It seems everyone has a bucket list these days, and the team at RBC InvestEase is no different. Our bucket list consists of one item—helping Canadians get off the sidelines to start saving and investing for their future!
Opening a TFSA or RRSP, or even trying to choose between the two, always seems to be at the top of everyone’s list of questions when they speak with our Portfolio Managers. We know many people trying to invest for their future are put off or even intimidated by the terminology and acronyms that dominate the industry.
We want to make this easy for you and we’ll stay with our theme of buckets to make this happen. Think of TFSAs and RRSPs as different types of accounts—or buckets—that you put money into to save and invest for future goals. The acronyms may sound complex but these are just types of accounts that have different features to encourage saving and investing.
We’ll explain some of the important features of a TFSA in this article. Part 2 of our article lays out the features of an RRSP
- What does the acronym TFSA mean? Tax-Free Savings Account
- Who can open a TFSA with RBC InvestEase? Three items to consider. You must be 1) a Canadian resident, 2) with a valid Social Insurance Number (SIN), 3) who has reached the age of majority in your province or territory of residence (18 years of age in Alberta, Ontario, PEI, Quebec, and Saskatchewan. 19 years of age elsewhere.)
- What’s the benefit of a TFSA? All of the gains and income earned in a TFSA are not taxed, which means you’ll have more savings and be able to reach your investment goals faster. Plus, you can withdraw your money at any time without penalty.
- How much money can I put into a TFSA?
- Official estimate: Visit the Canada Revenue Agency (CRA) website here. Once you log in, scroll to the ‘TFSA contribution room’ link. This is the amount you had available as of January 1st so subtract any TFSA contributions you’ve already made this calendar year.
- Unofficial estimate: To just get started in 2019, begin with the $6,000 limit and subtract any contributions you’ve already made this year.
- Unofficial estimate considering carry forward amounts: The table below provides your TFSA limit assuming you haven’t contributed to one previously. If you have, simply subtract that amount from the appropriate number in the table.
Unofficial estimate considering carry forward amounts for T F S A: Your Birth Year TFSA Contribution Limit 2001 $6,000 2000 $11,500 1999 $17,000 1998 $22,500 1997 $32,500 1996 $38,000 1995 $43,500 1994 $48,500 1993 $53,500 1992 $58,500 1991 or prior $63,500
- What else should you know? You can use a TFSA to save for any future goal: a down-payment on a home, a vacation, your retirement, or just ‘the future’. Also, withdrawals from a TFSA are not taxed. You won’t be able to put this money back into a TFSA until the following calendar year, but you’ll always be on top of this by following the ‘official way’ to knowing your TFSA limit.