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RRSP vs TFSA Calculator

Compare the after-tax retirement value of an RRSP versus a TFSA at your marginal tax rates today and at withdrawal. Accurate math for the 'which should I use' question.

Reviewed by Canadian Money Help Editorial Updated April 22, 2026 Source CRA 2026

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The choice between a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA) comes down to one variable: the account holder’s marginal tax rate at contribution compared to the marginal tax rate at withdrawal. When those two rates are identical, the accounts are mathematically equivalent after tax. They diverge when rates differ. The calculator above computes the after-tax balance of each account given the gross amount saved, the return assumed, the number of years to withdrawal, and the two marginal rates.

Quick answer

An Ontario resident earning $120,000 today and expecting to withdraw at a $60,000 retirement income faces a 43.41% current marginal rate and a 29.65% withdrawal rate. On a $10,000 gross contribution at 6% for 30 years, the RRSP produces approximately $57,400 after tax and the TFSA produces approximately $32,500 after tax. The RRSP advantage is $24,900, driven by the 13.76 percentage point rate differential. When the same person expects a $100,000 retirement income at a 43.41% rate (no bracket reduction), the two accounts return identical after-tax balances.

The underlying math

The RRSP after-tax balance is the pre-tax contribution compounded at the return rate and multiplied by one minus the withdrawal marginal rate: RRSP_after = C × (1 + r)^n × (1 − m_out). The TFSA after-tax balance is the after-tax contribution compounded at the return rate: TFSA_after = C × (1 − m_in) × (1 + r)^n. The ratio of the two is (1 − m_out) / (1 − m_in). When m_in > m_out, RRSP wins. When m_in < m_out, TFSA wins. When m_in = m_out, the two are equal.

Scenarios where RRSP wins

  • Peak-earning years into retirement drawdown. A senior software engineer earning $180,000 at the top federal bracket deferring into retirement income of $70,000 captures a 15 to 20 percentage point arbitrage. The deferred tax compounds for decades before being paid.
  • Employer group RRSP with matching. A 50% employer match on the first 6% of salary is a 50% return before any market exposure. The RRSP is the correct destination for the matched portion regardless of the rate comparison.
  • Income smoothing across years. A self-employed professional with lumpy income can contribute in high-income years and defer withdrawals to low-income years, producing a lower effective rate at withdrawal than in any single year.

Scenarios where TFSA wins

  • Low marginal rate now, higher rate in retirement. A young earner in the lowest bracket expecting to be a high earner in retirement (rare but possible with large pension, rental, or inheritance) will pay less tax at contribution than at withdrawal.
  • OAS clawback exposure. OAS is reduced 15 cents on the dollar for net income above $90,997 in 2026. RRSP and RRIF withdrawals count toward this threshold; TFSA withdrawals do not. A retiree near the clawback zone adds an effective 15 percentage points to the RRSP withdrawal rate.
  • Guaranteed Income Supplement (GIS) exposure. GIS is reduced 50 cents on the dollar for most non-OAS income. A low-income retiree drawing RRSP income loses half to GIS clawback, while TFSA withdrawals do not reduce GIS.
  • Estate considerations. Remaining RRSP or RRIF balances at death (excluding spousal rollovers) are deemed disposed on the final tax return at the marginal rate, commonly 50%+. TFSA balances roll to a surviving spouse as successor holder with no tax. Non-spouse beneficiaries receive the TFSA value as of the date of death tax-free.

Tie-breakers when rates are equal

When current and withdrawal marginal rates are identical, the after-tax balances are mathematically equal, but four practical factors remain:

  • Withdrawal flexibility. TFSA withdrawals are tax-free and restore contribution room on January 1 of the following calendar year. RRSP withdrawals are fully taxable, trigger withholding at source, and do not restore room (other than Home Buyers’ Plan and Lifelong Learning Plan repayments).
  • Government benefit clawbacks. OAS, GIS, Age Credit, and the Canada Workers Benefit all phase out based on net income that includes RRSP and RRIF withdrawals. TFSA withdrawals do not enter those formulas.
  • Contribution room. The 2026 TFSA limit is $7,000 per adult. The 2026 RRSP limit is the lesser of 18% of earned income and $32,490. High earners can shelter more in an RRSP than in a TFSA each year.
  • Spousal income splitting. A spousal RRSP allows the higher-earning partner to contribute and deduct against their income while the lower-earning spouse owns the account and withdraws at their lower marginal rate. A TFSA has no spousal splitting mechanism beyond direct gifting.

2026 combined marginal tax rates by province

Marginal rates are the combined federal and provincial tax on the last dollar of income. The table below lists rates at two representative income levels. Quebec rates include the federal abatement.

Province $60,000 income $150,000 income
British Columbia 28.20% 45.80%
Alberta 30.50% 42.00%
Saskatchewan 33.25% 43.50%
Manitoba 33.25% 46.40%
Ontario 29.65% 43.41%
Quebec 37.12% 47.46%
New Brunswick 29.82% 45.32%
Nova Scotia 29.95% 47.00%
Prince Edward Island 32.80% 47.63%
Newfoundland and Labrador 29.50% 46.30%

Figures are representative and rounded. The exact marginal rate depends on the specific bracket the next dollar falls in and on provincial surtaxes, health premiums, and low-income reductions. A Canada-wide paycheck estimate is available via the Canadian Paycheck Take-Home Calculator.

