Compare RRSP vs TFSA to determine the best Canadian retirement savings strategy for your situation. This calculator considers your current and future tax rates to show which account delivers better after-tax returns.
RRSP vs TFSA: Complete Canadian Guide
Both RRSPs and TFSAs are powerful savings vehicles, but they work differently. Understanding when to use each can significantly impact your long-term wealth.
RRSP (Registered Retirement Savings Plan)
- Tax Deductible: Contributions reduce your current taxable income
- Tax-Deferred Growth: Investments grow without annual tax
- Taxable Withdrawals: All withdrawals taxed as income
- Contribution Limit: 18% of previous year's income (2024 max: $31,560)
- Mandatory Conversion: Must convert to RRIF by age 71
TFSA (Tax-Free Savings Account)
- After-Tax Contributions: No tax deduction for contributions
- Tax-Free Growth: All investment gains are tax-free forever
- Tax-Free Withdrawals: No tax on any withdrawals
- Contribution Limit: Annual limit (2024: $7,000), cumulative since 2009
- Flexible Access: Withdraw anytime without penalties
When to Choose RRSP
- High income now (over $50,000)
- Expect lower tax rate in retirement
- Need the immediate tax deduction
- Employer pension matching available
- Disciplined about not touching retirement savings
When to Choose TFSA
- Lower to moderate income (under $50,000)
- Same or higher tax rate expected in retirement
- Want flexibility to access funds
- Already maximizing RRSP contributions
- Saving for multiple goals (house, retirement, etc.)
Advanced Strategy: Use Both
Many Canadians benefit from using both accounts strategically:
- Contribute to RRSP for immediate tax deduction
- Use tax refund to fund TFSA
- Prioritize employer RRSP matching first
- Use TFSA for emergency fund and flexible goals