Does your TFSA give you the financial freedom you deserve?

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Investing for Canadians

What is a Tax Free Savings Account?

The purpose of a Tax Free Savings Account or TFSA, was to give Canadians a simple way to save and avoid taxes on the interest and dividends on both growth and the withdrawals from your fund. So this means that when the account grows through market returns, there will be no tax owing on the growth, unlike a traditional RRSP.

And even further when you take the money out of your TFSA it does not trigger any tax that needs to be paid and does not push you into a higher tax bracket when you take the money out. Also it does not affect any of your income tested retirement benefits such as OAS (Old Age Security) or the GIS (Guaranteed Income Supplement) provided by the Federal Government. Due to its tax advantaged status this has proven to be a powerful investment tool for both young investors and retirees alike.

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TFSA Investing

How does a Tax Free Savings Account work?

The tax free savings account was created as an alternative to traditional RRSP investing, and as well to provide Canadians with a more attractive short term investing vehicle, that they can allow to grow and withdraw from, without any taxing penalties, essentially allowing you to grow your money and use it, completely tax free. Sounds attractive, and really it is, and as the TFSA program itself matures, more and more Canadians are seeing the value in this style of investment sheltering.

In the early years of the TFSA there were limits restricting how much you could actually invest in these types of investment vehicles, starting at an initial annual deposit of $5000. But over the last 5 years of the program, and the increase in allowable limits for 2013, one could essentially hold a maximum of $25,500 in their TFSA account. This is now starting to become a viable place to put your money away these days and actually have it make sense. A TFSA works great for both short term and long term savings goals, and normally compliments our investment strategy with our clients.

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Who should invest in a TFSA?

TFSA InvestingIf you are looking for a better return on your short term deposits, and still like the flexibility of having access to your money, then a TFSA should be right for you. Many people enjoy the longer term investing results of their RRSP program, but know that they have little access to the funds, unless they pay a high price in taxes. This is a perfect situation for a TFSA, where you get better performance than bank account returns, and also have a great deal of flexibility in your withdrawal needs, free of any tax. We like to use Tax Free Savings Accounts with both young and old clients, because of their unique needs.

For a young couple, you may need access to cash on a regular basis to cover evolving needs. As a mid-lifer you can use a TFSA to fund fun purchases like cars, boats, or future renovations. And for retirees and near retirees, you can earn a decent rate of return on a savings vehicle that will pay you tax free! A very attractive concept to retirees, who are always looking for tax efficient streams of income.

Millennials, age 20-35

 

A TFSA is an incredible way to start a savings program in tandem generally with an RRSP.

This is what you want to use a TFSA For:

  • saving for a down payment on a home
  • save for the future arrival of a baby and all the costs associated with it
  • a new car purchase
  • renovations on a home
  • going on an annual vacation
  • big screen entertainment system, as so much more…

It is a great shorter term investment vehicle, which allows you to get a better rate of return than a bank account, but still has the same flexibility.

Generation X, age 36-60

 

Gen X’ers have gone through most of the challenges of the Young Savers, and are very happy to see the arrival of the TFSA, and as each year passes, the allowable limit increases providing an even greater opportunity to save for bigger obligations and purchases.

Here are some ways a TFSA can help Gen X’ers

  • down payments on second homes or vacation property
  • fancier second cars
  • bathroom renovations
  • buffer for their children’s educational needs
  • weddings for their children
  • and many, many more obligations that life throws at you.

Baby Boomers & Retirees 61-80

Most Understand, it is not how much money you have in retirement but how tax efficient is that money. Boomers are looking at the TFSA as an opportunity to save in retirement in a very tax efficient manner.

In Retirement a TFSA will help you achieve

  • A supplement to your Retirement Income
  • A place to grow your investments without adding to your tax bill
  • An account for annual of quarterly vacations
  • Guaranteed Income for Life through a GMWB

In Retirement planning, keeping your income is just as important as growing your income, and a TFSA is an excellent way to do that.

The details of a TFSA

  • Maximum contributions started at $5000 per year in 2008, and 2013 the limit was increased to $5500, so if you have never invested before and would like to start the program, the maximum you could deposit in 2017 would be $52,000.
  • If you take $10.000 out of your TFSA this year, next year, you can actually deposit the annual maximum plus this years $10,000, so when you make withdrawals, you are eligible to put that money back next year, without any penalties, so your limit never decreases.
  • Anyone in between the age of 18 to 100 can invest in a TFSA
  • The investment options for a TFSA are as diverse as an RRSP, so don’t let this investment simply sit in a Bank account TFSA, or you are losing out on the greatest benefit of a TFSA, Growth!
  • When you take money out of your TFSA account, you will not pay taxes on that income, and it will not push your current income into a higher tax bracket.
  • All growth on your Tax Free Savings Account is non-taxable, so even as it grows inside your TFSA, you will never have to pay another tax dollar on its growth.
  • If you use a GMWB rider on your Tax free savings account, you can create tax free income for life.

Here is what we can Do for You…

New Investors

We will sit down with you and understand what your Risk Tolerance and Time Horizons are and then devise a plan to maximize any opportunities that are available. Here is how it works,

  • Meet with an Advisor, and understand where you currently are, and where you would like to be.
  • Devise a plan that takes into account your Age, your Investment Amount, and your Comfort with Risk.
  • Match up your needs with one of Canada’s best Investment Companies based on your Profile
  • Set up a monthly Pre-Authorized amount that you feel comfortable with to fund your investment account.
  • Then we monitor your Savings program through our online analysis program.
Current Investors

We will sit down with you and understand what your Risk Tolerance and Time Horizons are and then devise a plan to maximize any opportunities that are available. Here is how it works,

  • Meet with an Advisor, and understand where you currently are, and where you would like to be.
  • Devise a plan that takes into account your Age, your Investment Amount, and your Comfort with Risk.
  • Match up your needs with one of Canada’s best Investment Companies based on your Profile
  • Set up a monthly Pre-Authorized amount that you feel comfortable with to fund your investment account.
  • Then we monitor your Savings program through our online analysis program.

We do not Charge any Additional Fees to our Clients, we are compensated by the Companies whom you invest with…

Call Us Today!

  905-536-0496