Short Answer: RRSPs are usually stronger when your current tax rate is higher than your expected retirement tax rate. TFSAs are often better when you expect higher future income or need flexible tax-free withdrawals.
When RRSP Often Wins
RRSP contributions can be attractive in high-income years because the deduction lowers current taxable income. The tradeoff is taxable withdrawals later.
When TFSA Often Wins
TFSAs preserve flexibility because qualified withdrawals are tax-free and do not create taxable retirement income.
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FAQ
Should high earners use RRSP first?
Often, yes, especially if the deduction is taken at a high marginal rate and retirement withdrawals are expected at a lower rate.
Is TFSA better for low-income workers?
Often, yes. If your current tax rate is low, the RRSP deduction may be less valuable than preserving tax-free TFSA room.
Can I use both?
Yes. Many Canadians use TFSA for flexibility and RRSP for high-income tax deferral.