TFSA vs RRSP: which should I max first?

For most Canadians, max your TFSA first if you’re in a low-to-moderate tax bracket, expect your income to rise, may need the money before retirement, or want flexibility. Max your RRSP first if you’re in a high tax bracket now and expect to be in a lower tax bracket in retirement.

A practical rule:

1. Use your TFSA first if your current income is modest, variable, or early-career. TFSA withdrawals are tax-free and don’t create taxable income later.
2. Use your RRSP first if you’re earning a high income now. The deduction is most valuable when it reduces income taxed at a high marginal rate.
3. If your employer offers RRSP matching, contribute enough to get the full match before anything else. That is usually the best first move.
4. If you’re saving for a home, compare the FHSA first if eligible, because it can combine an RRSP-like deduction with TFSA-like tax-free qualifying withdrawals.
5. If you can max both, the order matters less; use RRSP refunds to help fund your TFSA.

Simple examples:

• New grad earning $50k with income likely to rise: TFSA first.
• Professional earning $140k and expecting lower retirement income: RRSP first.
• Parent receiving income-tested benefits: RRSP contributions can sometimes help by lowering net income, but TFSA withdrawals later won’t reduce benefits.
• Someone unsure whether they’ll need the money: TFSA first for flexibility.

Best default answer: get any employer RRSP match, then max TFSA, then RRSP—unless you are clearly in a high tax bracket today, in which case RRSP likely moves ahead.