2 min read
Should I Contribute to a TFSA or RRSP First?
Quick Answer
If your is under $50,000, prioritize your . If you're earning over $50,000, an often makes more sense for the . Both are valuable—the best choice depends on your .
contributions are made with after-tax dollars, and withdrawals are tax-free. contributions are tax-deductible, reducing your , but withdrawals are taxed as . is $7,000/year (2026), while RRSP room is 18% of previous year's income up to $33,810 (2026).
Choose if: your is under $50,000 (low now), you expect higher income in retirement, you want flexible access to funds without penalties, you're saving for short-term goals, or you've already maxed out matching from an employer.
Choose if: your is over $50,000 (higher ), you expect lower income in retirement, your employer offers RRSP matching (free money!), you're using the Home Buyers' Plan to buy your first home, or you want to reduce your this year.
Most Canadians benefit from contributing to both accounts. A common approach: first, contribute enough to your to get full employer matching. Then, max out your for flexibility. Finally, contribute additional funds to your RRSP for tax savings.
Frequently Asked Questions
Yes! Most Canadians should have both. They serve different purposes and offer different tax advantages.
over-contributions are penalized at 1% per month on the excess amount. has a $2,000 grace amount, then 1% monthly penalty. Always track your contribution room through your .
Not directly. You'd need to withdraw from one (following its rules) and contribute to the other. An withdrawal triggers taxes; a withdrawal doesn't but uses contribution room.