Are you utilizing your Tax Free Savings Account as you should?

Dawn Luhning |

Now that RRSP season is over (the deadline for a 2016 contribution was 1 March), it's time to think about your Tax Free Savings Accounts (TFSA). As an advisor, I can help you minimize taxes. By utilizing the TFSA, I can actually help you avoid some tax. 

Doesn't that sound like a good idea?

If you've never contributed to a TFSA before today, you have $52000 in contribution room.  $52000 in room to allow your money to grow in a tax free environment. What you invest in, inside the TFSA account, is completely up to you. It's like a shoe box and you can put any type of investment inside the shoe box - GICs, mutual funds, segregated funds, etc.

I believe that every Canadian should have a TFSA account. It is a great way to save further for retirement, on top of your RRSPs and pension plans, if you have them. It's also a great place for short term savings like a vacation or other purchase you've been looking at...

A few things to watch for with the TFSA though. If you are maxed at the $52000 level and you want to redeem some funds, let's say $5000 today, you cannot contribute those funds back until the following calendar year. You never lose the contribution room on this type of an account. You just have to watch when you contribute it back to the account. An advisor can help you keep track of the contribution room/withdrawals etc. Another issue that I've ran into with clients is when there are TFSAs at various financial institutions. There is a risk of over-contributing to the account and being charged penalties by CRA. I recommend that your TFSA is held with one financial institution for this reason.

Taxes are inevitable. If you're making money, you're paying taxes. If you're not utilizing the TFSA, you're missing out on one small opportunity to not have to pay taxes.

Book an appointment with me to discuss your TFSA.