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TFSA or RRSP: which comes out ahead?

It mostly comes down to your tax rate today versus your tax rate in retirement. Put in your numbers and see which account leaves you with more after tax.

This is a rough estimate. The real decision involves far more than two tax rates: future rates can change and are hard to predict, and there are other factors to weigh. If there's real money on the line, it's worth taking the time to think it through properly.
$
%
%
%
yrs
RRSP comes out ahead by $0 more, after tax
RRSP strategy, after tax $0 Includes your reinvested tax refund
TFSA, after tax $0 Tax-free going in and coming out

How this works. We assume you put the same amount into each account. With the RRSP, that contribution is deductible, so you get a tax refund now; we assume you reinvest that refund and pay tax when you withdraw the RRSP later. The TFSA is funded with money you have already paid tax on, so its withdrawals are tax-free. Both grow at the same return, and we show the after-tax value of each at the end.

When your tax rate is the same now and in retirement, the two come out identical. The RRSP wins when your retirement rate is lower, the TFSA wins when it is higher. One thing a calculator can't show: TFSA withdrawals don't count as income, so they don't reduce income-tested benefits like OAS or the GIS, which can matter a lot in retirement.

This is general education, not personal financial or tax advice. Your own rates, room, and situation will differ.

Not sure which accounts to fill first? Read more on the blog.

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