Visual priority order
Account comparison
| Account | 2026 limit | Tax on contribution | Tax on growth | Tax on withdrawal | Best use |
|---|---|---|---|---|---|
| RRSP | 18% of earned income up to $32,490 | Deductible (refund at marginal rate) | Tax-deferred | Ordinary income at withdrawal-year marginal rate | High-bracket today, lower-bracket retirement |
| TFSA | $7,000 annual, $102,000 cumulative since 2009 | No deduction (after-tax dollars) | Tax-free | Tax-free | Flexible rainy-day, low-bracket savers, retirees over RRIF |
| FHSA | $8,000 annual, $40,000 lifetime | Deductible (refund at marginal rate) | Tax-free | Tax-free if qualifying first-home withdrawal | First-time home buyer with 1-15 year horizon |
| Non-registered | Unlimited | After-tax dollars | Taxable each year (dividends, interest, capital gains) | Capital-gains 50% inclusion at sale | Once all sheltered room is used |
How the priority logic works
- Employer match always first. A typical 50% match is a 50% one-day return; no deferral or tax-free growth competes with that.
- FHSA next if eligible. The $8,000 annual cap and $40,000 lifetime cap are small enough that filling them in 1-5 years usually maxes the vehicle. The deduction works like RRSP, growth is tax-free, and a qualifying withdrawal for a first home is fully tax-free (no repayment required, unlike the Home Buyers Plan).
- RRSP next if high marginal rate. RRSP makes mathematical sense when your current marginal rate is meaningfully higher than your expected withdrawal-year rate. The quiz uses 30 percent as the soft threshold: above that, RRSP wins on tax arbitrage; below it, TFSA usually wins.
- TFSA otherwise. Tax-free withdrawals never trigger OAS clawback, never push you into a higher bracket in retirement, and offer flexibility because withdrawals are added back to room the following year.
- The other of RRSP/TFSA once your first pick is full. The second tax-sheltered vehicle still beats non-registered on every dimension that matters.
- Non-registered as a last resort. Held outside any shelter; capital gains taxed at 50 percent inclusion; dividends, interest, and unrealised gains attract paperwork.
20-year projection at $5,000 per year per account
Side-by-side comparison assuming $5,000 contributed yearly for 20 years, 6 percent nominal real return, marginal rate as shown in your inputs.
| Year | RRSP balance | TFSA balance | FHSA balance |
|---|
FHSA assumes you used the lifetime $40,000 across years 1-5, then sits invested tax-free until withdrawal. After-tax values shown for RRSP assume withdrawal at retirement marginal rate.
Sensitivity: retirement marginal rate
If your retirement marginal rate is lower than your contributing rate, RRSP gains tax arbitrage. If higher, TFSA pulls ahead. The table shows after-tax outcomes for $32,490 contributed today, withdrawn after 20 years at 6 percent growth:
| Retirement marginal rate | RRSP after-tax value | TFSA value (always tax-free) | Winner |
|---|
Worked example: 32-year-old Ontario engineer, $95,000 income, first-home goal
This is the default scenario shown above. Walking the math:
- Annual income $95,000 in Ontario: combined federal-plus-Ontario marginal rate roughly 30 percent.
- Annual savings $20,000. No employer match. First-time home buyer with a 3-10 year horizon. FHSA, RRSP, and TFSA contribution room available.
- Step 1: Employer match. None applies here. Skip.
- Step 2: FHSA $8,000. Annual cap. Deduction at 30 percent saves $2,400 in tax this year. Will grow tax-free and withdraw tax-free for the first home.
- Step 3: RRSP $7,000. Marginal rate at 30 percent is right at the threshold, but the home-buying horizon means RRSP funds may be tapped via HBP. Deduction saves $2,100 in tax.
- Step 4: TFSA $5,000. Soaks up the remaining savings into a flexible shelter. No deduction, but withdrawals are tax-free forever.
- Total tax saved this year: $4,500 in refunds from FHSA plus RRSP deductions, all reinvestable into the TFSA the following year.
- Total tax-sheltered: $20,000 of $20,000 saved this year is inside a tax shelter. Zero leaks to non-registered.
How marginal rate changes the answer
| Marginal rate band | Typical income | First-home buyer priority | No first-home goal priority |
|---|---|---|---|
| ~25% | Under $55K | FHSA, TFSA, RRSP | TFSA, RRSP |
| ~30% | $55K-$100K | FHSA, RRSP, TFSA | RRSP, TFSA |
| ~35% | $100K-$150K | FHSA, RRSP, TFSA | RRSP, TFSA |
| ~45% | $150K-$250K | FHSA, RRSP, TFSA | RRSP, TFSA |
| ~50-54% | $250K+ | FHSA, RRSP, TFSA | RRSP, TFSA |
Common mistakes the quiz steers you around
- Skipping employer match for FHSA "max." A 50 percent match beats 30 percent tax saving on day one.
- RRSP-loading a 25 percent earner. If you will be in a similar bracket in retirement, RRSP offers no tax arbitrage; TFSA is cleaner.
- FHSA when you have already owned. If you have not been a renter for 4 calendar years, you fail the first-time buyer test. Reroute to RRSP or TFSA.
- Forgetting the FHSA 15-year deadline. FHSA must be closed within 15 years of opening (or by age 71). After that, residual balance can roll to RRSP tax-free, but loses the tax-free-withdrawal feature.
- Ignoring carry-forward. Both RRSP and FHSA deductions can be carried forward. If next year's income will be higher, contribute now but claim the deduction next year.
