What’s a TFSA?
Tax free savings accounts were established by the federal government in January 2009 to encourage Canadians to save money. While it is called a “savings account”, it is not in fact something you need to set up through your bank or credit union. Like the now traditional RRSP’s this new tax instrument can have the same variety of investments included. You need to find investments that can provide a good rate of growth in order for a TFSA to have value. Traditional savings accounts are not likely to provide the growth you need to make the TFSA effective.
The savings limits are cumulative beginning at age 18. In 2020 the limit is $6,000. If you have never contributed to a TFSA you can deposit a total of $75,500. Unused TFSA room rolls over from one year into the following year.
Similar to the RRSP, the growth on the account is not taxed. The key and exciting difference about the TFSA is that the growth on the account is never taxed and neither are the contributions. You may also withdraw money at any time from the TFSA. You can replace the money that you withdrew in the following year, should you wish to do so.
Because the TFSA is tax neutral, withdrawal from the account will not impact on any of your old age security benefits.
For more information about the tax-free savings accounts please call 604-589-4884 or e-mail Ayoba@telus.net.