TFSA vs RRSP as a Newcomer: Which Comes First?
Both accounts get tossed at you the moment you open a bank account. Here's a plain-English breakdown of which one actually fits your situation.
The 30-second version
TFSA: contribute after-tax dollars, grow tax-free, withdraw anytime tax-free. RRSP: contribute pre-tax dollars (you get a refund), grow tax-deferred, pay tax when you withdraw. The right choice depends on your income today vs. in retirement — and your time horizon.
TFSA contribution room as a newcomer
You only start accumulating TFSA room the year you become a Canadian tax resident. So if you arrived in 2024, your 2024 room is one year's allotment ($7,000), not the full historical amount. Check your CRA My Account for your exact number — do not guess.
When the TFSA usually wins first
If you're early in your career or in a lower tax bracket (under roughly 30% marginal rate), the TFSA is almost always the better starting point. The flexibility to withdraw without penalty is huge when you're still building an emergency fund or saving for a down payment.
When the RRSP makes sense
Higher income (40%+ marginal rate), employer matching on group RRSP contributions, or saving specifically for a first home through the Home Buyers' Plan. Otherwise, fill the TFSA first.
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