed only to a TFSA, with a median contribution of $6,500. The remaining 2.5 million tax filers who made a contribution in 2023, contributed to both. The median contribution made to an RRSP by this group was $5,000, while the median contribution made to a TFSA reached $6,150.

Notably, those earning more than $80,000 were more likely to contribute to an RRSP; those with incomes under $60,000 were more likely to contribute to a TFSA.

Older clients also preferred the TFSA, with 2.3 million tax filers over age 65 contributing to these accounts. The median contribution to a TFSA reported by this age group was $6,500. The median contribution of those contributing to the First Home Savings Account (FHSA), meanwhile, in the first year of its availability, was $8,000, the maximum allowable.

Older Canadians drive rise in charitable donations  

Finally, total charitable donations jumped by more than $1-billion in 2023.

“Following the decreases seen in 2022, charitable donations rose significantly in 2023, with increases in both the number of donors and the amount of donations,” the agency’s researchers write. “In 2023, there were just over five million (1.9 per cent) tax filers who reported a total of $12.8-billion in charitable donations, a $1.4-billion (11.8 per cent) increase over 2022. In addition, the median donation increased by 2.6 per cent during this period to $390.” 

Tax filers over age 65 made up 35 per cent of all donors. This age group also reported half of the total amount donated. They say those between 55 and 64 were the second largest age group to donate – representing 19.2 per cent of all donor and 19.7 per cent of total donations.