Is a TFSA right for you?
Whether you’re looking to save for that new kitchen reno, to enhance your retirement income, or for that dream safari (so you can finally see a giraffe up-close), the reasons for investing in a TFSA are vast and personal. (Although who wouldn’t love to see a giraffe up-close?) Here are three of the top reasons why a TFSA may be right for you.
The rainy-day and sunny-day* saver:
There’s more to preparing for the weather than simply having an umbrella.
We all talk about the elusive “rainy day”. And sure, many of us have a savings vehicle—an umbrella—all set just in case. But what happens when we go to use this umbrella, and we get dinged for it? Not cool. A TFSA, on the other hand, is an all-purpose savings account that not only offers the flexibility to save for said rainy day, but it allows savings to build tax-free. And avoid being penalized to use your very own hard-earned umbrella.
* Just as there are rainy-day savings, so too can we have sunny-day savings. A tucked-away stash at-the-ready for purchases that make life all the more special.
The life-stages planner:
Go from milestone to milestone with ease.
While life has a way of revealing itself, there are certain inalienable truths that—at one time or another—will resonate with each of us. The first car. The education. The wedding. The new home. The home renos. The retirement. And then, just when you think you’ve covered them all, a new set of life stages reveal themselves. Your children’s first car. Their education. Their wedding. And on it goes. Because you can contribute $5,500* each year, and because you can carry over unused contributions from previous years, a TFSA is an ideal savings vehicle to accrue funds. And an ideal means to top-up savings for your golden years, as well. You can withdraw your money when you need to and you can re-contribute the money you withdraw. Withdraw smaller bits (think: tuition) or one lump sum (think: daughter’s wedding), and incur absolutely no tax penalties.
The retired saver:
Just because you’ve retired, doesn’t mean your investments should.
Planning for your retirement requires that all kinds of decisions be made. And, some of these can feel overwhelming. Especially given that you want your savings to stretch as far as they possibly can. Well, if you’ve got surplus funds you want to save for later in retirement, a TFSA provides you with an ideal investment vehicle. With a TFSA, you can tax-shelter your non-registered funds, up to $5,500* annually, as income earned in TFSAs is tax-free. And, not only is there no age threshold at which a TFSA must be converted to a taxable account, it gets better. Any withdrawlas made from your TFSA will not impact income-tested federal government benefits like the Guaranteed Income Supplement, Old Age Security, and the Age Credit. So you can scratch that concern off your list.
TFSA tip
Ah, the tax-saving joys of income-splitting! You can give funds to a lower-income spouse to contribute to their TFSA.
Let’s chat
Whether you have limited RRSP contribution room, expect to receive income-tested benefits/credits, expect your marginal tax rate to increase when you retire, or you need access to your funds before retirement, a TFSA is likely to be beneficial for you. Scenarios for saving and investing are as unique as your fingerprint and we take tremendous pride in helping you come to the best decisions. So, when you are ready to discuss strategies for saving, please contact us at 604-877-7000 or visit your nearest branch.
* On December 7, 2015, the Minister of Finance tabled a ways and means motion which contained provisions to return the TFSA annual contribution limit to $5,500 from $10,000. The proposed changes will take effect on January 1, 2016 (subject to Parliamentary approval). The new TFSA dollar limit will be indexed to inflation for future years.
The Canada Revenue Agency has developed several questions and answers to explain the new provisions related to the TFSA dollar limit.