TFSA vs RRSP Comparison Calculator
Find out which savings vehicle is better for your situation. Compare tax savings, growth potential, and withdrawal flexibility.
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TFSA
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Total Value After 25 Years
RRSP
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Total Value After 25 Years
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TFSA vs RRSP: Which Should You Choose?
Choosing between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP) is one of the most important financial decisions Canadians face. Both offer significant tax advantages, but they work differently and suit different situations.
Understanding TFSA
A TFSA allows you to save money tax-free. While contributions aren't tax-deductible, all growth and withdrawals are completely tax-free. For 2025, the annual contribution limit is $7,000, with unused room carrying forward indefinitely.
Understanding RRSP
An RRSP provides an immediate tax deduction on contributions, reducing your taxable income. Your investments grow tax-deferred, but you'll pay tax on withdrawals. For 2025, you can contribute up to 18% of your previous year's income, to a maximum of $31,560.
When to Choose TFSA
- You're in a low tax bracket now but expect to be in a higher one in retirement
- You want flexibility to withdraw money without tax consequences
- You've maxed out your RRSP contributions
- You're saving for short-term goals (home, car, vacation)
- You're under 18 or a non-resident
When to Choose RRSP
- You're in a high tax bracket now and expect to be in a lower one in retirement
- You want to reduce your current taxable income
- You're saving specifically for retirement
- You want to use the Home Buyers' Plan or Lifelong Learning Plan
- Your employer matches RRSP contributions
💡 Pro Tip
Many Canadians benefit from using BOTH! Consider maxing out your RRSP first if you're in a high tax bracket, then contributing to your TFSA with the tax refund.
Key Differences at a Glance
| Feature | TFSA | RRSP |
|---|---|---|
| Tax on Contributions | No deduction | Tax deductible |
| Tax on Growth | Tax-free | Tax-deferred |
| Tax on Withdrawals | Tax-free | Fully taxable |
| 2025 Contribution Limit | $7,000 | 18% of income (max $31,560) |
| Withdrawal Flexibility | Anytime, no penalty | Withholding tax applies |