Key takeaways
- If your tax rate in retirement will be lower than today, the RRSP usually wins
- If it will be the same, the two are about equal; if higher, the TFSA wins
- TFSA withdrawals do not count as income, so they do not reduce benefits such as the GIS or OAS
- 2026 limits: TFSA $7,000; RRSP 18% of last year’s earned income up to $33,810
- Newcomers get TFSA room from the year they become resident; RRSP room starts a year later
How the comparison works
To compare fairly, the calculator starts with the same pre-tax dollars in both accounts:
- RRSP: you contribute the full amount and get a deduction. The money grows. When you withdraw, you pay tax at your marginal rate in retirement.
- TFSA: you first pay tax on the income at today’s marginal rate, then contribute what is left. It grows and comes out tax-free.
If your tax rate is the same at both times, both accounts give the same result. The difference comes from the gap between your rate today and your rate when you withdraw.
Worked example
Tomás lives in Ontario and earns $85,000. His marginal rate is about 29.65%. He expects $45,000 a year in retirement, which puts him at about 19.05%. With $5,000 of pre-tax income, 25 years and a 5% return:
- RRSP: $5,000 grows to about $16,930, and he keeps about $13,710 after tax.
- TFSA: he can put in about $3,520 after tax, which grows to about $11,910, tax-free.
The RRSP leaves him about $1,800 more. If he expected the same income in retirement, the two would be equal.
When each account makes sense
| Situation | Usually better |
|---|---|
| High income now, lower income expected in retirement | RRSP |
| Low income now (for example your first year in Canada) | TFSA |
| You may need the money before retirement | TFSA |
| Low retirement income, likely to get the GIS | TFSA |
| Saving for your first home | FHSA first, then either |
| You may leave Canada for good | Depends: see below |
Many people use both: the RRSP for the tax refund and the TFSA for flexible savings.
Newcomers: room, timing and leaving Canada
Your TFSA room starts in the year you become a resident of Canada, if you are 18 or older. You get that full year’s limit ($7,000 in 2026), but not the limits from earlier years. Your RRSP room starts the year after you have Canadian earned income, and you must file a tax return to create it. See TFSA and RRSP room in your first year.
If you might leave Canada, think ahead. TFSA income may be taxed by your new country, and you cannot contribute while a non-resident. RRSP withdrawals by non-residents usually face a 25% withholding tax, which a tax treaty may reduce. Read your TFSA after leaving Canada.
How retirement benefits change the answer
RRSP and RRIF withdrawals count as income. In retirement, that can reduce income-tested benefits such as the Guaranteed Income Supplement (GIS) and, at higher incomes, Old Age Security (OAS). This acts like an extra tax on each RRSP dollar. TFSA withdrawals do not count as income, so they do not reduce these benefits. If you expect a modest retirement income, the TFSA often wins even when the tax rates look similar.
Next steps
Check your rate now with the marginal tax rate calculator, see your exact refund with the RRSP tax savings calculator, and avoid penalties with the over-contribution calculator.