Many people dislike RRSPs, yet love TFSAs. Those people would be surprised to know that the after-tax outcomes of both plans are nearly identical over long periods of time. 

Let's break it down. 

Earned income: $130k
Marginal Tax Rate: 43.41%
Province: Ontario
Contribution: $7,000

Many people go wrong in their analysis of the two plans by comparing $7k in an RRSP to $7k in a TFSA. You actually have to look at the net cost of contribution. IE, how much pre-tax money does it take to contribute $7k to my TFSA vs. RRSP? 

To contribute $7k to a TFSA, you need to earn $12,369 in employment income. 

To contribute $7k to an RRSP, you only need to earn $7k in employment income. Why? Because you get your tax back on contributions. 

Now, this may not appear to be real life to people as you would rightly point out that in both scenarios, you would have already paid the tax on the $12,369 to end up with $7k left to invest. 

This is where you can take advantage of an RRSP loan if appropriate. Here is how this strategy works. 

You know that it costs $12,369 to contribute $7k to a TFSA, but you also know that if you want to defer the tax on your contribution truly, you should contribute $12,369 to an RRSP to take advantage of deferral fully. 

The problem is that you only have $7k lying around. 

If you were to borrow the remaining $5,369 from a line of credit in Feb of 2024, making your total contribution $12,369, you could file your taxes in March and get a tax refund by April or May. 

The math: 
$7k after-tax contribution
$5,369 loan contribution
$12,369 total contribution
Tax refund: 12,369*43.41% = $5,369.38 refund
Pay off the loan with the refund
Cost of RRSP: $7k

(You could also borrow from your TFSA to do this, but if you do it, it's better to do it in December of the year before to regain the contribution room immediately in the new year so you can re-contribute the refund. 

Ok, so we now see that a $7k TFSA contribution is actually equal to a $12,369 RRSP contribution. 

Now we can get to the real comparison. Is it better to invest $7k in a TFSA over time, or $12,369 in an RRSP over time? Which has the higher after tax outcome?

Let's run the numbers:

1-time contribution of $7k to TFSA vs $12,369 to RRSP
Rate of return: 6.5% net of fees
Time horizon: 30 years
Assumed withdrawal marginal tax rate in retirement: 43.41% (Trying to make this as even as possible even though the marginal rate is very likely to be lower as there is no more employment income)

Value of TFSA: $46,300.56
Pre-tax value of RRSP: $81,813.10
After-tax value of RRSP: $46,298.03
Cost of borrowing for 3 months while waiting for a refund if doing the loan strategy: $107.38
After-tax and interest charges value of RRSP: $46,190.65

If you are in a lower tax bracket in retirement (likely scenario), the RRSP beats the TFSA. 

Lower tax bracket scenario:
Assumed Tax bracket: 37.91%
RRSP net after-tax value: $50,797.75
TFSA Value: $46,300.56

The lower tax bracket scenario is the likeliest outcome as we have more control over when we take taxable income and can use things like income splitting after age 65. Also, we are withdrawing a pool of taxable assets like RRSP, RRIF, Pension, CPP etc, non-taxable assets like TFSAs, and partially taxable assets like non-registered accounts instead of strictly earning employment income, which will likely result in a lower overall tax bill even on the same net level of spending.

Remember, borrowing to invest has risks as it can amplify losses. The interest charges to borrow to invest in registered assets are not deductible. Even though the length of time to borrow is short which decreases the risk, always get professional advice before enacting strategies you read about online.