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.
“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 email@example.com. You’ll find other investment tips on his Facebook page or on IG Wealth Management’s Twitter page.
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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.