Les CELI, pour bâtir votre avenir sur du solideAugust 23, 2016

TFSAs: Build Your Future on Solid Ground

It is not always easy to put money aside. Wages are not always at the same level as our desires, forcing us sometimes to make difficult choices or put aside more ambitious projects. However, there is a solution to make your assets grow more quickly ... and tax free at that. What is the name of this solution? TFSA!

What Is a TFSA?

A tax-free savings account (TFSA) is a type of registered savings plan that allows you to earn revenue from investments (interest, dividends, capital gains, etc.) while remaining immune to income tax. In a way, it is a complement to other registered plans, such as RRSPs and RESPs. Since withdrawals from a TFSA are not taxable, such accounts can be a very convenient way to put money aside for short, medium, or long-term projects.

The Main Features of a TFSA

Anyone aged 18 or over is eligible for a TFSA. The maximum deposit amount had been $5,000 until 2012 and was raised to $5,500 in 2013. Eligible investments in TFSAs are generally the same as RRSPs, with the main advantage that withdrawals from the plan are not taxable.

For withdrawals, you can establish new deposit limits for the subsequent year. If you have not contributed for a year, your unused contributions will be carried forward to the following year. Since there is no upper age limit for a TFSA-type plan, you can start contributing at any time.

Is a TFSA Right for You?

TFSAs can be beneficial to many people, including:

  • Low-income people: benefits based on your income will not be affected by withdrawals from your TFSA. So you can continue to receive your benefits while enjoying the advantages of a registered plan.
  • High-income people: if you have RRSPs or RESPs and have already contributed the maximum amount for these plans, TFSAs can help you save more.
  • Elderly people: since the maximum age for contributing to RRSPs is 71, TFSAs can help you earn extra income during your retirement or become a new savings plan to replace your RRSPs.
  • Middle-aged adults: savings sheltered from taxes may allow you to create an emergency fund against major contingencies, renovations, or even to increase your funds for the education of your children.
  • Young adults: after graduation and entering the labour market, this type of plan is a great way to save your money to purchase a first home, a car, or prepare another expensive project (marriage, travel, etc.).

For more information on TFSAs and to know what type of plan would be best suited to your financial situation, contact your financial adviser today. Remember: it's never too late to build a better future.

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