Budget Beavers

TFSA vs. RRSP Decision Tool 2025

Which account wins at your marginal rate — including the FHSA 3-way decision.

For informational purposes only. Not financial advice. Calculations use publicly available CRA data. Consult a financial advisor or tax professional for personalized advice.

Inputs

$ TFSA room 2025
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%
Many retirees land in the 20.5–26% bracket
% S&P 500 / TSX historical avg
Enables FHSA routing — the best-of-both-worlds account
Recommendation
Calculating...
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Enter your details to get a recommendation.
TFSA final (tax-free) Your TFSA balance at the end of your time horizon. All withdrawals are tax-free — this number is 100% yours.
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RRSP after tax Your RRSP balance after paying income tax at your expected retirement rate on withdrawal. RRSP withdrawals are fully taxable income.
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RRSP refund today The immediate tax refund from your RRSP contribution = amount × your marginal rate. If you reinvest this refund in a TFSA, it also grows tax-free — shown as 'RRSP + refund reinvested' on the chart.
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If reinvested → TFSA
Winner advantage Dollar and percentage advantage of the winning strategy. Calculated as: best RRSP scenario (after tax + refund reinvested) vs TFSA final.
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TFSA room 2025: $7,000 · RRSP limit 2025: $32,490 · FHSA: $8,000/yr · Source: CRA

Side-by-Side Growth

The math behind your result

Every number on this page is derived from the exact Canadian regulatory formula — not approximations or estimates. The calculation runs entirely in your browser using the inputs you provided. Expand the section below to verify the math step-by-step, or share the URL to reproduce these exact results.

▶ How is this calculated?

TFSA — tax-free compounding

TFSA final = contributionAmount × (1 + r)^n
No tax ever — on contributions, growth, or withdrawals.

RRSP — deferred tax on withdrawal

RRSP gross     = contributionAmount × (1 + r)^n
RRSP after tax = grossBalance × (1 - retirementMarginalRate)

RRSP refund today = contributionAmount × currentMarginalRate
(The CRA returns this as a tax refund on your T1)

If you reinvest the refund in a TFSA:
RRSP + refund reinvested = rrspAfterTax + rrspRefund × (1 + r)^n

Decision rule

if (firstHomeBuyer && amount ≤ $40,000)  → FHSA first
if (retirementRate ≥ currentRate)         → TFSA  (certainty wins)
if (currentRate > retirementRate + 5pp)  → RRSP  (clear spread advantage)
else                                      → SPLIT (marginal, split hedges risk)

Why the FHSA is special

The First Home Savings Account (2023) is the only Canadian account that is simultaneously tax-deductible on contribution (like RRSP) AND tax-free on qualifying withdrawal (like TFSA). It dominates both accounts for first-time buyers until the $40,000 lifetime limit is reached. Source: Dept. of Finance Canada — Budget 2022, FHSA regulations.

About the TFSA vs RRSP Calculator

The core decision rule

The standard tax-shelter textbook answer: contribute to an RRSP when your current marginal rate exceeds your expected retirement marginal rate, and to a TFSA when the rates are equal or reversed. The logic is that an RRSP defers tax — you save at today's rate, but pay at tomorrow's rate. If tomorrow's rate is lower, you come out ahead. If it is higher, you don't.

For equal rates the math is identical, but the TFSA wins on certainty: your RRSP withdrawal tax rate is not actually known today, whereas the TFSA is tax-free by law regardless of future tax policy changes.

The RRSP refund — the most overlooked piece

When you contribute to an RRSP, you receive a tax refund equal to your marginal rate times the contribution. At 43.41% on a $7,000 contribution, that's $3,039 back on your next tax return. The calculator shows you two RRSP scenarios: (1) the after-tax withdrawal value alone, and (2) the combined value when you reinvest that refund in a TFSA. Scenario 2 is the fair comparison — disciplined RRSP investors reinvest their refunds, and this is why RRSP often wins even more than the raw rate comparison suggests.

The FHSA — a new option since 2023

The First Home Savings Account, introduced in the 2022 federal budget and available from April 2023, is the most powerful registered account for first-time buyers. Contributions are deductible from income (like RRSP), and withdrawals for a qualifying first home purchase are completely tax-free (like TFSA). It is the only account in Canada that offers both benefits simultaneously. The annual limit is $8,000, the lifetime limit is $40,000, and the account must be used within 15 years of opening. If you are a first-time buyer with room available, you should maximize the FHSA before making RRSP or TFSA decisions.

When is the TFSA better despite a higher current rate?

Several real-world scenarios can make the TFSA better even when your current rate is higher: (1) You may receive OAS clawback in retirement if your income (including RRIF minimums) pushes past $93,454 (2025) — TFSA withdrawals don't count as income; (2) You may have income-tested benefits in retirement (GIS, provincial drug plans) that RRSP/RRIF withdrawals reduce but TFSA withdrawals don't; (3) You may value flexibility — TFSA withdrawals don't reduce future contribution room (room is restored the following year), unlike RRSP which is one-way. The SPLIT recommendation captures situations where the math is close and diversifying across both accounts hedges these risks.

Not financial advice. This calculator provides estimates for informational and educational purposes only. Tax rates, registered account limits, and benefit clawback thresholds change annually. Consult a licensed financial advisor, tax professional, or CPA for personalized advice. All calculations happen in your browser — no input data is sent to any server.

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