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RRSP or TFSA, and how much does the government give back?
The order matters more than the amount. Employer match first, then the account your tax rate favours, then the rest. An RRSP contribution comes with a refund at your marginal rate. A TFSA grows tax-free forever.
Worth knowing before you start
- An RRSP contribution refunds tax at your marginal rate: $10,000 in at 43% gives $4,300 back next spring. The RRSP wins when your tax rate in retirement will be lower than today’s.
- A TFSA is better at lower incomes and for money you may need before retirement. Withdrawals never affect OAS or GIS.
- For a first home, the FHSA is deductible like an RRSP and tax-free out like a TFSA, $8,000 a year to $40,000.
- Unused room carries forward. Check the CRA figure before you contribute, and never go over it. The TFSA penalty is 1% a month.
The steps, in order
- 1 RRSP, TFSA or FHSA?Which account wins for your income now and later, and the one rate that decides it.Open the RRSP vs TFSA vs FHSA calculator →
- 2 What refund will I get?The refund for any contribution and the amount that brings you down a bracket.Open the RRSP refund calculator →
- 3 How much room do I have?Your TFSA room today, starting from the CRA figure.Open the TFSA room calculator →