A Tax Free Savings Account can be an important tool for you in maximizing your Net Income in retirement.
Why your Net Income? Because unlike an RRSP, with a Tax Free Savings Account (TFSA), you don't pay tax on the amount that you have invested -- or any growth in your investments over the years.
The TFSA has been available to Canadians since 2009.
How it works:
- You have to be 18 or older
- If you've never contributed to a Tax Free Savings Account, you will have up to $52,000 in unused contribution room that you can contribute. (It's currently $5,500 per year but has been as high as $10,000 per year in the past.) And it carries forward if you don't use it.
- You don't get a tax deduction (like you do with an RRSP) but you don't pay tax when you withdraw from the plan.
Some key features:
- The TFSA allows for lifetime contributions with no requirements to withdraw at a certain age. This is different from an RRSP, which has a maximum age of 71. Contributions can be made monthly or lump sum throughout the year.
- Any unused contribution room will carry forward indefinitely. Any amounts an individual withdraws from a TFSA in a given year will be added to his or her TFSA contribution room for the following year.
- The TFSA is a great addition to other registered savings options (ie: RRSP, RESP). They will be particularly attractive to members of any existing pension plan. , because the increasing pension adjustment each year continually erodes personal RRSP contribution limits for pension plan members.
Contact us today to take advantage of growing your investments tax free through a TFSA.
Mutual Funds are distributed through Desjardins Financial Security Investments Inc. (DFS Investments)
Tax Free Savings Account (TFSA)
Planning on saving some extra money for a purchase in the near future? Lean how a tax free savings account can help you grow your nest egg.
Registered Retirement Income Fund (RRIF)
When it comes time to draw an income out of your RRSP, how do you do it?