One $100,000, three accounts, three very different outcomes.
Put an RRSP, a TFSA, and a non-registered account under the exact same conditions — same starting balance, same yearly contribution, same return — and the finish lines are nowhere near each other. The difference is entirely tax. Below you can see where it goes, including the make-or-break choice every RRSP holder faces: reinvest your refund, or spend it.
The scenario
After-tax value at retirement
The RRSP’s growing tax bill
How each account is taxed
TFSA
After-tax money in, nothing but tax-free growth after that.
RRSP
Pre-tax money in (you get a refund), but the CRA taxes every dollar coming out.
Non-registered
After-tax money in, and the growth is taxed along the way and on sale.
The RRSP refund: reinvest it or spend it?
An RRSP contribution is made with pre-tax dollars, so it triggers a refund — roughly your contribution times your working tax rate. A $7,500 contribution at a 28% bracket sends about $2,100 back to you. What you do with that refund decides whether the RRSP is brilliant or mediocre:
Reinvest it — put the refund to work (here, in a TFSA) and your true out-of-pocket cost matches the TFSA contributor’s. This is the RRSP working as intended, and it’s how the RRSP can match or beat a TFSA when your retirement tax rate is lower than your working rate.
Spend it — treat the refund as a windfall and the math collapses. You’ve effectively paid full freight for an account that still gets fully taxed on the way out. It’s the most common RRSP mistake, and the bars above show exactly how much it costs.
A note on the starting $100,000: a dollar inside an RRSP isn’t worth a dollar inside a TFSA — the RRSP dollar still owes tax. That’s why, even before the refund decision, the TFSA’s opening balance quietly carries more real, after-tax value. The shaded area in the chart is that deferred tax, growing right alongside your savings.
Side-by-side at retirement
| Account | Ends with | Tax owing | You keep |
|---|
Assumptions & sources. The non-registered figure assumes buy-and-hold growth taxed as a capital gain on sale (50% inclusion) at your retirement rate — its best case; dividend- or interest-heavy holdings would be taxed harder each year. RRSP withdrawals are taxed at the retirement bracket you select; the reinvested refund is assumed to grow tax-free in a TFSA. Tax rates are 2026 combined BC + federal marginal rates (TaxTips.ca); the default retirement income reflects the average total income of Canadians 65+ (Statistics Canada, Canadian Income Survey 2023). A simplified model that ignores OAS clawback, RRIF minimums, CPP, and contribution-room limits.
Which account is right for your dollars?
The right mix depends on your income now versus later, your room in each account, and what the money is for. That sequencing — RRSP vs TFSA vs taxable, and in what order — is exactly the kind of question we help business owners and professionals work through.
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