TFSA TIPS
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The document provides 10 tips for using a Tax-Free Savings Account (TFSA) effectively. Some key tips include maximizing annual TFSA contributions, using tax refunds to contribute, allowing investments to grow tax-free for as long as possible without withdrawals, and contributing for a spouse or partner to double the family's annual contribution limits. Expert financial advice can help determine the best strategy for each individual's retirement planning.
TFSA TIPS
- 1. Comprehensive Personal Article Top 10 TFSA Tips Jaffer Hussain Consultant With the introduction of the Tax-Free the effects of tax-free compound 8. If you anticipate that your mar- Savings Account (TFSA), Canadians growth. If you can’t do it all in ginal tax rate will increase at a now have more options than ever January, monthly contributions later date, you may benefit by before to help them save money and can also be effective. saving through your TFSA rather reduce taxes. Below are the Top 10 than making additional RRSP 5. Ideally, you should use your full TFSA Tips you should know: contributions. That’s because the allowable contribution room tax reduction that your RRSP con- 1. Use your tax-refund wisely. Use each year. But if you don’t, you tribution may generate now may the tax refund from your RRSP will accumulate unused TFSA be less than the tax reduction it contributions to invest in your contribution room that can be could generate later on. TFSA for an optimal combination used at a later date. When possi- of growth and flexibility. ble and if it fits your financial 9. Make a contribution for your strategy, strive to maximize your spouse or common-law partner. 2. If you have used-up all of your TFSA contributions. You can contribute to a partner’s RRSP contribution room and are TFSA without affecting your own looking for additional invest- 6. Contributing to a TFSA during contribution room. Income attri- ments, ensure you use-up all of your accumulation years could bution rules which govern RRSPs your TFSA contribution room help reduce claw-backs on do not apply. This can effectively prior to investing in non-regis- income-tested benefits such as double your family’s TFSA an- tered accounts. Old-Age Security and Age Credits nual contributions if one partner when it comes time to withdraw 3. Resist the temptation to dip into cannot afford to make such an retirement funds. Because your TFSA. The TFSA offers investment. returns on investment within a more flexibility than RRSPs and TFSA are non-taxable, they will 10.Get expert help. In most cases, therefore there are fewer barriers not be included as part of your the TFSA should complement to discourage an individual from net income, potentially saving your current retirement strategy, accessing the money. Remember, you money over time. not be the primary focus. To find the longer your investments sit out what’s the best strategy for uninterrupted, the longer you 7. Unlike RRSPs, there is no age you contact an Investors Group may benefit from the positive ef- limit on making contributions Consultant. fects of tax-free compound to a TFSA. In fact, you can growth. Discipline and a clear contribute well into your retire- objective are essential when in- ment years, helping you save for vesting within a TFSA. short-term goals like that dream vacation, a new car or even home 4. Procrastination can be costly, so renovations. The income gener- make your TFSA contribution ated from investments in your early in the year. The sooner you TFSA is tax-free, therefore it will put your money into a TFSA, the not affect your federal income- sooner you stand to benefit from tested benefits such as OAS or Age Credits.
- 2. Comprehensive Personal Article Jaffer Hussain Suite 701 305 Milner Avenue Consultant Toronto, ON jaffer.hussain@investorsgroup.com M1B 3V4 (416) 659-5140 1-800-848-7229 Written and published by Investors Group as a general source of information only. It is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax, legal or investment advice. Readers should seek advice on their specific circumstances from an Investors Group Consultant. Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus before investing. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated. Investors Group Financial Services Inc. ™Trademark owned by IGM Financial Inc. and licensed to its subsidiary corporations. “Top 10 TFSA Tips” ©2011 Investors Group Inc. (03/2011) MP1493