The Tax Free Savings Account (TFSA) first came to be in 2009. If you know me well, then you've heard my rant about TFSAs. I think this is the greatest account Canadians have ever had to save money and invest in.

The original contribution amount allowed in 2009 was $5,000.00. Many Canadians dismissed the $5,000 contribution as they believed it was too small to make a large impact.... they were wrong. The cumulative contribution allowed from 2009 to 2019, if you have never contributed to a TFSA before, is $63,500.00, which is a much larger contribution.

The contributions from 2009-2012 was $5,000 for each year; $5,500 for 2013 and 2014; $10,000 for 2015; $5,500 for each year 2016, 2017 and 2018; and $6,000 for 2019, which totals the cumulative $63,500.00.

Now let's talk about the Power of Compounding, Tax Free Compounding. In 2009, you were allowed to contribute if you were the young age of 18 in Ontario but let's say you didn't have the money at the time and didn't make a single contribution. In 2019 you are now 28 and decide to make the full $63,500 contribution.

If you never contribute to the TFSA again and earned 5% annually until the age of 65 you would have approximately $386,169, better yet if you earned 6% you would have approximately $548,391.53. Hopefully, your spouse or partner did the same thing and if that is the case you would have approximately $772,338 at 5% and $1,096,783.06 at 6% combined.

Now think how much you would have at 65 if you both contributed the allowed amount every year to your TFSA!!

Regardless of your age, if you haven't contributed yet, today is the day to START. If you have contributed but not the full amount, top up to the maximum. Let the Power of Compounding work for you.

TFSA Part 2 coming soon....

 

"How will you replace your current income in retirement?" - Jim Seyers