Should You Consider a TFSA?

Written By Passion Works Digital
A young man and woman in their mid-twenties dressed in casual outdoor clothing take a selfie on rocks with a lighthouse in the background.

A survey by ING DIRECT finds slightly more than half of Canadians have yet to take advantage of Tax-Free Savings Accounts.

The Tax-Free Savings Account (TFSA) is a flexible, registered savings vehicle that allows Canadians over the age of 18 to contribute up to $5,000 annually. Although the contribution is not tax-deductible, any income accumulated in the TFSA is tax-free.

The advantages of a TFSA are:

  • Investment income earned is tax-free.

  • Withdrawals are tax-free.

  • Unused contribution room is carried forward to future years.

  • Withdrawal amounts can be put back into the TFSA in future years without affecting the contribution room.

  • Complements existing registered savings plans like the Registered Retirement Savings Plans (RRSP) and the Registered Education Savings Plans (RESP).

  • Choose from a wide range of investment options such as segregated funds, mutual funds, Guaranteed Investment Certificates (GICs), stocks and bonds.

  • Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security, the Guaranteed Income Supplement, and the Canada Child Tax Benefit.

  • TFSA assets can generally be transferred to a spouse or common-law partner upon death.

Passion Works Digital https://passionworksdigital.com
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