Tax Free Savings Account (TFSA)
The benefits of opening a TFSA
A TFSA can be an effective way to save for your future.
Here are some reasons to open a TFSA:
- TFSAs grow an a tax free basis meaning that all of the interest earned an yuor deposits grows tax free. Puase cl
- If you are looking for a flexible way to save, a TFSA is a good option as it allows you to carry forward any unused contributions to subsequent years. In addition, you are able to credit any withdrawals that you have made back to the TFSA to enabling you to benefit from the maximum savings potential.
- You may already be investing the maximum amount possible into your RRSP. In this case, investing money into a TFSA allows you to draw supplementary income from it when you retire, without having to pay any tax on the withdrawals.
- If you are on a low income and therefore receive money from the federal government such as the Canada Child Tax Benefit, your TFSA will not affect the amount of benefit that you receive.
- You should bear in mind that you have already paid tax on the funds that you invest into your TFSA. Therefore, if you expect that your tax rate will have increased by the time that you withdraw your funds, you will have paid fewer taxes in total. Remember that the opposite applies for your investment in a RRSP.
- A TFSA offers you the option of keeping investments that would usually be subject to a higher rate of tax sheltered, as you do not pay tax on the earnings.
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