Short answer
An RRSP lowers your tax now and is taxed when you withdraw. A TFSA gives no deduction, but growth and withdrawals are not taxed and the money stays flexible. If your income is higher now than you expect in retirement, the RRSP often helps more. Many people use both, depending on their room and goals.
Next step: Use the RRSP refund estimator at https://ironmarkfinancial.ca/calc-rrsp-refund.html to get your own number. It is no-cost and takes about two minutes.
How does an RRSP work?
You deduct RRSP contributions from your income, which can lower your tax for the year. The money grows inside the plan, and you pay tax on withdrawals as income.
For 2026, the RRSP dollar limit is $33,810. Your actual room is the lesser of that amount and 18% of your earned income from the previous year, plus any unused room carried forward and adjusted for pension contributions. The CRA sets this out on its limits page.
How does a TFSA work?
You contribute money you have already paid tax on. Growth in the account is not taxed, and withdrawals are not taxed either. The 2026 TFSA dollar limit is $7,000.
- Unused room carries forward from earlier years.
- If you withdraw money, that amount is added back to your room on January 1 of the next year.
- If you contribute more than your room, you pay tax on the excess at 1% a month.
How do I decide between a TFSA and an RRSP?
- Is your income higher now than you expect it to be in retirement? If so, the RRSP deduction may help you more now.
- Might you need the money before retirement? A TFSA is easier to use for goals along the way.
- Does your employer match contributions to a group RRSP? If so, the match is part of your pay, so many people start there.
- Are you saving for a first home? The FHSA is another account to look at.
- Do you have the room? Check your RRSP room on your CRA notice of assessment and track your own TFSA room.
What should I do with my RRSP refund?
An RRSP refund is money back from the tax your contribution lowered. Putting that refund back into your TFSA or RRSP is one way to keep the cycle going. Our RRSP refund estimator shows a rough amount using 2026 tax rates.
Is one account better for everyone?
The truth is that neither account is better for everyone. They do different jobs, and the best choice often changes over your life. If your situation is complex, a licensed professional can help you decide.
Where do I find Ontario tax rates?
Your tax rate depends on your income and province. The CRA publishes current federal and provincial tax rates, including Ontario's.
Frequently asked questions
What is the TFSA limit for 2026?
The CRA lists the 2026 TFSA dollar limit as $7,000. Your total room also includes unused room from earlier years.
What is the RRSP limit for 2026?
The 2026 RRSP dollar limit is $33,810, according to the CRA. Your actual room is the lesser of that amount and 18% of last year's earned income, plus carry-forward room and pension adjustments.
Can I contribute to both a TFSA and an RRSP?
Yes. They have separate room, and many people use both.
Do I pay tax when I take money out of a TFSA or RRSP?
You do not pay tax on TFSA withdrawals. RRSP withdrawals are added to your income and taxed.
What happens if I put too much in my TFSA?
The CRA says an over-contribution is taxed at 1% per month on the excess. Check your room before you contribute.
What is the fastest way to get my own number?
Use the RRSP Tax Refund Estimator at https://ironmarkfinancial.ca/calc-rrsp-refund.html. It answers the question: How much could I get back at tax time from an RRSP contribution? It is no-cost with no obligation.
Sources and further reading
- RRSP and TFSA dollar limits by year (Canada Revenue Agency)
- RRSPs and related plans (Canada Revenue Agency)
- RRSPs and other registered plans for retirement, guide T4040 (Canada Revenue Agency)
- Before you contribute to a TFSA (Canada Revenue Agency)
- Calculate your TFSA contribution room (Canada Revenue Agency)
- First Home Savings Account, FHSA (Canada Revenue Agency)
- Current year tax rates (Canada Revenue Agency)
Figures were checked against these pages on October 26, 2026. Limits and benefit amounts change, so confirm the current numbers with the source.
Related guides and tools:
This article is general education, not personal advice. Rules can change, so check the official sources above. In Ontario, life insurance quotes are prepared by a licensed life insurance agent.
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