I'm still relatively young (I just turned 30), and no debt but mortgage. I'm kind of late to the retirement savings game and still have $15,000+ of contribution room for my TFSA as of this year.

As a rule of thumb, should I max out my TFSA contribution before looking at other investments?

  • 2
    I take it your goal is retirement savings?
    – karancan
    Jun 11, 2014 at 12:21

4 Answers 4


The advantages of the TFSA are

  • liquidity - you can take money out and put it back in quite simply and you even get your room back if you take it out
  • a place to tax shelter interest income when you've used all your RRSP room or want to save RRSP room for a time when your tax rate is higher than it is now
  • you don't pay tax when you withdraw and you're never forced to withdraw/pay tax as you are with an RRSP

This makes them great for 50-somethings who didn't do any saving yet, for whom clawbacks when they drawdown RRSPs will have a big impact on taxes and government-related income. It also makes them great for "I will save up for that car / my downpayment / the kids skating fees next year" when the money would come out of an RRSP at the same or even a higher tax rate and would not have time to compound for long. This may apply to you. And finally it makes them great for highly paid people who just don't know what the heck to do with all the money that is piling up and have no intention of ever using any of it while they're working, but have filled up their RRSPs. My 20-somethings are using them because they pay essentially no taxes now, so are waiting to use their RRSP room later.

If you have money that you are saving for something other than retirement, put it in a TFSA. If you've maxed the RRSP and still have money left over, put it in an TFSA. If you have children, consider an RESP first, because of the bonus money. But don't think TFSA first unless it's for timelimited saving like towards a car or renovation.


As a rule of thumb, no. Only in very rare circumstances will it prove better than a RRSP. The media has overplayed the usefulness of this account type for retirement savings. That's just a general rule. Your specific situation will make a difference but it's very easy to show that RRSPs will always outperform if the marginal rates are lower on withdrawal than when you deduct contributions from income.

If you plan to use the money before retirement or you're expecting to collect GIS on retirement then you may need to look at the specifics of your situation. If you plan to put money in a RRSP and carry forward the deduction to use at a later date then it doesn't matter whether you put it in a RRSP now or use the TFSA and transfer it later.

The RRSP also has advantages of some tax treaties and creditor protection. It (as a RRIF) can also be used after 65 for income splitting and the pension credit.

An RESP can also provide a greater return as you get free money, which is always good. There are many other things you can do with it but I'd say it's always better in a TFSA than paying tax in a regular account.

Since you pay the mortgage with after tax dollars that could be another option for the cash and it's a guaranteed return, albeit small nowadays.


Go with a TFSA before RRSP unless your wages put you in the top two tax brackets. The promise that your tax rates will be lower in retirement is just a sales pitch. You can see how this plays out with your own assumptions using the spreadsheet at http://www.retailinvestor.org/SaveInRRSPorTFSA.xls

There are long list of differences between the accounts (see http://www.retailinvestor.org/rrsp.html#tfsa) but most all come down on the side of the TFSA unless you are a high roller.


Yes go TFSA first.

Unless you make a lot of salary and want to lower your taxes. In this case RRSP might be the way to go.

But seeing as you're 30 and probably will make greater salary in the future, go TFSA.

  • Based on the contribution room, what would qualify as a lot of money?
    – John
    Jun 11, 2014 at 15:53
  • TFSA = Pay income tax now. RRSP = Pay income tax later. If you think your yearly income will be more in the years ahead (it is for most people), you want to pay the taxes now, while your marginal tax rate is low. If you have $15k in room, and have the money to max it out, do it! Get the power of compounding working ASAP. When you're old and cash out, it will all be tax free! :)
    – Wes
    Jun 11, 2014 at 16:04

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