Quick answer
Choose the RRSP first if your tax rate today is higher than you expect it to be in retirement, typically on incomes over about $60,000 to $70,000; choose the TFSA first if your income is lower now, you may need the money before retirement, or you'll rely on OAS and GIS later. For 2026 the TFSA limit is $7,000 and the RRSP dollar limit is $33,810 or 18% of 2025 earned income, whichever is less.
TFSA and RRSP Compared
| TFSA | RRSP | |
|---|---|---|
| 2026 limit | $7,000 (cumulative $109,000 since 2009) | 18% of 2025 earned income, max $33,810 |
| Tax deduction | No | Yes |
| Withdrawals | Tax-free, any time, room comes back next year | Taxed as income |
| Affects OAS and GIS | No | Yes, withdrawals count as income |
| Age limit | None, after 18 | Convert to a RRIF by the end of the year you turn 71 |
| Newcomers | Room starts the year you become resident | Room starts after your first year of Canadian earned income |
TFSA vs RRSP: What You Keep After Tax
Compare the same pre-tax income put into each account, with the RRSP refund reinvested.
Simplified: one contribution, a flat tax rate on withdrawal, and no effect on benefits. Not tax advice.
When Each Account Wins
Higher income now
You're in a higher bracket than you expect in retirement. The refund is worth more than the tax you'll pay later, especially if you reinvest it.
Lower income or flexibility
Early career, a lower bracket, or saving for something before retirement. TFSA withdrawals are tax-free and the room comes back.
OAS and GIS later
RRSP and RRIF withdrawals count as income and can reduce the Guaranteed Income Supplement. TFSA withdrawals don't.
TFSA vs RRSP: Your Questions
What is the TFSA limit for 2026?
$7,000. If you've been eligible since 2009 and never contributed, your total room is $109,000. Newcomers only get room from the year they became resident.
What is the RRSP limit for 2026?
18% of your 2025 earned income, up to $33,810, minus any pension adjustment, plus unused room. Check your Notice of Assessment.
Should I put money in a TFSA or RRSP first?
If your tax rate today is higher than you expect in retirement, the RRSP usually wins. If it's lower, or you need flexibility, the TFSA usually wins.
Can I have both?
Yes. Many families use the RRSP for the refund and the TFSA for flexible savings, often putting the RRSP refund into the TFSA.
What's the penalty for over-contributing?
1% a month on the excess for both. The RRSP allows a $2,000 cushion; the TFSA doesn't.
Do TFSA withdrawals affect government benefits?
No. TFSA withdrawals aren't income, so they don't affect OAS, GIS or the Canada Child Benefit.
Pankaj Bhatia, PFA, CHS
Pankaj is a licensed insurance advisor with offices in Mississauga and Cambridge, Ontario, and a member of Advocis. He helps families compare Super Visa and visitor plans from Canadian insurers and sorts out claims and refunds when plans change.
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