RRSP vs. TFSA — which is right for you?

Compare the after-tax value of contributing to an RRSP vs. a TFSA based on your income today and in retirement.

Your scenario

Province

Annual income today

$20,000$500,000

Marginal rate: 29.6% in ON

Estimated retirement incomefrom all sources

$10,000$300,000

Effective rate in retirement: 19.1% · marginal: 19.1%

Annual contribution

$500$33,810

TFSA capped at $7,000/yr — the 2026 annual limit. The RRSP comparison uses the full $10,000 you entered. The remaining $3,000/yr above the TFSA limit could go into an RRSP, non-registered account, or a future TFSA room.

Years until retirement

5 yrs40 yrs

Expected annual growth

1%20%

Reinvest RRSP refund each yearAdds the compounded value of all annual refunds to the RRSP total. Enables true apples-to-apples comparison since TFSA uses after-tax dollars.

Illustrative only. Both accounts use the same contribution amount and growth rate. When reinvestment is enabled, each year's RRSP refund is assumed to be invested back at the same growth rate — this is the standard apples-to-apples comparison since TFSA contributions are made with after-tax dollars. Effective (not marginal) tax rate is used for RRSP withdrawal. Actual results depend on total retirement income, OAS clawback, pension income splitting, and other factors.

Verdict

RRSP nets $73,919 more in your scenario

Your marginal rate today (29.6%) exceeds your effective rate in retirement (19.1%), so the RRSP deduction saves more now than the withdrawal tax costs later.

RRSP

Better for you

Projected balance$675,060

Annual refund (not reinvested)$2,965

Net after tax$546,461

TFSA (capped at $7,000/yr)

Projected balance$472,542

Tax on withdrawal$0

Net after tax$472,542

Not sure which to prioritize?

Jatinder can model your full retirement picture, including OAS, CPP, and other income sources.

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