How much contribution room can I carry forward?
If you choose not to contribute to your TFSA at all or do not contribute the maximum amount in a year, you can indefinitely carry forward your unused contribution room.
The only restrictions on this are that you must be a Canadian resident, older than 18, and have a valid social insurance number. In addition, if you make a withdrawal, the amount you withdrew is added to your annual contribution room for the following calendar year.
For an RRSP, you can carry forward your unused contribution room until the age of 71. When you turn 71, you must convert your RRSP into a Registered Retirement Income Fund (RRIF). If you make a withdrawal from your RRSP, it does not open up any additional contribution room.
Contributions and Tax Deductibility
TFSA contributions are not tax-deductible and are made with after-tax dollars, while RRSP contributions are tax-deductible and are made with pre-tax dollars.
Tax Treatment of Growth
One of the reasons it is essential to make both RRSP and TFSA contributions is that investment value growth is treated differently.
A TFSA is more suitable for short-term objectives like saving for a vacation or down-payment on a house because the investment value growth is tax-free. In addition, when you make a withdrawal from your TFSA, you will not have to pay income tax on the amount withdrawn.
The growth in an RRSP is tax-deferred, meaning you will not pay any taxes on your RRSP gains until you withdraw money from your future RRIF account; the account you convert your RRSP into at age 71. As a result, RRSPs are better suited for long-term objectives, like retirement. In addition, since you will have a lower income in retirement than when you are working, you will be in a lower tax bracket and pay less tax on your RRIF income.