TFSA vs RRSP
Both shelter your investments from tax, but in mirror-image ways. Choosing well can be worth tens of thousands over a lifetime — and it comes down mostly to one question.
The mirror-image tax treatment
An RRSP contribution is deductible now and taxed on withdrawal. A TFSA contribution isn't deductible, but nothing is ever taxed again. If your tax rate is the same now and at withdrawal, the two produce an identical after-tax result — the difference is entirely about which rate is higher.
Keep reading: RRSP growth calculator · TFSA growth calculator. For the official rules, see CRA — RRSPs and related plans.
The one question that decides it
Will your marginal tax rate be higher now or in retirement?
- Higher now (peak earning years): the RRSP deduction is worth more — lean RRSP.
- Higher later, or income is low/variable (students, early career, gig income): lean TFSA.
- Not sure: the TFSA's flexibility and benefit-friendliness make it a safe default.
It's not either/or
Most Canadians use both. A common pattern: RRSP to lower a high income, then TFSA for everything else — and, for a first home, the FHSA before either.
Frequently asked
Can I lose RRSP room by withdrawing?
Yes — unlike the TFSA, RRSP withdrawals (outside the Home Buyers' Plan or Lifelong Learning Plan) are taxed and the room is gone permanently.
Sources
General information for Canadian readers, not individualized financial, tax or investment advice. Figures reflect the date reviewed; confirm current limits and rules with the CRA or a qualified professional before acting.