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Yes – a TFSA can work for you

The Tax - Free Savings Account (TFSA) has been called the single most important personal savings vehicle since Registered Retirement Savings Plans (RRSP). Is the TFSA really that good – and should you have one? The answers are yes and yes – but only if you are just starting out in life, retired or anywhere in between. Is that you? Then here’s why you should have a TFSA.

Tax-free growth

As a Canadian over the age of 18, you are eligible to save in TFSA investments that grow on a tax-free basis.

Tax-free withdrawals

You can make TFSA withdrawals at any time for any reason – and the money you withdraw is tax free.

Make the most of your contribution room

Your annual contribution limit includes the total of the withdrawals made in the prior year. And if you don’t use all of your contribution room right away, it accumulates year after year – fill it at any time you choose. By the way, a contribution to investments held within a TFSA does not affect RRSP contribution room.

Investment flexibility

Investments that are TFSA eligible are virtually the same as those available for investments held within RRSPs, including mutual funds, money market funds, Guaranteed Investment Certificates (GICs), publicly traded securities, and government and corporate bonds.

Personal financial flexibility

A TFSA works well for short- or long-term financial goals such as:

  • A ready source of emergency funds.
  • Saving for a new car, cottage or dream vacation.
  • Saving for the down payment on a new home or starting your own business.
  • Reducing taxes on your non-registered investments.
  • Adding to your retirement savings.
  • Adding to education savings beyond RESPs.
  • Splitting income with your spouse to minimize taxes.
  • And TFSA withdrawals don’t affect your eligibility for income-tested federal benefits such as Old Age Security (OAS).

There are other ways in which a TFSA could work for you. Your professional advisor can take a close look at your personal situation and help you get the most from a TFSA and every other element in your overall financial plan.

Reviewed: April 2015

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.