Should you be putting more money into your RRSP or should you contribute to your TFSA (which, by the way, has no deadline)?
Here are a couple of ideas to consider:
1.) If you have made a significant amount of employment income in 2025 and you will be paying a large chunk of that in income tax, then the RRSP is your best choice for where to contribute. You will receive a nice tax refund, and you can grow that money inside the RRSP on a tax-deferred basis. This is preferential tax treatment, which is good.
It may even be worthwhile to borrow some additional cash to top up your RRSP. It's very important to make sure you have the contribution room before dumping in a bunch of money (you can always call CRA and ask them if you don't know). If you use an RRSP loan to top up your RRSP, you should then use the resulting "tax refund" to pay down the loan. This is the smart thing to do. Interest rates are low right now, making this a great strategy to consider.
If your marginal tax rate is 39%, that means for every $ 1,000 you contribute to your RRSP, you get a tax refund of $390. Sweet right?
Here's an example:
Let's say you're an Albertan and you made $75,000 of income.
If you contribute $15,000 to your RRSP (assuming you have room & a 32% Marginal Tax Rate)
You will receive a tax refund of $4800.
Want to try your own numbers? Here's an online calculator we like: RRSP savings calculator
2.) If your income for the past year was low, it means you haven't paid a lot of tax; therefore, there isn't much benefit to contributing to your RRSP. In this case, it would make more sense to contribute to a TFSA (Tax-Free Savings Account). The maximum contribution room for a TFSA to date is $57,500. If you are a high-income earner and you've maxed out your RRSP, then it makes sense to work towards maxing out your TFSA.
Keep in mind that the main benefit of a TFSA is that the growth within the account is tax-free. If you have a TFSA and aren't getting any growth, then the account is pointless (ie, This is the case if you have a TFSA at the bank invested in a High-Interest Savings Account. Don't be deceived by the name! Getting 0.8% or 1% is not high interest!). Some of the segregated funds that our clients are invested in grew over 10% last year, and these are relatively conservative investments.
So, to review: an RRSP is the best account type if you earned a significant income last year and have paid a lot of taxes. The TFSA is the best account if you are either a lower-income earner or if you have maxed out your RRSP contribution room.
When it comes to investing and using the account types available, there isn't a one-size-fits-all solution. You need to be aware of your options and what is best for you in any given year.
That's where we can help! We work with you to create a worry-free retirement plan.
Click Here to learn more about our process for creating your financial roadmap for retirement, getting your total financial house in order, and living your ideal lifestyle.
Retirement Income, Investment & Tax Planning for Those 55+,
Willis J Langford BA, MA, CFP
Nancy R Langford CRS
