I can use my Tax-Free Savings Account (TFSA) to invest??
By John C. Burris PFP, RIA
We’ve heard a common misconception about the TFSA a few times over the past few months: that you cannot use your TFSA to invest. Having “Savings Account” in the name could be partly blamed for that myth, but it’s important to know the TFSA has the potential to do much more than a regular savings account. Its benefits are versatile, and can create positive effects for both low and high-income earners.
Yes, you can use a TFSA to hold cash, but its true benefit can be realized when using it to invest. While withdrawing from the account is not taxable, we consider the TFSA’s most attractive feature to be that any investment earnings made in this account won’t be taxed either.
Using your TFSA to hold the investments with the best potential for growth can drastically decrease the amount you pay in taxes while living, and that your estate pays when you pass away. Far too often, the TFSA is used for much less than its potential.
The TFSA has contribution limits, and rules on what types of investments are permitted, so we think it’s best to review how the TFSA could greatly benefit your situation with an Advisor.
The picture compares two different investments: Plan 1 shows $20,000 invested and earning 5% for 20 years. Plan 2 shows $20,000 invested in a savings account earning 0.25% for 20 years. If held within a TFSA, those earnings would not be taxable.
Mutual funds and/or approved exempt market products are offered through Investia Financial Services Inc.
Contact our team if you would like to discuss how the TFSA could best benefit your financial plan.
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