In just a couple of years since it was introduced by the federal government, the Tax-Free Savings Account (TFSA) has become a very popular personal savings vehicle. And with good reason: Who doesn’t like the idea of tax-free savings growth? In fact, the TFSA has been called the most important savings option since the 1950’s launch of Registered Retirement Savings Plans (RRSPs). If you haven’t already hopped on board the TFSA savings wagon, you may be asking yourself these questions: Is a TFSA really that good? Should I have one? Will it work for me? Good questions – here are the answers.
How a TFSA works
Every Canadian over the age of 18 is eligible to save up to $5,000 a year in a TFSA and the investments held within the TFSA grows on a tax-free basis. TFSA withdrawals can be made at any time for any reason – and the withdrawn money is tax-free.
The value of the TFSA eligible investments is increased by making the most of all available contribution room. For example, you can contribute $5,000 a year plus the total of withdrawals made in the previous year. \And all the contribution room you don’t use right away accumulates year after year so you can fill it any time you choose. It’s important to know that contributions to investments held in a TFSA do not affect RRSP contribution room.
TFSAs provide investment flexibility. TFSA-eligible investments are the same as those available for investments held within RRSPs, including mutual funds and money market funds, Guaranteed Investment Certificates (GICs), publicly traded securities, and government and corporate bonds.
How a TFSA works for you
A TFSA is a worthwhile investment option for almost every income earning or retired Canadian because it works so well for both short- and long-term financial goals like these:
– Providing an immediate source of emergency funds.
– Saving for just about anything – from a new car or cottage to a dream vacation.
– Saving for the down payment on a new home or even starting a business.
– Reducing taxes on your non-registered investments.
– Adding to your retirement savings. By the way, TFSA withdrawals don’t affect eligibility for such income-tested benefits as Old Age Security (OAS).
– Splitting income with your spouse to minimize taxes.
To explore these and the many other ways a TFSA can work for you, and to make sure you’ll always get the most from all the elements in your financial plan, talk to your professional advisor.
Call us to find out more about how the team at Investors Group – Halifax can help you prosper now… and over time. (902) 423-8294. www.investorsgrouphalifax.com
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