TFSA

Read More Close

A Tax Free Savings Account (TFSA) lets you grow your savings and access your money tax-free.

Is a TFSA for you?

Whether you are saving for the short-term or the long-term, a TFSA may be for you.

How TFSAs work

If you are a Canadian resident, 18 or older and have a Social Insurance Number (SIN), you can open a TFSA.

You can save up to $5,500 a year, and any unused contribution room is carried over indefinitely. The amount you withdraw is added to your contribution room for the following year.

You can open more than one TFSA, but make sure you keep track. The penalty for over-contribution is 1% on the excess amount each month.

Eligible investments for TFSAs include cash, guaranteed deposits, segregated and mutual funds, stocks and bonds.

Key Features and Benefits

Tax-free growth
Tax-free growth means you never have to pay taxes on interest, dividends or capital gains from your investments.

For example, if you save $5,500 a year over 20 years, it could mean as much as $39,068 more in your pocket.

TFSA chart

For illustrative purposes only

Tax-free withdrawals
You can withdraw money from your TFSA at any time, tax-free. And the amount you withdraw is added to your contribution room for the following year.

Withdrawals from a TFSA don't affect your eligibility for federal income-tested benefits such as Old Age Security (OAS), Guaranteed Income Supplement (GIS), Canada Child Tax Credit (CCTC), GST Credit, etc.

Flexible investment choices
With Empire Life you have a choice of investments to meet your short and long-term goals:

Tax benefits of TFSA vs. RRSP

Both a TFSA and an RRSP let your savings grow tax sheltered. So how are they different? 

  • With a TFSA, your withdrawals are always tax-free, but you don't get a tax deduction when you contribute
  • With an RRSP, you get a tax deduction when you contribute, but you pay tax when you make withdrawals

 

TFSA

RRSP

Tax deduction on contribution

no

yes

Tax sheltered growth

yes

yes

Tax free withdrawals

yes

no

Which one works better?

  • Generally, you will come out ahead with a TFSA if you are in a higher tax bracket when you make withdrawals
  • Generally, you will come out ahead with an RRSP if you are in a higher tax bracket when you make contributions

Get an Empire Life TFSA working for you

If you would like to find out more about TFSAs and the investment options from Empire Life, talk to your advisor.