Results
Worked out as you move the sliders and not saved. Today’s dollars.
British Columbia: $10,000 saved, 25 years
The RRSP comes out ahead by about $2,912, because the refund today (28.2% of the contribution) is worth more than the tax paid on the way out (19.6%).
After-tax value over time
Each line is what you would keep after tax if you cashed out in that year. The marginal rate on the next dollar you earn is about 28.2%. Break-even: if the average tax rate on your RRSP withdrawals is below about 28.2%, the RRSP (with the refund reinvested) wins.
Show the numbers
| You save from your pay (into either account) | $10,000 |
| Tax refund from the RRSP deduction (reinvested in a TFSA, or spent) | $2,820 |
| Cost to you out of pocket, the same for both choices | $10,000 |
| RRSP value before tax in 25 years | $33,864 |
| Withdrawn over 20 years (about $1,693 a year on top of $40,000) | $1,693 |
| Tax on the RRSP withdrawals | $6,637 |
| TFSA after tax | $33,864 |
| RRSP after tax, refund reinvested in a TFSA | $36,776 |
| RRSP after tax, refund spent | $27,226 |
How this is worked out, and a rule of thumb
Both choices cost you the same out of pocket: the amount you save. The RRSP also gives a tax refund, worked out with the same tax engine as the income tax calculator (your province, 2026 rates). You either spend that refund or put it in a TFSA, which is why the choice matters. Both accounts grow at the same rate. The RRSP is then withdrawn in equal yearly amounts over the years you choose, on top of your other retirement income at age 66, and the extra tax is worked out with the same engine, including the age and pension credits. TFSA withdrawals are tax-free. If you reinvest the refund in a TFSA it is counted too. If the refund is spent, the TFSA nearly always wins, so the real contest is the RRSP with the refund reinvested.
Rule of thumb. If your tax rate is higher today than it will be in retirement, the RRSP tends to win; if it is lower (a young person early in their career, a low-income year), the TFSA tends to win; if about equal, it is a tie. A tie is not the whole story: TFSA withdrawals do not count as income, so they do not reduce GIS, the Canada Child Benefit or the age amount, and do not add to the OAS clawback. Many people use both.
Simplifications: one lump sum, no growth during the withdrawal years, today’s tax rules and rates, no fees, no home buyers’ plan or lifelong learning plan, and no benefits such as GIS or the OAS clawback in the figures (they are flagged above). Check your room first with the TFSA contribution room calculator. For information only, not tax or investment advice.
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This free tool is a courtesy of HJ Wu & Company Inc. (CPA), a Vancouver CPA firm offering accounting, tax, financial reporting and review assurance. Tell us what you think of the calculators too.