Is it better to put the majority of my income into TFSA or RRSP?

Asked 3 years ago

I'm 6 years from retirement. Should I max out my RRSP or TFSA first? I will have a pension and with CPP and OAS. I am worried that RRSP drawdowns will put me into a higher tax bracket and/or cause OAS and CPP clawbacks? Therefore, I think I'll max out my TFSA first. Any suggestions on what I should do?

Tax-free savings account (tfsa)Registered retirement savings plan (rrsp)Investment advice Avoiding taxes

Andrew Moran

Thursday, October 28, 2021

If retirement is right around the corner, you should certainly attempt to max out your TFSA. 
But there are variables at play here, including your income.
The annual contribution limit for 2021 is $6,000. If you are earning a medium to high salary, it can be easy to max out your TFSA in a short period.
Another thing to consider is how much you currently have in your retirement savings and investment accounts, including your RRSP and TFSA.
What makes the RRSP attractive is that it functions as a tax deferral for your working years, allowing you to use the tax savings on your return to put toward other investment vehicles, including your TFSA.
Finally, will you be using your TFSA for savings or investments? If you are attempting to play catch up on your retirement finances by aggressively investing, a TFSA would be a wise option.