Some investors continue to make the mistake of thinking a TFSA is a savings account, and they earn a very small amount of interest annually. I personally think that the Federal Government selected a very poor name back in 2008. I prefer to call it a Tax Free Investment Account instead, and subsequently grow it at a higher long term return using a good balance of high quality stock market and fixed income investments.

This investment is one of very few tax advantages that focus on wealthy individuals. I say this because it is available to all Canadian adults – but only those with money left over at the end of the year can make use of it. If you have the disposable income available it would be a shame not to take advantage of this tax-free growth for the rest of your life.

Anyone 18 or older and who has a valid social insurance number is eligible to open a TFSA. Contribution room accumulates beginning in the year in which a person turns 18.

With the latest TFSA announcement, the total contribution room available in 2022 for someone who has never contributed (and has been eligible for the TFSA since its introduction in 2009) is $81,500.

For people who have withdrawn from TFSAs, their crystallized gains and losses from withdrawals are factored in to their TFSA contribution room. The formula is:

Unused TFSA contribution room to date + total withdrawal made in this year + next year’s TFSA dollar limit = TFSA contribution room at the beginning of next year

Here are the TFSA contribution dollar amounts by year:

TFSA holders are permitted to hold a wide range of investments in their TFSAs, including mutual funds, ETFs, bonds, publicly traded securities and certain private company shares – in short, every type of investment an investor can hold in a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF).

Brad Weatherill