Both RRSPs and TFSAs offer tax advantages, but they work very differently. Choosing the right one — or the right split between them — depends on your income and goals.
RRSP: Tax Deferral
Contributions reduce your taxable income now, but withdrawals are taxed later. This tends to make the most sense if you expect to be in a lower tax bracket in retirement.
TFSA: Tax-Free Growth
Contributions aren\’t deductible, but growth and withdrawals are completely tax-free. This makes a TFSA more flexible for both short- and long-term goals.
A Simple Rule of Thumb
If you\’re in a higher tax bracket now than you expect to be in retirement, prioritize your RRSP. If you\’re early in your career or expect similar or higher future income, a TFSA is often more efficient.
During tax planning sessions, we help clients figure out the right contribution split based on their actual numbers — not just general rules of thumb.