TFSA vs RRSP vs Non-Registered
TFSA or RRSP? The math in one table, rules of thumb by income, which investments go in which account, and 2026 room.
The short version
- An RRSP gives you a deduction now and taxes the withdrawal later. A TFSA gives no deduction but never taxes the withdrawal. If your tax rate is the same then as now, they come out exactly equal.
- The RRSP wins when your rate today is higher than it will be when you withdraw. The TFSA wins when it's lower, or when retirement withdrawals would trigger the OAS clawback or cut benefits.
- The TFSA is also better for money you might need before retirement: withdrawals are tax-free and the room comes back the next January.
- Non-registered accounts come third: only after both are full, and best for Canadian dividends and long-held growth stocks.
- 2026 room: TFSA $7,000 new ($109,000 total if eligible since 2009); RRSP 18% of last year's earned income, up to $33,810.
TFSA vs RRSP vs Non-Registered
The TFSA-or-RRSP debate fills more coffee breaks than hockey trades, and most of it misses the point. Mathematically, the two accounts are mirror images. The difference comes down to one thing: your tax rate going in compared with your tax rate coming out. Get that comparison right and the answer is usually obvious. Get it wrong and you can lose thousands, or more likely just leave them on the table.
The Math, in One Table
| $10,000 of pre-tax earnings, Ontario, doubles before withdrawal | TFSA | RRSP |
|---|---|---|
| Tax now at 29.65% | Pay $2,965, invest $7,035 | Invest the full $10,000 (refund covers the tax) |
| Value at withdrawal | $14,070 | $20,000 |
| Withdraw at 20% tax | $14,070 | $16,000: RRSP wins |
| Withdraw at 29.65% tax | $14,070 | $14,070: a tie |
| Withdraw at 40% (OAS clawback zone) | $14,070 | $12,000: TFSA wins |
The RRSP version only works if you invest the refund too. Spend it, and the TFSA usually wins. Your own saving: the RRSP tax savings calculator; your retirement rate: the retirement income tax calculator.
TFSA or RRSP for you?
Tell the assistant your income now, expected retirement income, pension, province and whether you might need the money sooner. It compares the two after tax and says where each dollar should go first.
Rules of Thumb
- Income under about $58,000: TFSA first, usually. Your rate now is low, and RRSP withdrawals later can cut the Guaranteed Income Supplement.
- Income over about $100,000: RRSP first, usually. The deduction is worth 40% or more.
- In between: it depends on your expected pension. A big defined-benefit pension means a high retirement rate, which favours the TFSA.
- Buying a first home? The FHSA beats both: a deduction going in and tax-free coming out.
- Emergency fund: TFSA. RRSP withdrawals are taxed and the room is gone; see RRSP withdrawals.
Which Investments Go Where
| Investment | Best home | Why |
|---|---|---|
| U.S. dividend stocks and U.S.-listed ETFs | RRSP | No U.S. withholding there; see U.S. stocks |
| Bonds, GICs, high-interest savings | RRSP or TFSA | Interest is taxed fully in non-registered |
| High-growth stocks | TFSA | The growth is never taxed |
| Canadian dividend stocks | Non-registered, once others are full | The dividend tax credit only works outside registered plans |
The Accounts at a Glance
- TFSA: new room each January, unused room carries forward, withdrawals added back the next year. See TFSA contribution room and avoid overcontributions.
- RRSP: deduct now, must become a RRIF by the end of the year you turn 71; see RRSP to RRIF.
- Non-registered: interest fully taxed, dividends with a credit, half of gains taxed; see investment taxes.
TFSA vs RRSP Questions
Is a TFSA or RRSP better?
If your tax rate when you withdraw will be lower than your rate when you contribute, the RRSP is better. If it will be higher, or the same and you value flexibility, the TFSA is better. At equal tax rates they give the same result.
Should a low-income earner use an RRSP?
Usually the TFSA is better. The RRSP deduction is worth little at a low rate, and RRSP or RRIF withdrawals in retirement can reduce income-tested benefits such as the Guaranteed Income Supplement.
Can I have both a TFSA and an RRSP?
Yes. Many people use both, with the RRSP for retirement savings and the TFSA for flexible savings and growth.
What should go in a non-registered account?
Usually Canadian dividend stocks and long-held growth investments, once your TFSA and RRSP are full, because Canadian dividends get the dividend tax credit and only half of capital gains are taxed.
How much TFSA room do I have in 2026?
$7,000 of new room for 2026. Someone eligible since 2009 who has never contributed has $109,000 in total. Your exact room is in My Account.
Sources: CRA, Tax-free savings account; Guide T4040. Checked October 2026. The table is arithmetic, not a forecast; real returns, tax rates and benefit rules change. Income thresholds in the rules of thumb are approximate and based on 2026 Ontario rates.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.