RRSP vs TFSA — how to choose
Both accounts let your investments grow tax-free. The difference is when you're taxed: an RRSP gives you a deduction today and is taxed when you withdraw; a TFSA uses after-tax money now and is never taxed again. That single difference is the whole decision.
The one rule that decides it
Starting from the same after-tax dollars, the RRSP ends up worth the TFSA amount multiplied by (1 − your retirement tax rate) ÷ (1 − your current tax rate). In plain terms:
- RRSP wins if your tax rate will be lower in retirement than it is today (deduct high, withdraw low).
- TFSA wins if your tax rate will be higher in retirement.
- It's a tie if the two rates are equal — same after-tax result either way.
Why income today matters
The RRSP deduction is worth your marginal tax rate. A $10,000 RRSP contribution saves a $90,000 earner far more tax than a $45,000 earner. That's why this tool asks for your current and expected retirement income and your province — it pulls the real 2026 marginal rates for each.
Frequently asked questions
So which should I pick?
If you're a high earner now who expects a lower income in retirement, the RRSP usually wins. If you're early-career, in a low bracket, or expect a high retirement income, the TFSA often wins — plus it gives tax-free, flexible withdrawals. The calculator shows the dollar difference for your situation.
Does the RRSP refund matter?
Yes — a lot. An RRSP only matches the TFSA if you reinvest the tax refund the deduction generates. Spend the refund and the TFSA usually comes out ahead. This calculator assumes the refund is reinvested.
Can I use both?
Absolutely, and many people should. They have separate limits. A common plan: RRSP during peak-earning years, TFSA for flexibility and tax-free growth.