TFSAs are more powerful than you think
Lisa opened her Tax-Free Savings Account (TFSA) at 23 years old in 2009, the year TFSAs were first introduced to Canadians, and set up bi-weekly contributions to the account from her pay cheque.
The representative at her financial institution explained that it was a great vehicle to save money for short-term goals because she could withdraw the money at any time, tax-free, and her contributions would be automatic. Out of sight, out of mind, he said.
What Lisa didn’t know and wasn’t told at her financial institution is that TFSAs allow for a range of investment options in addition to cash contributions, such as guaranteed investment certificates (GICs), bonds, stocks, exchange-traded funds (ETFs), mutual funds and options.
Missing this critical piece of information, Lisa saw no real growth in her TFSA aside from her own contributions. Many investors like Lisa don’t know that a TFSA is a registered investment account, like an RRSP, where your earnings from qualified investments can grow tax-free. For this reason, a TFSA is not only a great short-term savings vehicle, but can work as a retirement savings solution because, unlike an RRSP or RRIF, withdrawals from a TFSA are always tax-free and you can contribute to the account long into your retirement years.
Don’t put your financial future out of sight, out of mind. Talk to an Assante advisor today, like Lisa did, about the advantages of using your TFSA as part of a comprehensive plan for retirement and how to maximize the tax benefits and investment options of this type of account.
The information provided is for illustrative purposes only. It is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances.