As the Tax-Free Savings Account (TFSA) hits its 10th anniversary in Canada, it’s a great opportunity to investigate how it can work to diversify and strengthen your short- and long-term financial plan.
Stu Tunheim, a consultant with IG Wealth Management in Courtenay, appreciates how this simple, yet powerful savings vehicle can fit in with a person’s financial planning.
“I think it’s one of the best tools the federal government has given Canadians over the years. To be a good tool, however, it needs to be used correctly for each individual – that means it isn’t used in the same way for everyone,” he says. “Overall, this account can significantly increase your cash flow later in life and save you a lot in taxes. Make sure it’s incorporated into your plan in the best way for you.”
Stu offers you food for thought about TFSAs:
How much can you invest? – The annual contribution limit for TFSAs has grown since their inception and now stands at $6,000 if you’ve contributed every year. If you’ve never invested in a TFSA, were 18 or older in 2009 and are a Canadian resident, your current total contribution room is $63,500. That’s a lot of room to work with.
Usage has changed through the years – Viewed initially as a place to put extra cash, people now understand that virtually anything that can be held in an RRSP can be held in a TFSA – stocks, bonds, mutual funds, longer-term investments. You can put long-term retirement assets into it.
You’ve got more flexibility – When the annual contribution limit was $5,000, putting your money into a TFSA didn’t save you a lot in tax. But with $63,000 of room having accumulated since they began being offered, the tax savings on investment earnings starts to make a difference. And as a viable option for mutual funds and long-term investing, you can make it a larger part of your retirement plan. Plus, the $6,000 annual limit is expected to creep up over the next few years, making it even more relevant to your retirement.
What happens at retirement? – TFSAs are great for people who max out their RRSPs and need another place to grow their money tax-free. When you pull it out in retirement, you won’t pay tax on withdrawals, so it can supplement other sources of retirement income.
To arrange a chat with Stu Tunheim to talk about how TFSAs can work for you, contact him at 250-338-7811 or via email at stu.tunheim@ig.ca. You’ll find other investment tips on his Facebook page or on IG Wealth Management’s Twitter page.
Investors Group Financial Services Inc.
Trademarks, including IG Wealth Management, are owned by IGM Financial Inc. and licensed to its subsidiary corporations. This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Stu Tunheim is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant.