RRSP vs TFSA calculator
Which account leaves more after tax — deduct now and pay on withdrawal, or contribute after tax and withdraw free.
RRSP ends ahead by
Estimate$4,120.00
37% now against 29% on withdrawal
- RRSP after tax
- $55,623
- TFSA after tax
- $51,502
- Tax refund generated
- $4,440.00
| Contribution | $12,000 |
|---|---|
| RRSP room this year | $17,100 |
| Refund at your marginal rate | $4,440.00 |
| RRSP after tax on withdrawal | $55,623 |
| TFSA after tax | $51,502 |
| RRSP ahead by | $4,120.00 |
- The refund is counted as invested. Spending it instead removes the RRSP advantage entirely.
- RRSP room carries forward, so unused room from earlier years may allow more than this.
At a 37% rate now against 29% later, a $12,000 deductible contribution generates a $4,440 refund. Investing it is what decides the comparison.
Side by side
How this is calculated
Invest the refund or the comparison is meaningless
A $12,000 deductible contribution at a 37% marginal rate frees $4,440 of tax. Comparisons that ignore that money always favour the tax-free account, and the difference over 25 years is substantial.
deductible total = balance after tax + refund grownContribution room is usually income-linked
Deductible accounts commonly grant room as a percentage of income up to a cap — 18% in Canada, giving $17,100 on $95,000 of earned income. Tax-free accounts more often use a flat annual figure.
Withdrawals can affect means-tested benefits
Taxable withdrawals count as income for benefit tests, while tax-free withdrawals generally do not. Canada’s Old Age Security clawback recovers 15 cents per dollar of income above its threshold, which can outweigh an 8-point difference in marginal rates.
Worked example: $12,000 contributed, 37% now and 29% later, 25 years at 6%
| Contribution | $12,000 |
|---|---|
| Rate now | 37% |
| Rate later | 29% |
| Refund | $4,440 |
|---|---|
| Decided by | The rate gap |
Account names, limits and benefit interactions differ by country. Pick a country above for rules that match your situation.
What this assumes
- A constant return and constant marginal rates.
- The tax refund is invested.
- Withdrawals at the qualifying time.
- Contributions stay within room.
Where this commonly goes wrong
- Early withdrawals from deductible accounts usually attract withholding and permanently destroy the contribution room.
- Taxable withdrawals can reduce means-tested benefits, adding an effective cost beyond the marginal rate.
- Over-contributing to a capped account is typically penalised monthly until corrected.
Questions
Deduct now or withdraw tax free — which wins?
The deductible one if your rate now exceeds your rate on withdrawal, the tax-free one if not. At 37% now against 29% later the deduction wins, provided the refund it generates is actually invested.
What happens to the tax refund?
It is real money and belongs in the comparison. On a $12,000 contribution at 37% it is $4,440 — over 25 years at 6% that grows to more than four times the size, which is what makes the deductible account competitive.
Is contribution room use-it-or-lose-it?
Usually not for deductible accounts, where unused room carries forward indefinitely — Canadian RRSP room builds at 18% of earned income every year whether used or not. Tax-free account rules vary: some restore withdrawn room the following calendar year, others do not.
Related tools
Sources
General estimate based on published CRA rates for the current period. Not tax advice. Confirm your position with the CRA or a qualified adviser.
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