Decision flow at a glance
| Question | If yes | If no |
|---|---|---|
| Do I have an unmatched employer pension dollar available? | Contribute to employer plan up to match cap | Continue to FHSA test |
| Am I a first-time buyer with 1-15 yr home horizon? | Open and fund FHSA up to $8K/yr, $40K lifetime | Skip FHSA |
| Is my marginal rate at or above 30 percent AND retirement bracket likely lower? | RRSP next | TFSA next |
| Have I filled my first pick? | Move to the other of RRSP/TFSA | Keep filling first pick |
The formula explained
This quiz applies a sequence of allocation rules to your annual savings:
1. match_pool = min(savings, income * matchPct%)
2. fhsa_pool = min(remaining, $8,000, FHSA lifetime remaining) if first-time buyer and horizon less than 15 yrs
3. priority_high = RRSP if marginal_rate >= 30% else TFSA
4. priority_high_pool = min(remaining, room_high, annual_cap_high)
5. priority_low_pool = min(remaining, room_low, annual_cap_low)
6. non_registered = max(0, savings - match_pool - fhsa_pool - priority_high_pool - priority_low_pool)
The marginal-rate lookup uses 2026 Ontario combined federal-plus-provincial rates as the reference. Selecting Quebec applies a +1 to +3 percentage point adjustment to reflect the higher provincial layer. Selecting Alberta applies a -1 to -2 percentage point adjustment to reflect the lower provincial layer. The 30 percent threshold for RRSP-versus-TFSA is the standard rule-of-thumb from CRA tax-planning literature; users in the 25 to 30 percent band see TFSA prioritised because expected retirement marginal rates often fall in the same band, eliminating tax arbitrage.
FHSA priority is gated on three checks: first-time buyer status, home-buying horizon between 0 and 15 years (the FHSA must close 15 years after opening), and remaining lifetime contribution room. The vehicle dominates RRSP for first-home use because the qualifying withdrawal is fully tax-free with no repayment required, versus HBP's 15-year mandatory repayment.
Frequently asked questions
Does an FHSA withdrawal restore my contribution room?
No. FHSA qualifying withdrawals for a first home do not restore room. Once you have used the $40,000 lifetime contribution limit, that room is permanently consumed. This differs from TFSA, where withdrawals are added back to your room the following calendar year, and from the Home Buyers Plan, where RRSP withdrawals must be repaid over 15 years to restore that money to tax-deferred status.
How does the Pension Adjustment reduce my RRSP room?
If you participate in an employer defined-benefit (DB) or defined-contribution (DC) pension, a Pension Adjustment (PA) shows on your T4 box 52 each year. Your 2026 RRSP room equals 18 percent of 2025 earned income, capped at $32,490, MINUS the 2025 PA, PLUS unused carry-forward. Most DB members see a PA close to their full 18 percent room, leaving little RRSP space. Check your latest Notice of Assessment from the CRA for the exact figure.
How does a spousal RRSP help with income splitting?
The higher-earning spouse contributes to a spousal RRSP and claims the deduction on their tax return at their high marginal rate. The lower-earning spouse owns the account and withdraws the funds in retirement at their lower marginal rate. The 3-year attribution rule means the receiving spouse must wait 3 calendar years after any contribution before withdrawing to avoid the contribution being taxed back to the contributing spouse. Pension income splitting on RRIF income (after age 65) layers another smoothing tool on top of this.
When must my RRSP convert to a RRIF?
By December 31 of the year you turn 71, your RRSP must convert to a Registered Retirement Income Fund (RRIF) or annuity, or be fully cashed out. Mandatory minimum withdrawals begin in the year you turn 72 at approximately 5.40 percent of the December 31 balance, rising each year (e.g. 7.38 percent at 80, 11.92 percent at 90). Withdrawals are taxed as ordinary income. Pension income splitting with a spouse becomes available on RRIF income once you reach age 65.
How does TFSA contribution room since age 18 work?
TFSA room began accruing in 2009 for residents who were 18 or older that year. Annual amounts grew from $5,000 in 2009 to $7,000 in 2024-2026. If you have been an eligible Canadian resident for all years since 2009, your total room by January 1, 2026 is $102,000. Unused room carries forward indefinitely. Withdrawals are added back to room the following calendar year, so you cannot game the room by withdrawing and recontributing in the same year.
How does the Quebec QPP override affect this quiz?
Quebec residents pay the Quebec Pension Plan (QPP) instead of CPP, and the provincial tax brackets push combined federal-plus-Quebec marginal rates noticeably higher than Ontario at most income levels. At top-end incomes the Quebec combined rate reaches roughly 53.31 percent. The quiz reflects this by raising the marginal rate assumption when Quebec is selected, which tilts the priority order more strongly toward RRSP for high-income Quebec residents and slightly more toward FHSA where the deduction outpaces the TFSA tax-free shelter.
Should I always take an employer match first?
Yes. An employer match is an immediate 50 to 100 percent return on your contribution, dwarfing tax deferral or tax-free growth benefits over any reasonable horizon. Always contribute at least enough to the workplace pension to capture the full employer match before allocating to RRSP, TFSA, or FHSA. After the match is captured, the priority order in this quiz applies. Note: a workplace pension contribution generates a PA that lowers your RRSP room dollar-for-dollar.
Can FHSA contributions be deducted on prior years?
FHSA contributions can be deducted in the year contributed or carried forward to a future year, similar to RRSP. If you expect a higher marginal rate next year (e.g. a promotion or a return to work), you can contribute this year but carry forward the deduction to claim against next year's higher income. The contribution still grows tax-free in the meantime. This timing trick is most valuable around tax-bracket inflection points (e.g. crossing $111,733 federal threshold).