The quick version — which account for which goal
Before diving into the details, here is the one-line answer for most Canadians:
- Buying a first home in the next 1–15 years? — Open an FHSA first. It combines the best of RRSP and TFSA for first-time buyers.
- Higher income, saving for retirement? — Prioritize RRSP for the tax deduction now, TFSA for flexibility.
- Lower income or want flexibility? — TFSA first. You won't benefit as much from the RRSP deduction at lower tax rates.
- Both? — FHSA first (if eligible), then TFSA, then RRSP.
Side-by-side comparison
| Feature | RRSP | TFSA | FHSA |
|---|---|---|---|
| 2026 contribution limit | $32,490 (or 18% of prior year income) | $7,000 | $8,000 |
| Lifetime limit | None (18% of income annually) | Cumulative (~$95,000 total room by 2026) | $40,000 |
| Tax on contributions | Deductible from income | No deduction | Deductible from income |
| Tax on growth | Tax-deferred | Tax-free | Tax-free |
| Tax on withdrawal | Taxed as income | Tax-free | Tax-free (qualifying home purchase) |
| Withdrawal room restored | No | Yes, next calendar year | No |
| Age limit | Convert by Dec 31 of year you turn 71 | None | Must close by age 71 or year 15 |
| Who can open | Anyone with earned income | Canadians 18+ | First-time buyers, 18–71 |
| Best for | Retirement, high earners | Flexibility, any goal | First home purchase |
The FHSA is new and extremely powerfulThe First Home Savings Account launched in 2023 and combines the tax deduction of an RRSP with the tax-free withdrawal of a TFSA — but only for a qualifying first home purchase. If you have never owned a home and plan to buy within 15 years, this account should be your first priority. Up to $40,000 lifetime contribution, $8,000 per year.
RRSP — how it works
You contribute pre-tax dollars to an RRSP, reducing your taxable income for the year. Your investments grow tax-deferred inside the account. When you withdraw — typically in retirement — you pay income tax on the withdrawal. The theory is you contribute when you are in a high tax bracket and withdraw when you are in a lower bracket in retirement.
The RRSP is most powerful for higher-income earners (above roughly $50,000) where the tax deduction provides a meaningful refund. For lower-income earners, the immediate tax benefit is smaller and the TFSA may be a better first choice.
Your RRSP contribution limit for 2026 is the lesser of $32,490 or 18% of your 2025 earned income, plus any unused room carried forward from prior years. Find your exact room on your Notice of Assessment or through My CRA Account.
TFSA — how it works
You contribute after-tax dollars to a TFSA. Your investments grow completely tax-free. Withdrawals are also completely tax-free and can be made at any time for any reason. The withdrawn amount is added back to your contribution room the following January 1.
The TFSA is more flexible than the RRSP — there is no forced conversion age, no tax on withdrawal, and contribution room is restored when you withdraw. It is ideal for emergency funds, medium-term goals, and lower-income earners who won't benefit significantly from RRSP deductions.
If you have never contributed to a TFSA and were 18 or older in 2009, your total cumulative TFSA room is approximately $95,000 by 2026 (adding $7,000 for 2026).
FHSA — how it works
The First Home Savings Account gives you a tax deduction on contributions (like an RRSP) and tax-free withdrawals for a qualifying first home purchase (like a TFSA). Unused contributions carry forward. If you never buy a home, you can transfer the FHSA to your RRSP or RRIF without affecting your RRSP room.
To qualify you must be a Canadian resident, at least 18, have not owned a qualifying home in the current year or the previous four calendar years, and be a first-time home buyer at the time of withdrawal.