🇨🇦 RRSP / TFSA Calculator

How it works

This calculator projects how your retirement savings could grow inside an RRSP or TFSA, given your contributions, expected return, and time horizon. Both accounts shelter your investments from tax while they grow — the difference is when the tax break happens.

The real engine here is compounding: returns earned in early years go on to earn their own returns, so starting ten years earlier often matters more than contributing a bit more. The calculator shows that snowball effect in dollars, which tends to be motivating.

The formula

For regular monthly contributions: future value = PMT × [((1+r)^n − 1) ÷ r], where PMT is the monthly contribution, r the monthly return, and n the number of months. An existing lump sum grows as PV × (1+r)^n. On the rules side: RRSP room each year is 18% of your earned income up to the CRA annual maximum (minus any pension adjustment), and contributions for a tax year can be made until the first 60 days of the following year — usually early March.

Worked example

Contributing $400 per month at a 6% annual return (0.5% monthly) for 25 years: n = 300 months, and (1.005)^300 ≈ 4.465. Future value = $400 × [(4.465 − 1) ÷ 0.005] = $400 × 693 ≈ $277,200. Your total contributions were only $120,000 — the other $157,000 is compounding doing the heavy lifting.

Frequently asked questions

Should I choose an RRSP or a TFSA?
Rough rule: high tax bracket now and lower in retirement — the RRSP's upfront deduction wins. Modest income now — the TFSA's flexibility and tax-free withdrawals usually win. Many people use both.

What happens if I overcontribute?
The CRA allows a $2,000 lifetime buffer, but beyond that you pay a penalty of 1% per month on the excess until it is withdrawn or absorbed by new room. Track your limit on your CRA notice of assessment.

What does it cost to withdraw from an RRSP early?
The bank withholds 10% on withdrawals up to $5,000, 20% up to $15,000, and 30% above that — and the full amount is added to your taxable income for the year. TFSA withdrawals have no tax or withholding at all.

A tax deferral, not a tax exemption

An RRSP does not make tax disappear. It moves the tax bill from a year when you are earning, and probably in a higher bracket, to a year when you withdraw, ideally in retirement at a lower rate. The contribution refund feels like a bonus, but economically it is the government returning tax you prepaid on money that was never fully yours to spend. That is why an RRSP dollar and a TFSA dollar are not the same size: the RRSP dollar still has a tax claim attached to it.

The strategy follows from that. Contribute in high-income years, when each dollar of deduction is worth the most, and draw down in lower-income years. Unused contribution room carries forward indefinitely, and you can even contribute now but save the deduction itself for a later, higher-income year. Your actual room is printed on your CRA notice of assessment and shown in CRA My Account; rely on that figure, not on memory.

A worked example

Say you earn a $95,000 salary in Ontario. Your new RRSP room for the year is 18% of earned income, which is $17,100, assuming it sits below the annual dollar cap. You contribute $10,000. At an Ontario marginal tax rate of roughly 29.65% for that income range, the deduction saves you about $2,965 in tax, which typically arrives as a larger refund.

Now suppose a promotion will lift your income to about $125,000 next year, where the combined marginal rate is roughly 43.41%. Claiming the same $10,000 deduction in that year would save about $4,341 instead, roughly $1,376 more. The money can go into the RRSP and start growing tax-sheltered right away; only the deduction waits. Whether the wait is wise depends on how certain the raise is, and how much you value the refund today.

Watch out for these RRSP traps

• Early withdrawals are doubly expensive. The amount is taxed as income that year, withholding tax of 10% to 30% is skimmed at the source as a prepayment, and the contribution room is gone forever, unlike a TFSA, where withdrawals restore room the following January.
• Over-contributing draws a penalty of 1% per month on the excess beyond the small $2,000 cushion, and it accrues quietly until you take steps to fix it.
• Low-income savers can be better off in a TFSA first. RRSP withdrawals in retirement count as income and can reduce income-tested benefits such as the Guaranteed Income Supplement, a cost that never appears in the contribution-year math.
• Two legitimate early uses exist: the Home Buyers' Plan lets first-time buyers withdraw up to $60,000 tax-free, repaid over 15 years, and spousal RRSPs can equalize retirement incomes. Both have strict conditions worth reading before you rely on them.
• The account cannot run forever: by December 31 of the year you turn 71, the RRSP must be converted, typically to a RRIF, or cashed out and taxed in full.

Frequently asked questions

Should I contribute to an RRSP or a TFSA first?

Compare your tax rate now with the rate you expect when you withdraw. If your income is high today, the RRSP deduction is valuable now, so it often wins. If your income is low or early-career, the TFSA usually wins, and the RRSP room keeps carrying forward. An employer matching contribution beats both decisions, so take the match first.

What happens if I take money out of my RRSP early?

The withdrawal is added to your taxable income for that year, and tax is withheld at the source, 10% to 30% depending on the amount, as a prepayment toward the final bill. The bigger cost is permanent: unlike a TFSA, the contribution room is never restored. Early withdrawals therefore shrink your retirement shelter for good.

How do I find out how much RRSP room I have?

Your CRA notice of assessment prints your available deduction limit after you file each year, and CRA My Account shows the same figure online. Room grows by 18% of earned income annually, up to a dollar cap, minus any pension adjustment, and unused room carries forward. Trust the CRA figure over your own running total.

What is the Home Buyers' Plan?

It lets eligible first-time buyers withdraw up to $60,000 from their RRSPs, tax-free, toward buying or building a qualifying home. The money must be repaid over 15 years, starting the second year after the withdrawal. Any scheduled repayment you miss is simply added to your taxable income for that year instead of going back into the plan.