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The top five things you don't know about TFSAs

Tax-free Savings Accounts, or TFSAs as they’re more commonly known, were introduced to Canadians in 2009. By now you probably know that these are registered accounts where your savings can grow tax free. Yet there are many things you may NOT know about these handy accounts, and this means you could be missing out on a good financial opportunity.

Here are five key points you may not know about TFSAs.

#1. Any Canadian 18+ can contribute

Unlike RRSPs, which allow contributions based on your previous year’s earned income, any Canadian aged 18 or over with a valid Social Insurance Number can contribute to a TFSA. This means you can make a contribution whether you’re working full-time, part-time, or not at all.

Since there’s no age limit on opening a TFSA and making contributions, Canadian retirees and seniors can also open a TFSA to save for specific financial goals. A TFSA can also supplement RRSP or pension income as the investment growth and withdrawals aren’t taxed and they don’t impact any federally-tested income programs. [SOURCE]


#2. Where to find your TFSA contribution room

You may think that keeping track of your TFSA contribution is difficult, but it doesn’t have to be.

If you’ve never contributed to a TFSA, as of January 1, 2017 your TFSA contribution limit is $52,000. [SOURCE]

If, however, you have contributed to a TFSA in the past, track your available TFSA through the Canada Revenue Agency (CRA). You can find your personal TFSA balance and contribution room in the following places:

  • By calling TIPS (Tax Information Phone Service) at 1-800-267-6999
  • Through the CRA’s online MyAccount service
  • By requesting a TFSA Room Statement from the CRA at 1-800-959-8281 [SOURCE]
  • On your Notice of Assessment

It’s important to note that any transactions included in the CURRENT year will not be included – you’ll have to track these through your financial institution.


#3. TFSA investment options

Your TFSA can hold a wide range of investments. This lets you diversify your TFSA savings. And it makes a TFSA a flexible account that you can use to build savings for short, medium, or long-term goals.

Invest in the stock market via your TFSA by buying equity mutual funds, exchange traded funds (ETFs), or stocks. Fixed income investments within a TFSA may include bonds, GICs, or cash. Your financial advisor can help you choose the TFSA investment options best suited to your risk tolerance and time horizon.


#4. What to save for in a TFSA

Use a TFSA to save for anything you like. The flexibility of investment types combined with the withdrawal and contribution rules make it a good savings vehicle for many things.  Grow your emergency fund, or save for an upcoming wedding. Unlike RRSPs, which were introduced to help Canadians save for retirement, and RESPs which help save for post-secondary education expenses, there are no restrictions on your TFSA purposes.


#5. The rules of TFSA withdrawals and contributions

While you may open more than one TFSA, your total contribution across all accounts can’t exceed your TFSA contribution limit, according to the Canada Revenue Agency.

Calculate your TFSA contribution limit is using this year’s TFSA dollar limit, any unused TFSA room from the previous year, and any withdrawals made from the TFSA the previous year. This means that if you withdraw $10,000 from your TFSA one year, the following year you may deposit it back to your account,  in addition to your contribution for that year and any previous unused contribution room. [SOURCE]

To find out more about how a TFSA could help you meet your financial goals, visit your local Meridian credit union branch to speak to an advisor today.