Contributions to an RRSP are tax-deductible, and
contributions to a TFSA are not.
Contributions to a First
Home Savings Account are tax-deductible, and qualifying withdrawals
are not taxed, so might be the best option for who don't yet own a
home but plan to buy one within the next 15 years. If not used toward
buying a home (tax-free withdrawal), the funds can be transferred to an
RRSP.
The RRSP and TFSA have almost equivalent results when
the marginal income tax rate for RRSP contributions is the same as for RRSP
withdrawals.
The RRSP is better if
the marginal tax rate for RRSP withdrawals will be
lower than the marginal tax rate when contributions are made
the marginal rate for RRSP withdrawals will be
higher than the marginal rate for contributions
you are close to retirement age, and have little or
no savings or pension. RRSP/RRIF withdrawals may cause loss of Guaranteed
Income Supplement (GIS) or other benefits.
The TFSA will also be useful in some
situations such as:
when there is no RRSP contribution room available
for savings goals such as a vehicle,
appliances, down payment for a house, etc. It could be
used instead of, or in combination with, the RRSP
Home Buyer's Plan (HBP) and/or the First Home Savings Plan.
seniors who are not eligible, because of age, to
contribute to an RRSP
young people just starting out, in a low tax
bracket now, expecting to increase earnings and be in a higher tax
bracket in a few years. At that time, the TFSAs could be
transferred to an RRSP, making the contribution when the tax savings
is greater. Make the transfer near the end of a calendar year,
so that the withdrawal increases your TFSA contribution room sooner.