At Insightful Wealth Group, we strive to never leave a stone unturned when it comes to identifying ways of keeping more of your investment earnings where they belong – with you. While we regularly educate our clients on Tax Free Savings Accounts, we thought now would be a good time to provide a little refresher on TFSAs and why they are good for you.
Tax Free Savings Accounts were introduced by the Federal Government in 2009 to complement existing registered savings plans like RRSPs and RESPs. They allowed individuals living in Canada that are age of majority to invest up to $5500 per year with all investment returns and withdrawals not subject to tax. Unlike RRSPs, the contributions you make are not tax deductible. Contrary to how they may appear. you are not restricted to low yielding savings accounts; there are a large variety of investment options available depending on your personal risk level or future needs for the funds. The yearly amount has since been raised to $10,000. While $10,000 per year may not seem like a large investment, consider a couple who presently have no TFSAs would be eligible to invest $82,000 between their accounts. This equals a lot of investment income not subject to tax.
TFSAs are a great investment option for both short and long-term savings goals. Given that money which is withdrawn can be put back into the account in future years, TFSAs are a perfect place to keep your savings for a large purchase. Of course they are also a good way to invest additional funds to grow for your retirement needs as withdrawals will not affect OAS payments.
There are even times when a TFSA is a better choice than RRSPs. Each has its own advantages, disadvantages and uses. Outlined below are the features, benefits, and key differences of RRSPs and TFSAs.
At Insightful Wealth Group, we believe TFSAs can be an important part of your overall investment strategy. Regardless of whether you have a TFSA account (or many at various institutions) or have not yet opened one, we encourage you to call or stop by to visit us and discuss how to best utilize TFSAs for your personal situation. We can assist in opening or transferring your current Tax Free Savings Accounts as well as provide recommendations on how to invest your TFSA funds to meet your goals.