TFSA or RRSP: When to use one over the other
October 16, 2025
By Sun Life Staff
When deciding whether to save in an RRSP or a TFSA, the choice is basically to pay the tax now, or pay it later. But there’s more to consider.
Both a Registered retirement savings plan (RRSP) and a Tax-free savings account (TFSA) provide advantages. And everyone has a different story about how they want to save – and spend their money.
How a TFSA or an RRSP can help at important stages in your life
RRSP vs. TFSA
They both have their perks, but which one’s best for you?
| Registered retirement savings plan (RRSP) | Tax-free savings account (TFSA) | |
|---|---|---|
| Looking for your dream home? | Borrow up to $35,000 from an RRSP for a first down payment if you’re a first-time home buyer. | Use TFSA funds for a down payment or make mortgage payments at your own pace – without worrying about tax. |
| Want to settle down? | You don’t want a tax hit when you’re just starting off. So try to avoid RRSPs withdrawals until you’re further down the road – like after you retire. | Say “I do” to growing your money in a TFSA. Make tax-free withdrawals to pay off a wedding, honeymoon, or couples vacation. |
| Trying to start a family? | Start building your nest egg while taking care of your family. Keep your RRSP contributions going. | Make TFSA withdrawals to help cover new baby expenses and the cost of raising children. |
| Planning to travel? | You’re better off using TFSA to save for travel. That way, you can avoid a huge tax hit. | Save up money tax-free in a TFSA and use it to fund your solo, family or couples travel plans. |
| Returning to school? | Got the itch to go back to school? Borrow up to $10,000 per year from your RRSP with the RRSP Lifelong Learning Plan. | Use your TFSA funds to pay tuition fees, then carry forward unused contribution room to save money after graduation. |
| Getting ready for retirement? | As you approach retirement, max out your RRSP contributions each year. | Continue to grow your money in a TFSA and pull funds when you’re ready to retire. |
| Starting retirement? | Save money in your RRSP until age 71. When you retire (at 65, 71, or whenever), there’s a good chance your income (and tax bracket) will be lower. This means you’ll pay less tax when making RRSP withdrawals. | Want or need to keep working a bit longer? There’s no maximum age limit for you to contribute to a TFSA. Use your TFSA as a source of retirement income whenever you want. |
| Planning on leaving a legacy? | RRSPs give you flexibility to transfer funds with little or no tax to a qualified beneficiary. This way, you can leave your loved ones with some financial protection after you die. | Your TFSA earnings remain tax-free even after death. Plus, you can name a beneficiary on almost all TFSA accounts. This way, you can leave money to your loved ones outside of your will. |
This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.