Countless investors are looking forward, and with good reason, to the tax-free savings account, or TFSA, which becomes available beginning next January! This new investment vehicle, which will allow you to contribute up to $5,000 each year, includes great features, including:
- investment income (interest, dividends, capital gains or income trust distributions) generated in this account are tax-sheltered, and
- money withdrawn from this account is tax-free and will not affect your eligibility for federal income-tested benefits and credits, which are based on your income.
Its flexibility meets the requirements of many Canadians aged 18 and up, who will gain from investing in the TFSA, for example:
- young adults or couples with young children (to prepare for the unexpected, using the TFSA as an emergency fund; for a down payment on a home or vehicle)
- high-income workers (to build up additional income in a tax-free environment ahead of retirement)
- retirees seeking to keep their investments growing tax-free; since withdrawals from a TFSA are not classified as income, they do not affect the Old Age Security Pension or Guaranteed Income Supplement.
TFSA serves as a complement to your RRSP
The TFSA, for many investors, will serve as a complement to their RRSP.The following table gives an overview of the differences between an RRSP and a TFSA:
|
|
TFSA |
RRSP |
|
Annual contribution ceiling |
$5,000 |
18% of eligible income, up to $22,000 |
|
Tax-deductible contributions |
NO |
YES |
|
Investment income taxable |
NO |
NO |
|
Withdrawals taxable |
NO |
YES |
|
Option to carry forward unused contribution room |
YES |
YES |
|
Contribution rights recoverable after withdrawal |
YES |
NO |
|
Maximum age for contributing |
None |
71 years |
Assumption Life's TFSA offers the same investment options as those available for an RRSP:
- guaranteed interest accounts (GIAs),
- segregated funds
Talk to your Assumption Life advisor today and find out how you can maximize your savings.To contact a representative near you, go to our section “Need an advisor?” displayed on our home page.
