The core difference
The biggest difference between RRSPs and TFSAs is how they treat tax:
- RRSP: you get a tax deduction today, but you’ll pay tax later when you withdraw the money.
- TFSA: no tax deduction today, but withdrawals later are completely tax-free.
When RRSPs usually make more sense
Families often lean toward RRSPs when:
- You’re earning a higher income today
- The tax refund feels meaningful
- You plan to reinvest the refund
- Retirement is still many years away
In these situations, the upfront tax savings can significantly boost long-term growth. Learn more in our RRSP basics guide.
When TFSAs usually make more sense
TFSAs tend to shine when:
- You want maximum flexibility
- You may need access to the money before retirement
- Your income is moderate or lower
- You want certainty around future taxes
Because withdrawals are tax-free, TFSAs work well for both long-term investing and real-life needs.
A simple rule of thumb
If your income is higher today than it will be in retirement, RRSPs are often the better first choice.
If your income is lower today, TFSAs are often the stronger starting point. If you’re new to TFSAs, start with our TFSA basics guide.
Using both accounts together
Many families don’t choose just one. A common approach is to:
- Contribute to RRSPs to capture tax refunds, and
- Use TFSAs for flexibility and tax-free growth
Some people even put their RRSP refund into a TFSA, allowing both accounts to work together.
You can also explore tax-free growth scenarios using the TFSA Contribution & Growth Calculator.
Want to see how this plays out with real numbers?
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See how RRSP contributions could grow over time and how tax deductions affect long-term results.
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