Being such a new program, many Canadians do not fully understand the long-term power of the TFSA tax savings opportunities. It is much more than just an opportunity for saving — it can be a powerful and incredibly effective tool for an overall investment strategy. Here are some ways that you can use the TFSA for your long-term benefit and financial empowerment.
With the lifetime contribution room of a TFSA now at $52,000 for most people, TFSAs are now a serious portfolio and investment planning alternative to making RRSP contributions. So which is better you ask? Well, it depends…
If you are a Canadian with significant assets and savings then maximizing your TFSA makes sense as a retirement income planning strategy. The income from it during your retirement years is non-taxable and will not trigger any Old Age Security clawback which starts at $74,780 in 2017.
It is next to impossible to know when you might be impacted by a financial emergency; therefore, it is important to be prepared for something unforeseen in the future. Most people have heard the saying about saving money for a "rainy day". With the right forward planning, there is a great chance of being able to avoid a financial crisis should this present itself at a later date.
How much emergency funds are enough?
Investors who start saving at a young age automatically have one of the most powerful assets on their side: Time. To get ahead financially, young adults should beware of some of the most common pitfalls discussed below that can all too easily sabotage a financial success strategy.
The TFSA is a registered savings account that allows taxpayers to earn investment income tax-free inside the account. Contributions to the account are not deductible for tax purposes, and withdrawals of contributions and earnings from the account are not taxable.
Any individual (other than a trust) who is resident in Canada, is 18 years of age or older, and has a valid SIN, is eligible to establish a TFSA.
When Sophia first heard the term Tax-Free Savings Account (TFSA), the first thing that came to her mind was a low- or no-interest account at a bank. She soon learned that just about every investment option available to her in an RRSP is also available to her in a TFSA plan.
The Tax-Free Savings Account (TFSA) was introduced in the February 2008 Federal Budget and will be available January 1, 2009. It is touted by the Government of Canada as 'the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP)' in 1957. As always, there are some rules:
