This is a very common question because the two programs have many similarities, but also a few key differences.
Here are the primary differences between the accounts:
As for which one is best for you, here are the three major factors and their impacts on the decision.
- Income today vs. in the future
- Expect to have higher income in the future? TFSA is relatively more attractive right now.
- Amount of savings room available
- The TFSA has substantially lower lifetime contribution room for most people, so it is maxed out more quickly.
- Whether flexibility is important
- If the funds might be required for something other than retirement, the TFSA is more appropriate.