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 the calculator will apply once it ships in Phase 2.

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.