As of next year, Canadians will be able to save an extra $500 in their tax-free savings accounts.
The Conservative government has made the announcement, raising the TFSA contribution cap to $5,500 from $5,000 as of 2013. The savings vehicles are popular with Canadians because any investment gains made are not taxed.
“Many younger clients, those under the age of 45, do not have TFSAs because they are too busy trying to pay down their mortgage and save for retirement, as well as their children’s’ education,” says Mandy Baker, wealth builder for women and young professional families.
The story is different among the 45- to 65-year-old crowd, where TFSAs should be a core part of long-term financial planning.
“You should be maximizing these, alongside your RRSPs, because pensions are hard to find these days and are nowhere near what they need to be for retirement savings,” Baker said.
When the TFSA was introduced in 2009, government said it would increase the original $5,000 limit in $500 increments tied to inflation.
“2013 will be the year in which the first $500 increment takes effect,” a press release said.
The federal Conservatives had at one point proposed to double the TFSA contribution limit to $10,000 once the deficit was eliminated. But Finance Minister Jim Flaherty’s most recent fall economic forecast pushed back Ottawa's timeline for erasing the federal deficit until 2016-2017.
"While $500 extra savings in one year will not be a material amount when it comes to short-term savings for most Canadians, this will ensure that the TFSA limit will keep up with inflation and will make an impact on the overall amount saved on a long-term basis,” Baker said.
For further information contact Baker of Investors Group Financial Services at (250) 338-7811 or firstname.lastname@example.org.