TFSA or RRSP First? The 60-Second Answer

It's the most-asked question in Canadian personal finance, and the honest answer fits in a minute.

The one question that decides it

Is your tax rate higher today than it will be when you withdraw?

• Higher now → RRSP. Deduct at today's high rate, pay tax later at a lower one. The spread is your profit.
• Lower now → TFSA. Pay today's modest tax, then never again — withdrawals are tax-free and don't touch income-tested benefits.
• Not sure → TFSA. It's flexible, withdrawals restore room, and no tax surprise waits at the end.

The exception that beats both

Saving for a first home? The FHSA is the RRSP's deduction plus the TFSA's tax-free withdrawal — for a qualifying first home. $8,000/year, $40,000 lifetime. If a first home is plausibly ahead of you, open one now to start accumulating room.

Three common traps

1. RRSP refund spent, not reinvested. The refund is part of the strategy — redirect it into the TFSA or next year's RRSP.
2. TFSA used as a chequing account. Frequent withdrawal/recontribution cycles trigger overcontribution penalties (room only returns January 1).
3. Low income + RRSP. If retirement income could include GIS, RRSP withdrawals claw it back — TFSA first.

Full rules, limits and the fill-order cheat-sheet live in our registered accounts guide. And whichever wrapper you pick, what goes inside still decides the outcome — start with the basics.