Fiscal and Financial Planning Guide 2024-2025
Workers > TFSA or RRSP?
Should we favor the RRSP or the TFSA when our savings do not allow us to contribute to both?
The following example demonstrates that if the tax rate is equal at the time of contribution and at the time of withdrawal, the TFSA and the RRSP will give the same results if the tax savings generated by the RRSP are annually reinvested in the TFSA.
The net after tax amount in the two scenarios is identical at $8,954 because the tax rate of the taxpayer is the same at the time of the contribution (50 %) and at the time of the withdrawal (50 %).
If the tax rate is lower upon retirement, the RRSP will give a better result while if the tax rate is higher upon retirement, the TFSA will be more effective.
