The TFSA Turns 10

While the tax-free savings account is still simple to use, how people view it has changed.

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Happy 10-year anniversary to the tax-free savings account. That’s right, the TFSA, once a secondary savings account where people would mostly store short-term cash, hit double digits in January and it’s sure grown up over the years.

People have realized that virtually anything that can be held in an RRSP can be held in a TFSA. That’s stocks, bonds, mutual funds, more long-term investments – you can put long-term retirement assets into it.

As the years have gone by, the TFSA’s annual dollar limit has grown. In 2013 it rose to $5,500 and, as of January 1, 2019, it’s $6,000. (It did jump to $10,000 in 2015, but went back to $5,500 the following year.) The current total contribution room for those were at least 18 years old in 2009, Canadian residents and who have never used a TFSA is $63,500. That’s a lot of room to work with.

With 10 years having passed since the introduction of the TFSA, we wanted to know if Canadians are thinking about these accounts differently than they once did. We spoke with Jonathan Braun, Manager of Tax and Estate planning at IG Wealth Management.

  • How do people view the TFSA today?

    When it first came out most people saw it as another savings account – a literal bank savings account – because it had savings account in the title. So, they were a little confused and thought it was limited to just savings. Over the years, people have realized that virtually anything that can be held in an RRSP can be held in a TFSA. That’s stocks, bonds, mutual funds, more long-term investments – you can put long-term retirement assets into it.
  • Now that total contribution room has increased to more than $63,000, has the perception of the TFSA as a short-term place for cash changed?

    It has, or at the very least, people now have more flexibility. When the contribution limit was only $5,000, you weren’t saving a lot in tax. Now that you have $63,000 of room, the tax savings on investment earnings start to make a difference. As well, because it’s a viable option for mutual funds and long-term investing, you can make it a part of your retirement plan. And with a $6,000 limit, which will start creeping up to a larger figure over the next few years, it’s becoming more relevant to a person’s retirement.
  • How would high net-worth individuals use a TFSA?

    Not much has changed there. Most high net-worth individuals would probably max out their RRSP first and then max out their TFSA. They’re probably already maxing it out every year – it wouldn’t take much for them to do that. But anyone who isn’t taking advantage of a TFSA, should.
  • Now, 10 years on, what do you like about the TFSA?

    It’s simple and it’s great for people who max out their RRSP and want another place where their money can grow tax-free. Personally, I use it for long-term retirement planning. So, I put in the maximum each year. When I pull it out in retirement, I won’t have to pay tax on any withdrawals, so it can supplement my other sources of retirement income. It’s just another tool people can use to save, and save as cheaply as possible.

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