By Fidelity Investments
Tax Free Savings Accounts (TFSA) represent a unique way for Canadians to save money and pay less tax. They allow every Canadian resident age 18 and older with a Social Insurance Number to contribute. The annual limit for 2013 has been raised to $5,500.
Investments grow tax-free while inside the account.
Withdrawals can be made at any tine for any purpose and are not subject to tax.
Unused contribution room can be carrried forward indefinitely to future years.
Withdrawls can be recontributed in future years,
TFSAs can hold many of the same investments as a RRSP, including all Fidelity mutual funds.
The TFSA and RRSP are both important tax-advantaged savings plans sponsored by the Government of Canada. Generally, one is not better than the other; they work together to give short-term objectives, such as major purchases, and long-term goals. Whereas, RRSP’s are long-term plans that are designed for retirement saving.
A TFSA can be an excellent complement to an RRSP and my be used to maximize retirement income when RSP contribution limits have been reached.