FolioNorth

Canadian Tax Decision Tool

RRSP or TFSA: where does the next dollar belong?

Compare the after-tax value of one contribution to your RRSP versus your TFSA, given your current and expected retirement income. The answer hinges on one thing: are you in a higher tax bracket now than you'll be when you withdraw?

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What you expect to draw per year once you stop working. Include CPP, OAS, pension, and planned RRIF/non-reg draws.

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The dollars you have available right now to put into a TFSA — or, equivalently, the after-tax amount you'd contribute to an RRSP with the refund spent or reinvested.

The honest answer depends on this. Most academic comparisons assume reinvestment; most Canadians spend it.

RRSP vs TFSA verdict
$—
Waiting for income and contribution
Projection
TFSA after-tax final dollars$—
RRSP after-tax final dollars$—
Breakeven retirement income$—
Enter your current income, your expected retirement income, and the contribution amount to see the verdict.
Verdict
RRSP wins by $3,432
Your marginal rate is 37.2% today and 29.6% at retirement — defer that 7.5-percentage-point gap for 30 years and the deferred-tax savings compound to $3,432.

TFSA path

Dollars contributed$5,000
Final balance at retirement$28,717
Tax on withdrawal$0
After-tax final dollars$28,717

RRSP path

Pre-tax contribution$7,957
Final balance at retirement$45,699
Tax on withdrawal-$13,550
After-tax final dollars$32,149
If your retirement income is below ~$117,045, RRSP wins. Above that, TFSA wins.
This compares the math, not the rules. The verdict above is correct under the assumptions you supplied. It does not account for OAS clawback (RRIF withdrawals over ~$93,000 are clawed back at 15 cents on the dollar), GIS eligibility (RRSP/RRIF withdrawals can eliminate it for low-income retirees), or the discipline question — whether you'll actually invest the refund or spend it. The "refund handling" toggle above is the single biggest lever in this calculation. This is not advice. Your real situation includes pension splitting, attribution rules, spousal RRSPs, FHSA interactions, and behaviour. Use this number to anchor a conversation, not to make the call.

What is being modeled

This v1 compares one after-tax contribution using 2026 bracket-only marginal rates, assumes the same province now and in retirement, and keeps tax brackets flat across the horizon.

Frequently asked questions

Why does the answer depend on my retirement income?+
RRSP defers tax to withdrawal. If you withdraw in a lower bracket than you contributed, you pocket the difference. If you withdraw in a higher bracket, you're worse off than if you'd just used the TFSA.
What about OAS clawback?+
Not modeled in v1. OAS is clawed back at 15% on income above ~$93k (the threshold indexes annually). RRIF/RRSP withdrawals count as income; TFSA withdrawals don't. If your retirement income lands near or above the clawback threshold, RRSP looks worse than this calculator suggests.
What about GIS?+
Not modeled. GIS is income-tested and starts clawing back at very low income levels. For Canadians who will rely meaningfully on GIS in retirement, TFSA is almost always the right answer even when bracket math says otherwise.
Are surtaxes included?+
Federal and provincial bracket-shaped tax is included. Ontario's surtax (which adds ~0–6 ppt at $90k–$220k income) is omitted in v1; this slightly understates Ontario marginal rates. Quebec's federal abatement is applied.
Should I do both?+
Most Canadians should use both accounts over their lifetime. This tool answers "which one gets this dollar." For people with a high current income, RRSP-first-then-TFSA is the textbook order. For people in lower brackets, TFSA-first-then-RRSP saves room for higher-earning years.