The Tax-Free Savings Account (TFSA) is a flexible savings vehicle in which the investment income is earned tax-free helping you reach your financial goals more quickly. Due to the flexibility of the TFSA it can be leveraged throughout different life stages based on your financial priorities.

Retirees may be one of the major groups who stand to benefit from the TFSA. If you are in a position where you are in the same or higher marginal tax bracket in retirement a TFSA can be used as a source of tax-efficient income as withdrawals are not taxable. In addition, the withdrawals do not have any impact on federal income benefits you may receive and do not trigger Old Age Security claw back.

Unlike RRSPs where earning income generates new contribution room, TFSAs allow additional contribution room each year (currently $63,500). There are also no age restrictions as with RRSPs where contributions can’t be made past the end of the year you turn 71, meaning you can continue to contribute to your TFSA throughout your lifetime. This allows for preservation of tax-free growth without the requirement to convert it to an income vehicle in the future.

As mentioned previously, a TFSA can provide benefits through various life stages. See the article below for other strategies of incorporating a TFSA into your financial plan.

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