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n THE BRANDON SUN TUESDAY, JANUARY 27, 2026
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Financial Planning
2026
What new investors need New Canadian investors face a key choice between a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA), following updated 2026 contribution guidelines from the Canada Revenue Agency. Understanding how RRSPs and TFSAs are taxed is key to making the right choice early, financial adviser Sifawu Usikalu told the Sun in an interview on Monday. save much tax because the marginal rate is low. “In those cases, the TFSA tends to be more attractive because withdrawals are tax-free and there’s no penalty for accessing your money.” For higher earners or those further along in their careers, the balance shifts. BY ABIOLA ODUTOLA
“When you’re in a higher tax bracket and expect to retire in a lower one, the RRSP de- duction becomes far more valuable,” she said. From a tax strategy perspective, Usikalu said the decision often comes down to timing. “An RRSP lets you defer tax and pay it later, which works best if your tax rate drops in re- tirement,” she said. “With a TFSA, you pay tax upfront but never again. That’s ideal if your tax rate stays the same or increases.” A TD Bank overview of 2026 savings limits highlighted why many new investors lean to- ward TFSAs early on. The bank said a TFSA allows Canadians to invest in assets such as stocks, bonds, ex- change-traded funds, and guaranteed invest- ment certificates, with all growth and with- drawals remaining tax-free. “Funds withdrawn from a TFSA can be used for any purpose without triggering tax,” the report read. On the RRSP side, TD Bank stated the ac- counts are designed primarily for retirement, with contributions growing tax-deferred un- til withdrawals begin, typically by the end of the year an account holder turns 71, at which point withdrawals are taxed as income. Looking specifically at 2026 tax brackets, Usikalu said RRSP deductions are less com- pelling for young, lower-income earners, par- ticularly in Manitoba. In 2026, she said, the lowest federal tax bracket is 14 per cent and Manitoba’s lowest bracket is around 10.8 per cent, meaning com- bined rates for lower incomes are often in the mid-20 per cent range. At that level, she said, the immediate tax savings from a small RRSP contribution are relatively modest compared to the long-term benefit of tax-free growth in a TFSA. For new investors in 2026, Usikalu said there is no one-size-fits-all answer. “Lower income and early career usual- ly point to a TFSA, while higher income and the need for big tax deductions often point to an RRSP,” she said. “If you need flexibility or expect to use the money sooner, a TFSA is the better fit. If you’re planning strategically around benefits or long-term retirement in- come, an RRSP can play a key role.” » aodutola@brandonsun.com » X: @AbiolaOdutola
“At the most basic level, the RRSP is a pre- tax retirement account, while the TFSA is a post-tax savings vehicle,” she said. “With an RRSP, contributions reduce your taxable income today, investments grow tax-deferred, and withdrawals are taxed lat- er, ideally in retirement when your tax rate is lower. A TFSA is the opposite. You contribute after-tax dollars, but growth and withdrawals are completely tax-free forever.” The agency increased the RRSP contribu- tion limit from $32,490 in 2025 to $33,810 in 2026, with an individual room based on 18 per cent of earned income plus unused carry-for- ward space. For 2026, the maximum contribution limit for TFSA is $7,000, plus any unused contribu- tion room from previous years. For eligible in- vestors who have never contributed since the TFSA was introduced in 2009, the total avail- able room now stands at $109,000, the agency stated. Usikalu said for beginners, the distinction can be simplified. “For someone just starting, think of a TFSA as a flexible, tax-free piggy bank and an RRSP as a tax-advantaged retirement engine,” she said. Long-term eligibility can significantly in- crease available space, she said. “If someone has been eligible since 2009 and never contributed, their total TFSA room can be as high as $109,000,” she said. “Your RRSP room is based on 18 per cent of your 2025 earned income or the dollar cap, which- ever is lower, plus any unused room you’ve carried forward.” For young families or individuals with limit- ed savings, Usikalu said the TFSA often makes more sense as a starting point. According to her, keep full access to your money without tax or loss of contribution room, which is great for emergencies or short- and mid-term goals. She said that many younger earners are in lower tax brackets, making RRSP deductions less impactful, adding the tax break from an RRSP contribution might be relatively modest at that stage. There are situations where an RRSP can
Financial adviser Sifawu Usikalu says that for young families or individuals with limited savings, the Tax-Free Savings Account often makes more sense as a starting point. (Supplied)
