The two side by side
| RRSP | TFSA | |
|---|---|---|
| New room in 2026 | 18% of your 2025 earned income, up to $33,810 | $7,000 |
| Unused room | Carries forward | Carries forward |
| Tax refund when you put money in | Yes | No |
| Tax when you take money out | Yes, as income | No |
| Room back after a withdrawal | No | Yes, the next January 1 |
| Deadline for 2026 | March 1, 2027 | None |
Your RRSP room is on your notice of assessment and in your CRA My Account. TFSA room builds up every year from the year you turn 18 (or from 2009), whether you open an account or not. Going over either limit costs 1% a month on the excess (the RRSP allows $2,000 extra first).
How big is the RRSP refund?
Your refund is your marginal tax rate on what you put in. For $5,000 in Ontario in 2026:
| Income | Refund on $5,000 |
|---|---|
| $50,000 | $1,103 |
| $80,000 | $1,483 |
| $120,000 | $1,995 |
The higher your income, the bigger the refund. Under about $58,500 you’re in the lowest federal bracket (14%), so the refund is smaller.
Which leaves you with more?
Take $5,000 of pay, invested for 25 years at 6% a year, with a 30% tax rate today:
- TFSA: you pay the tax first, so $3,500 goes in. It grows to $15,022, all tax-free.
- RRSP: the refund covers the tax, so all $5,000 goes in. It grows to $21,459, then it’s taxed when you take it out.
- Taxed at 20% in retirement RRSP $2,145 more
- RRSP, after tax: $17,167 TFSA: $15,022
- Taxed at 30% in retirement The same
- RRSP, after tax: $15,022 TFSA: $15,022
- Taxed at 40% in retirement TFSA $2,146 more
- RRSP, after tax: $12,876 TFSA: $15,022
Same tax rate now and later: the same result
The TFSA gets $3,500 after tax and grows to $15,022, all tax-free. The RRSP gets the full $5,000, as the refund covers the tax, and grows to $21,459 before tax on the way out. This assumes you invest the refund.
With the same tax rate now and later, they come out exactly the same. The RRSP only wins if your tax rate in retirement is lower, and only if you invest the refund rather than spend it.
When the TFSA is the better choice
- Your income is modest now, so the RRSP refund is small.
- You might need the money before retirement, for an emergency, a car or a home. TFSA withdrawals are tax-free, and you get the room back.
- You expect a big income in retirement, from a workplace pension for example.
- In retirement, RRSP withdrawals count as income and can reduce Old Age Security and the Guaranteed Income Supplement. TFSA withdrawals don’t.
When the RRSP is the better choice
- Your income is high now and you expect it to be lower in retirement.
- Your employer matches contributions to a group RRSP. That’s free money: take all of it first.
- You’re buying your first home: the Home Buyers’ Plan lets you take up to $60,000 out of your RRSP tax-free, and pay it back over 15 years.
Using both
Many people do both: put money in an RRSP, then put the refund into a TFSA. If you’re saving for a first home, a First Home Savings Account (FHSA) combines the two: a deduction when you put money in, and tax-free withdrawals for a qualifying home.
By the end of the year you turn 71, an RRSP has to become a RRIF or an annuity, with withdrawals each year. A TFSA has no age limit.
See your own numbers
The RRSP vs TFSA calculator compares the two for your income, province and retirement, including the OAS clawback. The RRSP calculator shows your refund and what your RRSP could grow to, for your province and income. The income tax calculator shows your marginal tax rate.