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RRSP vs TFSA Comparison

Model the after-tax wealth of each account at retirement and find your personal break-even tax rate.

Your Situation

CAD
CAD / yr
yrs
%
CAD / yr
RRSP contributions reduce taxable income now; withdrawals are fully taxed at retirement. TFSA contributions are after-tax; all growth and withdrawals are tax-free. The key question: will your tax rate be higher now (→ RRSP wins) or in retirement (→ TFSA wins)?

RRSP

After-tax value at retirement
$0

TFSA

After-tax value at retirement
$0

Comparison Summary

How RRSP and TFSA Work

Both accounts shelter investment growth from annual taxation, but they differ in when you pay tax. With an RRSP, you deduct the contribution from income today (getting a refund at your current marginal rate), and pay tax on every dollar withdrawn in retirement. With a TFSA, you contribute after-tax dollars and pay nothing on growth or withdrawals, ever.

The math is elegant: if your marginal tax rate is identical now and at retirement, both accounts produce exactly the same after-tax wealth. RRSP wins when your current rate is higher than your retirement rate; TFSA wins in the opposite case. The break-even rate printed above tells you the retirement tax rate at which the two accounts tie.

In practice, high earners in their peak working years typically benefit more from RRSP (large deduction at a high rate, withdrawal at a lower rate in retirement). Lower-income earners, young savers, and anyone worried about OAS clawbacks or GIS eligibility often prefer TFSA. Many Canadians contribute to both.

Frequently Asked Questions

Can I contribute to both RRSP and TFSA in the same year?
Yes. The contribution limits are completely independent. In 2025, RRSP room is 18% of the prior year's earned income (max $32,490) and lifetime TFSA room is $102,000 (for those who were 18+ in 2009). Maxing both is ideal if cash flow allows.
Does the RRSP refund change the comparison?
Only if you reinvest it. This calculator assumes the refund is invested in the TFSA (or a taxable account), which is the fair apples-to-apples comparison. If you spend the refund, TFSA becomes more attractive.
What about OAS clawback?
High RRSP/RRIF withdrawals can push retirement income above the OAS clawback threshold (~$93,000 in 2025), effectively adding 15% to your marginal rate. If you expect large RRIF income, TFSA becomes significantly more valuable for later years.
FHSA — is it better than RRSP or TFSA for a first home?
The FHSA combines the best of both: contributions are deductible (like RRSP) and qualifying withdrawals for a first home are tax-free (like TFSA). First-time buyers should max the FHSA before choosing between RRSP and TFSA for other savings goals.