The TFSA’s 10th Anniversary

by Achieva Financial
Aug August 08

This year, the Tax Free Savings Account (TFSA) celebrates its 10th anniversary. In this time, the contribution limit has grown from $5,000 to $63,500, assuming you were eligible for the TFSA since 2009.

Since its inception, the TFSA has been a great vehicle for investors to grow their funds tax free, with no penalty for withdrawals. When withdrawals are made, investors re-gain that contribution room in the next calendar year. It has become a major part of Canadian savings strategies, with people in all age groups taking advantage of the benefits the TFSA has to offer. Millennials frequently use it earlier in their careers when their income is not high enough to see the benefit of large RRSP contributions, and other generations are frequently using it as part of their retirement savings strategy.

The TFSA as Part of your Retirement Strategy

According to census data, 40.4% of Canadian households are saving for retirement using a TFSA. Because your TFSA withdrawals are not taxed and have no impact on income-tested government benefits, it is a good idea to make TFSA contributions part of your retirement strategy. Once you’ve retired, you may wish to deplete your TFSA before converting your RRSP to a RRIF in order to preserve these income-tested benefits, while also maximizing the tax sheltered returns within your RRSP.

Want to use your TFSA as a longer term savings vehicle? A GIC ladder strategy is a great way to maximize your longer-term TFSA savings.