RRSP vs TFSA

What this is

Which account wins on a pre-tax dollar basis?

The math is actually simple: whichever account taxes you at a LOWER rate is the winner. RRSP wins when your retirement marginal rate is below your current. TFSA wins when it's above. Compounding cancels out.

• ·RRSP — contribute pre-tax. Tax is deferred. Pay tax at your retirement marginal rate when you withdraw.
• ·TFSA — contribute after-tax. Tax-free growth. Withdrawals never taxed.
• ·High earner now, low income in retirement? RRSP wins.
• ·Low earner now (student, early career), high income later? TFSA wins.
• ·Same rate now and later? Mathematically identical outcome.