Since its introduction in 2009, millions of Canadians have opened a Tax Free Savings Account or TFSA, according to the Canada Revenue Agency. But if you’re holding out to make sure it’s really for you, here are a few tips for you.
Lots of advantages and uses: One great TFSA advantage is that there usually isn’t a minimum deposit required to open an account, which makes it easy to pay yourself first. Many people open a TFSA to save for a dream vacation, home renovations and a new car— basically short- or long-term projects. You can also invest your money anyway you choose and you will have access to the funds at anytime, all tax-free. It’s also worth noting that your withdrawals won’t compromise your eligibility to receive federal benefits like the Guaranteed Income Supplement, Employment Insurance or the Canada Child Tax Benefit. Any withdrawals you make can be replaced in the following year.
Does a TFSA make sense as a retirement savings tool? First of all, it’s an excellent retirement savings alternative if you’ve maxed your RRSP contributions. Remember, your TFSA deposits are tax-free and tax-receipt-free. In other words, you will not receive a tax receipt for your deposits nor will your withdrawals be taxed like an RRSP. This means more money will stay in your pocket. So from a taxation point of view, the TFSA is a very creative savings tool.
For more information about the TFSA, speak to your financial advisor. Or to find immediate answers, visit Desjardins Financial Security Independent Network online at http://www.dfsin.ca.
Desjardins Financial Security Independent Network
This article is for general information purposes only and should not be construed as insurance, investment or tax advice. The information contained herein is based on sources and materials believed to be reliable, but are not guaranteed.