TFSA vs RRSP Calculator
Compare Tax-Free Savings Account and Registered Retirement Savings Plan strategies. Understand how current vs. retirement tax rates and refund reinvestment impact your optimal choice.
tl;dr
It comes down to your tax rate now versus when you withdraw. An RRSP gives you a deduction today and taxes the money on the way out, so it wins when your rate will be lower in retirement, especially if you reinvest the refund. A TFSA gives no deduction, but withdrawals are tax-free and don't count as income for benefits like OAS and GIS, so it wins when your rate will be the same or higher, or when you may need the money sooner. Most Canadians end up using both.
Growth Comparison
$10,000 over 20 years • 7% return
Comparison Settings
Include benefit clawbacks (CCB, GIS, etc.)
RRSP refund is reinvested (fair comparison)
TFSA Final
$38,697
3.9x multiple
RRSP Final
$48,371
4.8x multiple
RRSP Wins By
$9,674
25.0% advantage
RRSP Tax Refund
$6,667
reinvested
Detailed Breakdown
Lower retirement METR favors RRSP (tax arbitrage)
Key Considerations
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Why the Choice Matters
An RRSP and a TFSA can leave you with the same after-tax money — or very different amounts — depending on your tax rate now versus when you withdraw. Picking the wrong one can cost you, especially if RRSP withdrawals later push you into a higher bracket or trigger the OAS clawback.
How the Comparison Works
The calculator compares the after-tax value of the same savings in each account.
- 1. An RRSP contribution is deductible, so it produces a refund at your current marginal rate.
- 2. You choose whether the refund is reinvested or spent.
- 3. Both accounts grow tax-free at the same return.
- 4. RRSP withdrawals are taxed at your expected retirement rate; TFSA withdrawals aren't taxed.
- 5. The after-tax totals show which account leaves you with more.
Common Questions
When should I choose a TFSA over an RRSP?
Choose a TFSA if: you're in a low tax bracket now but expect higher income in retirement, you need flexibility to withdraw funds, you've maxed out your RRSP, or you want to save for non-retirement goals. TFSAs are ideal for younger Canadians early in their careers.
When should I choose an RRSP over a TFSA?
Choose an RRSP if: you're in a high tax bracket now and expect lower income in retirement, you want to reduce your current taxable income, you're saving specifically for retirement, or your employer offers RRSP matching. The tax deduction can be reinvested for compound growth.
Can I have both a TFSA and an RRSP?
Absolutely! Most Canadians benefit from having both. A common strategy is to maximize RRSP contributions while in your peak earning years to get the tax deduction, then use TFSAs for additional tax-free growth and flexible access to funds.
What if I withdraw from my RRSP before retirement?
Early RRSP withdrawals are taxed as income in the year you withdraw, and you permanently lose that contribution room. There are exceptions for the Home Buyers' Plan (HBP) and Lifelong Learning Plan (LLP) which allow tax-free withdrawals if you repay them on schedule.
How does the RRSP tax refund reinvestment work?
When you contribute to an RRSP, you get a tax deduction that often results in a refund. If you reinvest this refund back into your RRSP or other investments, you can significantly boost your long-term returns. Our calculator shows the impact of reinvesting vs spending your tax refund.
Are these calculators free to use?
Yes! All our calculators are completely free to use. No registration or payment required. We believe financial planning tools should be accessible to all Canadians.
Choosing Your Account
- ✓Compare your marginal rate today with the rate you expect in retirement.
- ✓If you use an RRSP, reinvest the refund — otherwise much of its advantage disappears.
- ✓Keep money you might need before retirement in your TFSA.
- ✓Remember that RRSP withdrawals count as income for OAS and GIS; TFSA withdrawals don't.
- ✓Most people use both — the calculator helps you decide how to split new savings.