A new way to save for retirement
– tax free
Money. You earn it, save it and spend it. Starting
January 1, 2009, you also get to keep more of it tax-free.
The federal government has introduced the Tax Free
Savings Account (TFSA). Under the new plan, Canadian residents aged
18 or older with a social insurance number can open a TFSA and
contribute up to $5,000 per year. The TFSA is a highly flexible
savings plan that can be used for any purpose at any time
— from a major purchase to a vacation to building up your
retirement nest-egg.
“It doesn’t get any better than
this,” says Patricia Lovett-Reid, Senior Vice President,
TD Waterhouse. “Income and growth in the account are not
taxable, and any withdrawals are also tax-free. Withdrawals are
added to your contribution room in the following year and unused
contribution room can be carried forward indefinitely. This is very
attractive to investors in all life stages.”
Unlike a registered Retirement Savings Plan (RSP),
your contribution room is not based on earned income, and there is
no upper age limit for contributing to the plan. The accumulated
savings can also be bequeathed tax-free to your beneficiaries as
part of your estate.
According to Lovett-Reid, the TFSA is the perfect
complement to an RSP or registered Retirement Income Fund.
“It can provide an additional source of tax-free income
without affecting government benefits such as Old Age Security. You
get peace of mind knowing that you can access the TFSA tax-free
without being bumped into a higher tax bracket, or worrying about
the impact on your other benefits.”
Retirees profit in others ways as well. If they
receive more RIF or pension income than they need, they can
contribute the excess to their TFSA and benefit from the tax-free
income and withdrawals.
“The TFSA is a new savings tool that
everyone can benefit from immediately and over the long
term,” concludes Lovett-Reid. “Its flexibility,
tax-free withdrawals, and the ability to contribute up to $5,000
every year regardless of your income level, and even throughout
your retirement, make it a must for any savings or retirement
plan.”
|
