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Tax-Free Savings Account (TFSA)
What is it?
A Tax-Free Savings Account or TFSA is a way for individuals who are 18 or older in Saskatchewan with a valid social insurance number (SIN) to set money aside as well as earn money tax-free throughout their lifetime. Any amount you contribute in addition to the income earned in the account is typically tax-free, even when you withdraw it.
Your TFSA may not be entirely tax-free in certain scenarios, like contributing more money than the limit allows or holding non-qualified investments. Following the rules and limits set by the Canada Revenue Agency (CRA) can ensure your TFSA remains tax-free. Don’t stress - our financial advisors can help you navigate any complex situations to ensure you maximize your TFSA benefits while staying tax-free!
What can I use it for?
Use your TFSA to save for a specific goal like the purchase of a new car, renovations to your home, starting a small business, taking a vacation, or building an emergency fund. Since you can withdraw funds from your TFSA whenever you want, it makes this account ideal for your short- and long-term goals.
Why invest in a TFSA?
There are no penalties or conditions when you withdraw your money. The money is yours and you’re free to access it, however, there could be conditions on withdraw periods.
The single biggest benefit is that the growth of all your assets is tax-free – you don’t pay a penny in income tax, even when you withdraw from your account
For more than just cash
It’s so much more than a savings account – investment products such as stocks, bonds, and mutual funds can be held in your TFSA account, resulting in higher interest opportunities
How does it work?
A TFSA operates as a registered savings account that allows you to save and invest money without incurring taxes on the growth of your investments. You can hold qualified investments like cash, stocks, bonds, and mutual funds in your TFSA. As you contribute each year to your TFSA, these contributions are not tax-deductible (in other words, you’re not eligible to receive a tax deduction when calculating your taxable income). However, any income earned within the TFSA, such as interest, dividends, or capital gains, is entirely tax-free.
Each year, the Government of Canada will determine the maximum amount a holder of a TFSA can contribute to it in that year. This is known as the contribution limit, and it changes every year. Your contribution room begins to accumulate every year, beginning when a Saskatchewan resident is 18 years and older. If you don’t contribute to the limit for any given year, that amount is carried forward and is added to your contribution room for future years.
TFSA by the numbers
The annual TFSA dollar limit for 2023
Maximum lifetime TFSA contribution limit if you haven’t contributed yet
Canadians hold a TFSA as part of their savings plan as of January 2022
Is this right for you?
✔ Right for you if you:
You’re looking for flexibility. TFSAs are flexible accounts that can be used for both short-term and long-term financial goals, like saving for a vacation or a down payment on a house.
You don’t want to be taxed. Seems like a no brainer, right? If you want to earn investment income and capital gains without paying taxes on the growth, a TFSA is a valuable tool.
You’re seeking some diversity. TFSAs complement other savings and investments tools, helping you diversify your financial assets. When you spread your investments across different account types, you can manage your risk and optimize your strategy!
May not be right for you if you:
You want a tax break. If you want immediate tax deductions for your contributions to investments, a TFSA isn’t the right choice. Contributions to a TFSA are made with after-tax dollars, meaning you don’t get a tax deduction when you contribute.
Retirement savings is a priority. If your primary goal is to save for retirement, an RRSP may be a better fit for you. RRSP contributions can reduce your taxable income, which can result in larger tax refunds and you can defer the taxes until retirement when your income may be lower.
Products for a TFSA
You've settled on a TFSA, and it aligns perfectly with your financial objectives. It's time to choose the right products to invest your funds in and watch them flourish. Your potential earnings are directly linked to your comfort level with risk.
Discover the array of options that Conexus has to offer – there's a wealth of opportunities waiting for you!
An investment vehicle that pools money from multiple investors to buy a diversified portfolio of stocks, bonds, and other securities. Their key benefits include diversification and accessibility to a wide range of investment options, making it a convenient way for you to participate in the financial markets with reduced risk and expertise on your side from Conexus.
Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Online brokerage services are offered through Qtrade Direct Investing, a division of Credential Qtrade Securities Inc. Qtrade and Qtrade Direct Investing are trade names and/or trademarks of Aviso Wealth Inc. The information contained on this webpage was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This information is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities. The views expressed are those of the not necessarily those of Credential Asset Management Inc or Credential Securities.