2019 will bring a TFSA limit of $6,000, this means the total room since the inception of the TFSA in 2009 is $63,500. TFSA contribution room accumulates every year from the year in which you turn 18. We've heard it in the past... what's the big deal... tax sheltering the growth on $5,000, $5,500, $10,000... But now, with the TFSA turning 10 with the dawn of 2019, tax free growth on $63,500 or $127,000 combined for a couple, why wouldn't you??? This isn't a tax deferral like a RRSP, TFSAs are a straight up, no nonsense money saving machine. Any income earned (eg. investment income and capital gains) is tax free, even when it is withdrawn. That is tax free growth, not too shabby! Keep in mind contributions are not tax deductible, nor are any fees in relation to TFSAs, any interest or money borrowed to contribute (we're not big fans of leveraging to invest anyway.) Yes, you can hold cash in your TFSA, but it's not just a "savings account." You can hold a variety of investment vehicles in a TFSA, such as mutual funds, GICs, ETFs, stocks and bonds.
From a planning perspective, TFSAs are positioned to be one of the most efficient means to save over the long term, in particular for millennials. Given that your contribution room starts accumulating in the year you turn 18, regardless of your income. Let's say you turned 18 in 2009 and your contribution rooms starts building. This will allow a lucrative amount of contributions by the time you reach your later years, in addition to compounding returns on a tax free basis.
TFSAs can be very strategic vehicles when it comes to retirement income planning and estate planning. Contact us today for ideas we can help you implement from a wealth management perspective. We're always happy to help!