A detailed comparison of the two most popular registered accounts in Canada, with income-specific guidance on which to maximize first to optimize your tax position in 2026.
The Core Difference
The main difference between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP) is *when* you pay taxes. With an RRSP, you get a tax deduction now, but pay tax on withdrawals later. With a TFSA, you contribute after-tax dollars, but all growth and future withdrawals are 100% tax-free.
When the RRSP Wins
RRSPs are generally more effective for individuals in higher tax brackets. If you expect your income to be lower during retirement than it is today, the RRSP allows you to defer tax at a high rate and pay it back later at a much lower rate.
When the TFSA Wins
TFSA contributions are ideal for flexibility and for those currently in lower tax brackets who expect their income to rise significantly in the future. It’s also the perfect vehicle for short-term goals like a wedding, renovation, or emergency fund.
"Don't let the simplicity of these accounts fool you—the decision of where to put your next dollar can have a six-figure impact on your lifetime wealth."— Rahul Jain