RRSPs vs TFSAs vs FHSAs: Getting a jump on tax season to figure out where best to park your money

Pumpkins are out. Tinsel is in.
The home stretch of the year is synonymous with holiday cheer, but for accountants and financial planners, festive season is early tax season.
Before closing her books, Tracie Heier, CPA, decides if she should max out her tax-free savings account (TFSA) or her registered retirement savings plan (RRSP,) basing the decision on her projected income for the year.
Heier, an associate partner at SRJ Chartered Accountants in Toronto, says that for someone in their peak earning years, it might make more sense to contribute to their RRSP over TFSA. 
“This year, I am choosing to contribute to both the TFSA and RRSP because of advice from my financial planner,” says Heier, “but it boils down to your income and long-term goals to determine what makes the most sense.”
Jason Heath, managing director at Objective Financial Partners in Toronto, agrees. 
“Generally speaking, you’re probably going to be in a lower tax bracket in retirement when withdrawing from the RRSP, which makes contributing to your RRSP during your working years more beneficial.”
Both investment vehicles tend to be underused.
The most recent data from the CRA shows that in 2020, just 8.9 per cent of TFSA holders maxed out their account’s cumulative contribution room.
An Edward Jones poll found that of those contributing to their RRSP, only 23 per cent planned to max out their accounts in 2023.
For married or common-law partners, Heath recommends contributing in the higher-earning partner’s name so that the couple can benefit from the larger tax refunds. 
Heier also recommends eligible Canadians open a First Home Savings Account (FHSA), a tax-free account to help you sock away a down payment for a first home.
She points out that, similar to an RRSP or TFSA, you don’t have to contribute the full amount to a FHSA.
“A lot of the time,” says Heier, “what we recommend is to contribute what you can, and then the (contribution) room will continue to build.” 
And remember to hold on to your receipts and keep running totals of your expenses for tax time in the spring.
“Personally, I like to use an Excel spreadsheet to map out my medical expenses or any of my charitable donations,” says Heier.
Come tax-filing time, all she has to do is log in to the CRA website and punch in the numbers.
Heath also recommends clients track expenses electronically. He adds that some overlooked medical expenses are premiums on your company’s health insurance plan or a non-refundable disability tax credit for conditions like Type 1 diabetes. 
While tax planning is important for all Canadians, Heath points out that retirees tend to be overlooked when it comes to tax strategy.
“As financial planners, we do a lot of planning with retirees to determine if someone should be withdrawing from their RRSP before age 71,” says Heath. “In a lot of cases, for someone retiring in their 50s or 60s, it is actually advantageous to take optional RRSP withdrawals earlier to try to smooth out your income and pay less in tax.”