RRSP vs TFSA: Which Account Should You Max Out First?

The most-asked question in Canadian personal finance has a genuinely correct answer — and it’s not “both” or “it depends.” It’s a rule.

The tax-rate rule

Your RRSP contribution is a bet that your tax rate today is higher than your tax rate when you withdraw. Your TFSA contribution is the opposite bet. Everything else is commentary.

• Earn $100,000 now, expect modest retirement income? RRSP usually wins: in Ontario you’d deduct at about 31% (2026) and might withdraw at around 20%. That spread is real money.
• Earn $45,000 now, career on the way up? TFSA usually wins: why deduct at about 19% (Ontario, 2026) and possibly pay 30% later?
• Same rate both ways? Dead tie — the accounts are mathematically identical.

Run your own rates through the RRSP vs TFSA calculator — it shows the after-tax dollar difference between the two over your timeline.

The order of operations that beats the rule

1. Employer match first. If your employer matches group RRSP contributions, that’s an instant 100% return. Nothing else competes.
2. FHSA if you’re buying a first home. Deductible in, tax-free out — the only double-free account in Canada. See our FHSA guide.
3. TFSA if you’re in a low bracket (under ~$50k), building an emergency fund, or unsure when you’ll need the money.
4. RRSP once your marginal rate reaches roughly 30% or more and the deduction is worth real money.
5. Back to TFSA once RRSP room is used or your retirement income is already well-covered.

The tiebreakers nobody mentions

• OAS and GIS clawbacks. RRSP/RRIF withdrawals count as income and can claw back benefits — 15% of OAS above $95,323 of 2026 net income, and GIS is reduced as income rises. TFSA withdrawals don’t count toward either. For lower-income retirees this makes the TFSA decisively better.
• Discipline. RRSPs punish withdrawal (tax + lost room), which is exactly why money survives in them. TFSAs are easy to raid. Know yourself.
• The refund trap. The RRSP’s advantage assumes you invest the refund. Spend it, and you’ve quietly converted pre-tax dollars to after-tax ones at a loss. Automate the refund back into the account.

Bottom line

The rule decides the account; behaviour decides the outcome. Pick with the calculator, automate the contributions, and revisit once a year when your income changes — bracket moves are the signal to switch priority.