TFSA vs RRSP Canada 2026: Which Should You Max First?
The age-old Canadian savings question. Here's my honest take on which account to prioritize based on your actual situation.
Every Canadian eventually asks this: "Should I put my money in a TFSA or RRSP?" The internet will tell you "it depends," which is true but unhelpful.
So let me give you the real answer with actual numbers and decision rules. No fluff.
2026 Limits (Quick Reference)
TFSA 2026
$7,000
Annual limit
RRSP 2026
18% of income
Max $33,810
The Key Difference (In Plain English)
TFSA:
Pay tax now, grow tax-free, withdraw tax-free forever.
RRSP:
Get tax deduction now, grow tax-free, pay tax when you withdraw (hopefully at lower rate in retirement).
My Decision Framework
Here's how I think about this for different income levels:
If You Earn Under $55,000/year: TFSA First
Why: Your tax rate is already low (~20-25%). The RRSP deduction doesn't save you much now, but you'll likely pay similar tax rates in retirement. TFSA gives you flexibility.
Example: You earn $50,000. RRSP contribution of $7,000 saves you ~$1,750 in tax. But when you retire and withdraw that $7,000+ growth, you'll pay tax on it. TFSA: no tax ever.
If You Earn $55,000-$110,000/year: Split Strategy
Why: You're in the middle tax bracket (~30-35%). The RRSP deduction is valuable, but you also want flexibility. Do both if you can.
My approach: Max TFSA ($7,000) first, then contribute to RRSP with remaining savings. This gives you tax-free money for emergencies (TFSA) and tax-deferred retirement (RRSP).
If You Earn Over $110,000/year: RRSP First
Why: You're in a high tax bracket (~40-50%). The RRSP deduction saves you serious money NOW, and you'll likely be in a lower bracket in retirement.
Example: You earn $120,000. RRSP contribution of $15,000 saves you ~$7,000 in tax. That's $7,000 you can reinvest. Math strongly favors RRSP at high income.
Quick Comparison Table
| Factor | TFSA | RRSP |
|---|---|---|
| Contribution Limit 2026 | $7,000 | 18% income (max $33,810) |
| Tax Deduction | ||
| Tax on Withdrawal | Never | Yes (as income) |
| Flexibility | Limited | |
| Best For | Any goal, any age | Retirement, high earners |
Special Situations
First-Time Home Buyer
Use RRSP for Home Buyers' Plan (borrow up to $60,000 tax-free for down payment). But also max TFSA for emergency fund. You'll need both.
Saving for Non-Retirement Goals
TFSA wins. Wedding, car, sabbatical, kid's education - anything you'll need before 65. RRSP withdrawal penalties make it terrible for short-term goals.
Self-Employed / Variable Income
TFSA first. Builds emergency fund (6-12 months expenses). Then RRSP with surplus income in good years to offset high tax bills.
My Personal Strategy
When I was building Waypoint Budget and had variable income:
- Max TFSA first ($7,000/year) - emergency fund + short-term goals
- Any extra goes to RRSP - tax deduction helps in good income years
- Track both in my budget - they're expenses, not afterthoughts
Now that income is stable, I split 50/50. TFSA for flexibility, RRSP for tax optimization.
The Bottom Line
Simple Rule:
- • Under $55k income: TFSA → RRSP
- • $55k-$110k income: Both (TFSA first if choosing)
- • Over $110k income: RRSP → TFSA
- • Any age, any goal that's not retirement: TFSA
But here's the real truth: the best choice is the one you actually do. Analysis paralysis helps nobody. Pick one, start contributing consistently, and adjust as your income changes.
Track Both in One Place
Waypoint Budget lets you track both TFSA and RRSP contributions as part of your overall budget. Set goals, monitor progress, never over-contribute.