Side-by-Side Comparison
| Feature | RRSP | TFSA |
|---|---|---|
| Tax Deduction | ✓ Yes - Immediate | ✗ No |
| Tax-Free Growth | ✓ Yes (tax-deferred) | ✓ Yes (tax-free) |
| Tax on Withdrawal | ✓ Taxable as income | ✗ Tax-free |
| Withdrawal Flexibility | Limited (penalties) | ✓ Anytime, no penalty |
| Contribution Room Returns | ✗ Lost forever | ✓ Returns next year |
| 2026 Contribution Limit | $31,560 or 18% income | $7,000 |
| Age Limit | 71 years old | No limit (18+) |
| Best For | High earners, retirement | Everyone, any goal |
When to Choose RRSP
✓ You Earn $50,000+/Year
Higher tax bracket = bigger deduction. A $10,000 RRSP contribution saves $3,000-$4,000 in taxes at 30%+ tax rates.
✓ You Won't Need Money Until Retirement
RRSPs are ideal for long-term retirement savings if you can leave funds untouched for 20-30 years.
✓ You Expect Lower Retirement Income
Deduct at 30% today, pay tax at 20% in retirement = net tax savings of 10%.
✓ You Have Employer Matching
Many employers match RRSP contributions (often 3-5%). That's free money - always maximize this first.
When to Choose TFSA
✓ You Earn Under $50,000/Year
Lower tax bracket = smaller deduction benefit. TFSA's tax-free withdrawals are more valuable long-term.
✓ You Want Flexibility
Withdraw anytime for emergencies, home purchase, or career break without tax penalties.
✓ You're Young (20s-30s)
More time for compound growth. Tax-free gains on decades of returns = massive wealth building.
✓ You're Already Retired
Can't contribute to RRSP after 71, but TFSA works at any age. Plus withdrawals don't affect OAS/GIS.
Smart Strategy: Use Both Together
Most Canadians should use BOTH accounts strategically:
Max Employer Match First
If employer matches 5% RRSP, contribute 5% minimum - that's instant 100% return.
Build Emergency Fund in TFSA
3-6 months expenses in TFSA for easy access without tax consequences.
Prioritize Based on Income
$50k+: RRSP first. Under $50k: TFSA first. $80k+: Max both if possible.
Asset Location Matters
Growth stocks in TFSA (tax-free gains), dividend stocks in RRSP (defer tax), bonds in RRSP.