Should You Contribute to Your TFSA or RRSP? Here’s What the Data Says

Helpfully, Statistics Canada recently published some information about how Canadian residents are using their tax-advantaged accounts, including some breakdowns based on income levels. We’re sharing these stats with you to help you see how your use of Canada’s tax advantaged accounts compares to other Canadian residents. This can help you see how your choices line up with others in similar situations to you.  

What Tax-Advantaged Account Contributions Look Like in Canada 

In 2023, more Canadians put their money into Tax-Free Savings Accounts (TFSAs) than into Registered Retirement Savings Plans (RRSPs). About 5 million people contributed only to a TFSA, with a median amount of $6,500 (the maximum contribution for 2023).  

Meanwhile, 3.8 million Canadians contributed only to an RRSP, with a median of $3,420. 

An additional 2.5 million people contributed to both—but even in those cases, their TFSA contributions were typically higher than what they put into RRSPs. In other words, 2.5 million Canadian residents contributed to a TFSA and used RRSP contributions to reduce their tax liability. 

So why are Canadians—especially those earning under $80,000—choosing TFSAs more often? 

The Core Question: Should You Add To Your RRSP or TFSA?  

US-based personal finance expert Paula Pant is known for saying: “Match beats Roth, which beats Traditional.”

This is a US framework, but here’s what it means in Canadian terms:

• “Match” = Group RRSP or pension plan with employer contributions → always take this first. The reason for this is that it’s a 100% return on your money, which you can’t typically get as a guaranteed rate anywhere else.  

• “Roth” = Tax-free growth, tax-free withdrawals → this is your TFSA.  

• “Traditional” = Tax-deferred growth, taxed on withdrawal → this is your RRSP. 

In Canadian terms, this saying would be “Match beats TFSA beats RRSP”.  

So, unless you’re getting an employer match through a workplace RRSP, it often makes more sense to contribute to your TFSA first, especially if your income is below $80,000 annually now and may rise later. 

What the Numbers Tell Us About Who Uses These Accounts 

TFSA users tend to be lower income—but still save consistently 

Half of all TFSA contributors earned less than $60,000, and most contributed close to the annual limit in 2023. Even seniors aged 65 and over are sticking with TFSAs, with 2.3 million older Canadians contributing $6,500 on average. 

RRSPs are more common among higher earners 

Over half of RRSP contributors had incomes of $80,000 or more, and their contributions varied widely. Incomes under $20,000 saw median RRSP contributions of $1,060—because for lower-income earners, the tax break isn’t as helpful today and withdrawals may be taxed at a higher rate later. 

Why a TFSA Often Makes More Sense for Newcomers 

TFSA withdrawals are tax-free—at any time 

Unlike an RRSP, there’s no tax penalty for withdrawing from a TFSA, and you don’t pay tax on the money when you take it out. That makes it perfect for medium- or long-term savings goals, especially if you’re not sure when you’ll need the money. 

It can also make more sense to invest in a TFSA if you’re uncertain if you will stay in Canada long term, since there are no penalties for withdrawals.  

No tax deduction, but no future tax bill either 

With a TFSA, you don’t get a tax break when you contribute—but that’s not always a bad thing. If you’re in a lower tax bracket now, the benefit of delaying tax (via an RRSP) may be smaller than the benefit of tax-free growth forever (via a TFSA). 

You get your contribution room back 

Every dollar you withdraw from your TFSA opens up that same amount of room the following year. For example, if you became a tax resident in Canada in 2024 and contributed $7,000 to your TFSA, but then withdrew it in November 2024 and didn’t make any other contributions, you will have an extra $7,000 of contribution room in 2025 (in addition to the $7,000 you have for 2025 – so $14,000 total). 

This makes it great for flexible life planning: emergency fund, car savings, career changes, or taking a sabbatical. 

What About FHSA Contributions?

2023 was the first year for the First Home Savings Account (FHSA), and nearly half a million Canadians contributed—most of them younger (25–34) and earning more than $60,000. The median contribution? A full $8,000, which is the yearly max. 

This account is built specifically for first-time homebuyers and offers the best of both worlds: you get a tax deduction like an RRSP and tax-free withdrawals like a TFSA, but only if the funds go toward buying your first home. If that’s not your plan—or if you’re unsure—adding funds to your FHSA may not be your top priority. 

Final Takeaway: Consider TFSA First, Unless You’re Getting a Match or Earn a High Income 

The trend is clear: Canadian residents are leaning into TFSAs, and for good reason. If you’re earning under $80,000, don’t have a matched workplace plan, and want flexibility and tax-free growth, the TFSA is often the better bet. 

You can always use an RRSP later—especially if your income increases or you want to reduce your tax burden today. But for now? Your TFSA gives you control, flexibility, and tax-free growth on your investments.  

As always, be cautious about using information from online and get individual advice for your unique circumstances if you need help.