Long the neglected “younger sibling” of the Registered Retirement Savings Plan, the Tax Free Savings Account or TFSA has grown up to represent a critically important savings and investment opportunity for Canadians!
There are currently over 18.2 million Canadian TFSA’s containing a combined, mind-boggling $233 billion in assets. This means nearly half the population is missing out on the benefits of a TFSA.
What you need to know about TFSAs:
- Tax Free Savings Accounts are simple in nature and as the name implies, are accounts meant to shield growth earned in the account from attracting tax. Essentially the interest, capital gains and dividends earned are Tax Free!
- Anyone over the age of majority (18 in Ontario) can open a TFSA
- Contribution room accumulates every year of eligibility and anyone can contribute regardless of income (those 18 or older as of 2009 have accumulated $63,500, eligibility to date)
- You can withdraw any amount any time, tax free and that amount can be added back to contribution eligibility January 1 the very next year
- There is no time limit, they are for life, they do not need to be closed or converted for income – unlike RRSPs.
What is nice to know about TFSAs:
They are flexible – unlimited tax free withdrawals, no loss of contribution limit and no time limit to the life of a TFSA
They are multi-purposed – the funds can be used to meet a variety of financial goals
They are compounding – as there are not taxes levied, there is a larger benefit from the power of compounding or earning income on income
So, what are you waiting for? Celebrate the Tax Free Savings Account’s Birthday by opening one!
This article is supplied by Elizabeth O’Connor, an Investment Advisor with RBC Dominion Securities Inc. (Member–Canadian Investor Protection Fund). This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article.
Elizabeth O’Connor can be reached at 705-789-2100 or [email protected]
Whether you are looking for a full time, full service financial advisor or seeking expert financial advice as a second opinion, call Elizabeth. With offices in Haliburton, Huntsville and Bracebridge, Elizabeth works closely with clients in cottage country from the lakes and surrounding towns.
Elizabeth O’Connor is an Investment Advisor with RBC Dominion Securities, which is a member of the Canadian Investor Protection Fund. 705-789-2100