The Benefits of TFSAs

A person putting money into a piggy bank

As you may be aware, in 2019 the annual contribution limit to your TFSA has been increased to $6,000. This means that, assuming you’ve been 18 years of age or older since TFSAs were introduced in 2009, you have $63,500 in contribution room.

What is a TFSA?

When you invest money in a regular savings account or in your RRSP, you will have to pay taxes on the money you make from your investments. This is not the case in a TFSA; all of your gains are tax-free. Your contribution room rolls over every year if you do not maximize your contribution, which means the amount you can contribute to your TFSA grows each year, regardless of if you make deposits or not.

As well, your TFSA may be worth more than $63,500 if you have well-performing investments, but you can still make contributions as long as you’ve deposited less than $63,500. This is why it is important to track how much money you’re depositing to your TFSA, to ensure you do not accidentally over-contribute, or have room remaining that you are not taking advantage of. It’s also important to remember that if you take money out of your TFSA, if your TFSA is maxed out, you cannot re-contribute those funds until the next calendar year.

How should I Use my TFSA?

Your TFSA is so much more than just a savings account. The TFSA is an excellent account to accumulate and grow wealth.  Members can use their TFSA towards a short-term goal such as saving for a family vacation, and for long-term benefit when built into their overall retirement plan.

Depending on whether your goals are short-term or long-term, there are a variety of investment options you can consider, including GICs, mutual funds, ETFs, stocks and bonds. If you want to invest your TFSA funds in the market with mutual funds, stocks or bonds, Credential Securities at Cambrian has a full team of financial advisors available to help. They'll work with you to choose the right options for your situation and can help you build a full plan to prepare for retirement. Or if you prefer to buy your investments yourself, our online brokerage partner Qtrade Investor lets you manage your investments independently online.