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A Tax-Free Savings Account (TFSA) allows you to save up to $6,000 per year and offers a number of advantages, including:
  • Investment income (interest, dividends, capital gains or income trust distributions) generated in this account are tax-sheltered.
  • Money withdrawn from this account is tax-free and will not affect your eligibility for federal income-tested benefits and credits, which are based on your income.
Its flexibility meets the requirements of many Canadians aged 18 and up, who will gain from investing in the TFSA, for example:
  • Young adults or couples with young children: to prepare for the unexpected, set up an emergency fund or save for a down payment on a home or vehicle.
  • High-income workers: to build up additional income in a tax-free environment ahead of retirement.
  • Retirees seeking to keep their investments growing tax-free: since withdrawals from a TFSA are not classified as income, they do not affect the Old Age Security Pension or Guaranteed Income Supplement.
For many investors, the TFSA will serve as a complement to their RRSP. Here are some of the differences between a TFSA and an RRSP:
Annual contribution ceiling $6,000 18% of eligible income, up to $26,010
Tax-deductible contributions NO YES
Investment income taxable NO NO
Withdrawals taxable NO YES
Option to carry forward unused contribution room YES YES
Contribution rights recoverable after withdrawal YES NO
Maximum age for contributing None 71
Assumption Life's TFSA offers the same investment options as those available for an RRSP: Guaranteed Interest Accounts (GIAs) and segregated funds.