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TFSA

A Tax- Free Savings Account is a program of the Canadian government that allows you to invest your money with any dividends, and capital gains being tax free.

What is a Tax Free Savings Account?

A Tax Free Savings Account is an opportunity to invest your money, generate some dividends or capital gains, and not pay tax on your investment growth. You simply open the TFSA with any financial institution, make a contribution and decide on the investment choices with Vertex Insurance and Investments advisors.

How does a Tax Free Savings Account work?

It’s pretty straightforward. You are free to invest your money as you wish. If you are a conservative investor, put it into very safe GICs (Guaranteed Investment Certificate). If you love risk, invest in the growth funds or choose a path between the two extremes.

A key feature is that you can withdraw money at any time. The TFSA is the perfect vehicle since there are no tax implications to withdrawing money. This is one of the benefits of a tax-free savings account.

Should you invest in a TFSA or RRSP?

Ideally, you should invest in both a TFSA and RRSP as the choice will depend on your income and financial goals.

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    • Advantages

    • Withdrawals: There is no tax withholding at the time of the withdrawal.
    • Tax Return: With a TFSA, you don’t need to report your contributions or withdrawals on your tax return.
    • Contribution limit: You can contribute a maximum of $6,000 per year to TFSA. In addition, if you have not put in the maximum amount in the past years, your contribution room accumulates.
    • TFSA doesn’t affect other government benefits
    • TFSA contribution is not based on your income as everyone in Canada has the same contribution room each year.
    • Contribution room keeps growing

    Disadvantages:

    • There is no tax break so if it is your key objectives to cut your income tax, the RRSP would be the better choice.
    • No grace for over contributions: You cannot put in more money than your contribution limit
    • Not protected from creditors: If you owe money, TFSA holdings can be seized by your creditors unlike RRSP accounts that are protected from the creditors

    Find out how your investment will grow over time with compound interest

    Compound Interest Calculator

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    Disclaimer : Vertex Insurance and Investments Inc. is an insurance agency licensed to sell life and travel insurance products in Ontario. Our website’s content is tailored towards Canadian residents and visitors coming to Canada. Any variations between the rates mentioned on our website and shown in the specific company’s software, the latter will be considered final. Please see the policy documents for full disclosure of the terms, conditions and exclusions. The logos and the trademarks used on the website are owned by the respective entities.

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