Single most important personal savings vehicle since RRSPs

Introduced by the Federal Government in 2008, the TFSA is a flexible investment savings account that allows clients to earn tax-free investment income.  It’s not a traditional savings account, rather another type of investment account, just as registered  retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) are plan types.

Features and benefits:

• Contribution room begins January 1, 2009

• Available to individuals age 18 or older with a SIN

• Contribute up to $5,000 per year (regardless of earned income)

• May have more than one TFSA but maximum contribution room applies

• Contributions are not tax deductible

• Earned investment income, capital gains or losses are not included in taxable income

• Withdrawals are not taxable

• Use the withdrawals for any purpose

• Carry forward unused contribution room indefinitely, like a RRSP

• Contribution room can be recovered in full when sums are withdrawn

• Eligible investments: daily interest funds, guaranteed interest funds, high interest savings accounts, segregated funds

• Can be assigned as collateral

• Will be indexed for inflation rounded to nearest $500