RRSP vs TFSA vs RESP, the Decision Tree

Every household landed on PlainRRSP eventually asks the same question: which account should I fund first this year? This page is the structured decision tree we use to answer it, the same logic our RRSP vs. TFSA calculator applies.

Step 0, Estimate your current marginal tax rate

The fundamental RRSP-vs-TFSA decision hinges on your marginal tax rate today vs your expected rate in retirement. Pick your situation below to estimate.

Step 1, Free money first

Do you have a child under 18? If yes, contribute up to $2,500 per child per year to an RESP. The 20% Canada Education Savings Grant match adds $500 of free federal money per child per year, capped at $7,200 lifetime. Lower-income households should also confirm Canada Learning Bond eligibility.

Does your employer match RRSP or DCPP contributions? Capture the full match. An employer dollar-for-dollar match up to 5% of salary is a guaranteed 100% return on those dollars, beats any other registered-account decision.

Step 2, First-home savings, if applicable

Are you under 71 and have not owned a primary residence in the last 4 calendar years? Open and contribute up to $8,000/year to a First Home Savings Account. The FHSA combines RRSP-style deduction with TFSA-style tax-free withdrawal for a first-home purchase. The lifetime $40,000 cap funds a meaningful share of most first down payments.

Step 3, Marginal-rate comparison

Compute your current combined federal-plus-provincial marginal rate and estimate your retirement marginal rate.

• Current rate > retirement rate by ≥5 percentage points → fund RRSP next, up to the year's contribution room.
• Current rate ≈ retirement rate (within ±5 pp) → split between RRSP and TFSA; the slight tilt toward TFSA preserves optionality.
• Current rate < retirement rate → fund TFSA first; you pay tax now at the lower rate and never pay tax on the growth.

Step 4, Catch-up considerations

Have you accumulated substantial unused TFSA room? The cumulative TFSA limit since 2009 is now over $100,000. Households with meaningful unused room and stable income may prioritize closing the gap, especially when TFSA growth has decades to compound tax-free.

Are you within 10 years of retirement and behind on RRSP? Carry-forward RRSP room may be substantial. Late-career, higher-income catch-up contributions can be highly tax-efficient when your marginal rate is near peak.

Step 5, What this decision tree doesn't model

Spousal RRSP income-splitting, attribution rules between spouses, US-tax filing obligations for cross-border families, withdrawal-strategy sequencing in retirement, and pension-adjustment edge cases are all out of scope for the Phase 1 decision tree. PlainRRSP's full calculator addresses some of these in Phase 2; the rest are situations where a CFP or CPA delivers real per-household value.

For the underlying mechanics, read RRSP vs TFSA, which comes first? and maximizing the RESP CESG match.