Tax-free Savings Accounts

A tax shelter for everyone

We have all heard the term “tax shelter” but many assume it something only for the very rich.  A tax-free savings account (TFSA) is a tax shelter that everyone over 18 can use to grow their wealth and it is easy to get started.

It’s more than just a savings account

Despite its name, a tax-free savings account is more like a tax shelter in that you can put a variety of investments into your TFSA and protect all of them from tax.  Some of the types of qualified investments that can be put in a TFSA include:

 

 

As these investments grow you are not taxed on that growth.  In fact, if you eventually use your TFSA to fund your retirement, those funds don’t count as income and are not taxed.

It’s a flexible way to grow your wealth

A real benefit of a TFSA is that you can withdraw funds from it at any time and not be taxed on that withdrawal. You can then repay the amount you withdrew on January 1st of the following year plus contribute the maximum allowed by the CRA for that year and any unused contributions from previous years if you wish.  So you are not penalized for withdrawing funds and you can always maximize your contributions.

You can make it automatic

YCU can set up a pre-authorized contribution plan (PAC) and transfer as little as $25 from any of your other accounts to fund your TFSA.  Many members maintain a high interest savings account and then transfer funds to their TFSA when it comes time to maximize their contributions for the year.  Either way, you always have funds invested in your TFSA that are tax-sheltered.

There are many strategies for using a TFSA and we know all of them.  Talk with one of our investment experts and get a Tax-free Savings Account working for you.

 

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