Make the most of your TFSA . . . ASAP!

 In Investments

Looking for some financial advice you can take to the bank?


In my view, the first financial act of 2015 — for any Canadian — should be contributing as much of the annual $5,500 limit into your Tax Free Savings Account (TFSA) as possible.

The TFSA was introduced by the Harper federal government in 2009, and it’s a terrific arrow to have in your financial quiver.


* The TFSA is an excellent savings vehicle, in both the short and long term;

* You pay no tax on your earnings;

* You can carry forward any unused contribution room to future years;

* Any withdrawals from the current year can be added to your contribution limit the following year (be careful about paying back money you withdrew too soon);

* You can use the TFSA to shelter investments that would otherwise be taxed at premium rates;

* Once you retire, any withdrawals from your TFSA are tax exempt, and do not count as income.


Over the past six years, there’s been plenty of debate about which is more advantageous — the TFSA or the RRSP.

Don’t get me wrong. Both are terrific savings vehicles. But if you’re close to retirement, or already retired, here are a couple of things to keep in mind.

First, those tax-free withdrawals you make from your TFSA, once you retire, can help you delay the act of drawing from your RRSP, with that particular income stream being taxable.

Second, you can’t make contributions to an RRSP once you reach age 71. If you are 71 or older now, chances are that you haven’t maximized your TFSA contribution limit — and that means the TFSA is an outstanding avenue for building tax-exempt income for the future.

Canadians taking advantage

Research conducted last fall suggests that nearly half of eligible Canadians now have a TFSA. A Statistics Canada report from early 2014 said that Canadian families held almost $66 billion in TFSAs, averaging about $10,000 per account.

The federal government has recently dropped hints that it may, at some point in the near future, double the annual TFSA limit to $11,000.

This is all encouraging data.

But the bottom line? Use every available penny of your TFSA contribution limit.

In the short term, and the long term, it just makes dollars and sense.


(Want to know more? Book an appointment with me, give me a ring at 403.457.4142, or send me an e-mail so we can follow up with a discussion about your financial future.)


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