RRSP or TFSA: what to do before the end of the year to maximize your benefits?

Year-end is a strategic time to get your finances in order, review your goals, and set actions that will help you save on taxes or grow your investments more quickly. Between RRSPs and TFSA, the choices are not always obvious—and the financial consequences can be significant.

1. RRSPs and TFSA: understanding their strengths — and their limits

Before choosing, you need to understand what each of these accounts does for you. The RRSP: your tool for reducing your taxes immediately, and contributions are tax-deductible. The higher your income, the greater the impact.

Your investments grow tax-free.

The withdrawals will be taxed later — ideally when you’re in a lower tax bracket.

The RRSP is particularly suitable for people with high or stable incomes.

The TFSA: your tool to grow your money tax-free

Your contributions do not provide any deduction, but everything that grows in the TFSA (interest, capital gains, dividends) is 100% tax-free — even on withdrawal.

Total flexibility: you can withdraw anytime, for any project.

The TFSA is ideal for short-, medium-, and long-term projects.

2. Check your contribution room BEFORE any decision

For the RRSP, your maximum is on line 14 of your Notice of Assessment, as well as your unused room from previous years.

Important: You have until March 1, 2026 to contribute to the 2025 RRSP

BUT several strategies related to your investments must be completed BEFORE December 31.

For the TFSA

The cumulative limit in 2025 is $95,000 if you were 18 years or older in 2009.

Withdrawals made in 2025 can be recontributed only starting January 1, 2026, but you can contribute this year as long as you have space.

3. Should you prioritize the RRSP?

The RRSP is often advantageous if :

• You have a high taxable income: Generally, an income above $75,000 makes RRSP contributions very worthwhile, and the higher the bracket, the greater the tax benefit.

• You anticipate a lower income in retirement: This is the ideal scenario. You save a lot of tax today and you’ll be taxed at a lower rate later.

• You want a tax refund to reinvest: Many use their tax refund to pay down debt, fund a TFSA or complete an emergency fund.

• You are eligible for the HBP or the RESP: The RRSP becomes a strategic lever if you plan to buy a home or return to studies.

4. Should you prioritize the TFSA?

The TFSA is often superior to the RRSP if :

• Your income is low or middle: Under $60,000, it is often more advantageous to save in a TFSA before considering the RRSP.

• You want to avoid taxes in retirement: Withdrawals from the TFSA do not affect the Old Age Security pension, the Guaranteed Income Supplement, or credits and benefits. This is a huge advantage to avoid “tax traps.”

• You plan projects before retirement: Home, cars, renovations, children's education, family travel… The TFSA offers the flexibility that no other account provides.

• You want to maximize long-term growth: Since everything is tax-free, the TFSA is perfect for stocks, index funds, and growth investments.

5. Can you use BOTH? Yes — and it’s often the best strategy

In many cases, the best solution isn’t choosing between RRSP or TFSA, but combining both.

Examples of effective hybrid strategies :

Strategy 1 : RRSP to reduce taxes — TFSA to grow the refunds

You contribute to the RRSP and you receive a tax refund. You can therefore place this refund into a TFSA.

→ This duo maximizes both tax reduction and growth.

Strategy 2 : RRSP for long-term projects — TFSA for medium-term goals

This allows you to never touch the RRSP prematurely.

Strategy 3 : TFSA first, then RRSP when your income rises

This option is perfect for young professionals and couples starting their careers.

6. What to do BEFORE December 31?

Certain decisions must absolutely be made before the end of the year :

1. Review your investments

Harvest losses to offset capital gains

Rebalance your portfolio (rebalancing)

2. Reinvest your TFSA withdrawals

If you withdrew an amount in 2025, you can still put it back WITHOUT waiting until January 1st ONLY if you have available space.

3. Calculate your real taxable income

Your current tax bracket determines whether the RRSP is worthwhile or not.

4. Prepare your RRSP strategy before March

Even though you have until March 1 to contribute, the analysis should be done now.

Conclusion

The RRSP and the TFSA are two powerful tools—but their effectiveness depends entirely on your personal situation. Year-end is the perfect time to make the right decisions, because a few actions can save you hundreds, even thousands, of dollars, while accelerating your financial progress.

Not sure of the best strategy for your situation?

We can analyze your income, your goals, your contribution room, and your plans to maximize your decisions before year-end.

Schedule an appointment with us — we’ll look at it together.