come first, depending on household planning and government benefits, she said. “If one spouse earns significantly more, or if lowering taxable income helps increase eligi- bility for benefits like the Canada Child Ben- efit or GST credits, RRSP contributions can be very strategic,” she said. “RRSP deductions reduce net income, which can reduce benefit clawbacks.” Debt is another key factor in the RRSP ver- sus TFSA decision. Usikalu said not all investing should come before debt repayment. “High-interest debt, like credit cards, should be paid down first,” she said. “The interest on that kind of debt often far exceeds the typical
investment return, even in a tax-free account.” Student loans can be more nuanced, Usika- lu said. “If interest rates are low and you qualify for tax credits on the interest paid, investing in a TFSA while making minimum loan payments can make sense,” she said. “The general rule is to eliminate high-cost debt before locking money away. A TFSA is more flexible than an RRSP, so if you might need cash for emer- gencies or debt repayment, lean on the TFSA first.” Income level also plays a major role in de- termining which account delivers the most value. For lower-income earners early in their careers, she said, the RRSP deduction doesn’t
BMO replacing Air Miles, Shell joins Scene+ TORONTO — BMO Financial Group has announced it will replace Air Miles with a new loyalty rewards program called Blue Rewards this summer. will receive more program details in the coming months. The bank said Blue Rewards will feature a simplified booking experi- ence for flights, hotels and car rent- als powered by Expedia Group. even better by delivering simpler, flexible, more personalized rewards for collectors and helping them make real financial progress every day.” loyalty program. Scene+ has more than 15 million members and is owned by Scotia- bank, Empire Co. Ltd. and Cineplex Inc. fuel loyalty partner,” said Tracey Pearce, president of Scene+. “As a leader in the fuel industry, Shell is an ideal partner for our eco- system.” BY SAMMY HUDES
BMO acquired the Air Miles pro- gram in 2023 for US$160 million after its U.S. parent company Loyal- tyOne Co. filed for bankruptcy. It is one of the oldest and largest loyalty programs in Canada, with around 10 million active users at the time of the acquisition. Collectors earn Air Miles through participating stores, services and payment cards, which can be redeemed for “aspira- tional rewards” like merchandise, travel, events, and attractions. Meanwhile, Shell Canada an- nounced Monday its long-standing partnership with Air Miles is set to conclude, as the fuel company is instead joining up with the Scene+
By bringing Shell on board, mem- bers will be able to earn points when they visit one of the fuel company’s 1,400 gas station and convenience store locations across Canada. The new offering is set to roll out in Alberta on March 3 and expand across Canada on May 26. That partnership will also see Scotiabank and Tangerine clients with eligible payment cards save at participating Shell locations. Shell customers can continue to earn and redeem Air Miles through March 2 in Alberta and May 25 in the rest of Canada. “We listened to our members when they told us they wanted a
Air Miles had lost a string of other big retailers in Canada during the years leading up to its sale to BMO. BMO said Blue Rewards collectors will continue to earn points at more than 400 brands. It said new Blue Rewards program partners include Porter Airlines and Accor Group ho- tel brands such as Fairmont Hotels and Resorts. Other new partners include In- stacart and MTY Group restaurants, such as Thai Express, Baton Rouge, Pizza Delight, Allo Mon Coco, Sushi Shop, Mr. Sub, Manchu Wok, Mucho Burrito and Jugo Juice.
It will also build on recent chang- es, including the ability to earn points on grocery and food deliv- eries when in-store receipts are scanned using the Blue Rewards app, as well as bonus points at most grocery retailers and wholesale clubs across Canada. “Blue Rewards completely re- imagines the loyalty experience with the client at the centre,” Mathew Mehrotra, group head of Canadian personal and business banking at BMO, said in a news release. “With a digitally enabled plat- form, we’re making one of Canada’s most celebrated loyalty programs
It said the new program will be available for all Canadians through a newly designed Blue Rewards app, and will be integrated into BMO’s existing mobile banking app and website for the bank’s clients. Air Miles program members can continue to use their collector cards, and their miles will auto- matically convert to “Blue Points” at an equivalent value upon this summer’s launch, with no action required. BMO Air Miles credit and debit card holders can also continue us- ing their cards uninterrupted and
» The Canadian Press
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