Common mis-assumptions

  • Retirement rate equals current rate minus 10%. Not a safe assumption. A pensioner with a defined benefit pension, CPP, OAS, and substantial RRIF income may face a marginal rate higher than during their working years. Run the calculator with a realistic retirement income projection before defaulting to a bracket drop.
  • The TFSA is always better for younger savers. A young saver in the bottom federal bracket (15%) expecting a top-bracket career should use a TFSA because rates will rise. A young saver in the 29% bracket expecting a modest middle-bracket retirement should use an RRSP.
  • The RRSP deduction is free money. The deduction defers tax, it does not eliminate it. Every dollar of deduction becomes a dollar of taxable withdrawal at some future marginal rate. Value captured equals the rate differential times the contribution.

Related calculators

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Methodology

RRSP after-tax balance is computed as the pre-tax contribution compounded at the annual return over the horizon, then reduced by the expected marginal tax rate at withdrawal. TFSA after-tax balance is the after-tax contribution (pre-tax amount reduced by the current marginal rate) compounded at the same return over the same horizon. Both accounts assume no tax drag on annual returns. Return is applied annually at year-end. No inflation adjustment is applied; results are in nominal dollars. The CRA prescribed rate table for RRIF minimum withdrawals, OAS clawback threshold, and federal bracket table are sourced as of the 2026 tax year.

Frequently asked questions

Is RRSP or TFSA better for retirement?
The better account is the one with the larger rate differential in the account holder's favour. RRSP wins when the current marginal tax rate is higher than the expected rate at withdrawal, because the deduction is worth more than the future tax owed. TFSA wins when the current rate is lower than the expected rate at withdrawal. When rates are equal, the after-tax balances are identical and other factors such as withdrawal flexibility, OAS clawback, and estate treatment become the tie-breakers.
What is the main difference between an RRSP and a TFSA?
An RRSP is funded with pre-tax dollars: contributions are tax-deductible, growth is tax-deferred, and withdrawals are fully taxable as income. A TFSA is funded with after-tax dollars: contributions are not deductible, growth is tax-free, and withdrawals are tax-free. Both accounts shelter investment growth from annual tax on interest, dividends, and capital gains.
What are the 2026 RRSP and TFSA contribution limits?
The 2026 RRSP limit is the lesser of 18% of prior-year earned income and $32,490. The 2026 TFSA limit is $7,000 per adult resident of Canada. Cumulative TFSA contribution room through 2026, for a person who was 18 or older on January 1, 2009, is $109,000.
Does an RRSP reduce taxable income?
Yes. RRSP contributions are deductible from taxable income in the year of contribution (or carried forward). A $10,000 contribution by a taxpayer in the 43% marginal bracket reduces tax payable by approximately $4,300. The deduction is claimed on line 20800 of the T1 return.
Are TFSA withdrawals tax-free forever?
Yes. Interest, dividends, and capital gains earned inside a TFSA are not subject to Canadian income tax, during growth or on withdrawal. US-source dividends remain subject to 15% US withholding tax because the Canada-United States Income Tax Convention does not treat the TFSA as a pension account. US citizens and green card holders resident in Canada are taxed by the IRS on TFSA growth.
Can a person contribute to both an RRSP and a TFSA?
Yes. Each account has its own contribution room and they do not interact. A common sequencing strategy is to contribute to the RRSP up to the point that lowers the marginal tax rate into a lower bracket, then direct additional savings to the TFSA. Refunds generated by RRSP contributions can fund TFSA contributions the following year.
Does OAS clawback affect the RRSP vs TFSA decision?
Yes. OAS is reduced by 15 cents for every dollar of net income above $90,997 in 2026, and is eliminated entirely above $148,179. RRSP and RRIF withdrawals count toward net income for this calculation. TFSA withdrawals do not. A retiree near the clawback zone adds an effective 15 percentage points to the RRSP withdrawal rate, which tilts the decision toward the TFSA.
What happens to an RRSP at age 71?
An RRSP must be converted to a Registered Retirement Income Fund (RRIF), used to purchase an annuity, or withdrawn in full by December 31 of the year the account holder turns 71. A RRIF requires minimum annual withdrawals based on a CRA prescribed rate that rises with age, from approximately 5.28% at age 71 to 20% at age 95 and above.
What happens to a TFSA at age 71?
Nothing. A TFSA has no age cap. Contribution room continues to accrue each year the account holder is a resident of Canada, regardless of age. Withdrawals remain tax-free at any age and restore contribution room on January 1 of the following calendar year.
Is a spousal RRSP still useful?
Yes, in specific cases. A spousal RRSP lets the higher-earning spouse contribute and deduct against their income while the lower-earning spouse owns the account and withdraws at their lower marginal rate. The T4RSP is issued to the contributor rather than the owner if withdrawals occur within three calendar years of contribution (the attribution rule). Pension income splitting introduced in 2007 reduced but did not eliminate the spousal RRSP's value: spousal RRSPs remain useful before age 65, when RRIF income splitting is not yet available.
How does the Home Buyers' Plan interact with this decision?
The Home Buyers' Plan (HBP) allows a first-time home buyer to withdraw up to $60,000 from an RRSP tax-free and repay it over 15 years starting the second year after withdrawal. The First Home Savings Account (FHSA) is a separate account with an $8,000 annual limit and $40,000 lifetime limit that combines RRSP-style deduction with TFSA-style tax-free withdrawal. Both accounts are available simultaneously. The FHSA-versus-HBP decision is covered by the First Home Savings Account and Home Buyers' Plan calculators.
What if the RRSP contribution produces a refund, where should it go?
An RRSP refund represents tax that would otherwise have been paid. To capture the full after-tax benefit of the RRSP, the refund is best reinvested (commonly into a TFSA) rather than spent. A contribution of $10,000 at a 43% marginal rate produces a $4,300 refund. Reinvesting that refund into a TFSA at 6% for 30 years adds approximately $24,700 of tax-free growth to the household's retirement balance.