RRSP vs TFSA Calculator
Compare saving in an RRSP versus a TFSA based on your tax rate now and in retirement.
About the RRSP vs TFSA Calculator
An RRSP gives a tax deduction now and taxes withdrawals later; a TFSA uses after-tax money and is tax-free on the way out. If you invest the RRSP refund too, the two are equal when your tax rate now equals your rate at withdrawal; the RRSP wins if your rate will be lower in retirement, the TFSA if it will be higher. RRSP withdrawals can also reduce income-tested benefits such as OAS and GIS, which favours the TFSA for lower incomes.
The formula
RRSP = G × (1 + r)ⁿ × (1 − t_later); TFSA = G × (1 − t_now) × (1 + r)ⁿ
Worked example
Example: RRSP wins by = $4,023
- Inputs: Pre-tax income to save: $5,500; Marginal tax rate now: 33%; Marginal tax rate when withdrawn: 22%; Annual return: 7%; Years invested: 28.
- Formula: RRSP = G × (1 + r)ⁿ × (1 − t_later); TFSA = G × (1 − t_now) × (1 + r)ⁿ
- Result: RRSP wins by = $4,023
Things to keep in mind
- Assumes the RRSP refund is invested; contribution room limits apply.
Questions people ask
Can I do both?
Yes, and many people should.
Does it matter what I do with the RRSP tax refund?
Yes. The RRSP's advantage assumes you invest the refund; if you spend it, the advantage shrinks. Compare the after-tax amounts you actually invest.
Sources
The rules and rates this calculator uses come from the official pages below. Its results are estimates, not an official determination, and rules change, so check the latest figures there before you act on them.