With a Tax-Free Savings Account (TFSA), you can contribute up to your contribution limit each year, earn tax-free interest, dividends and capital gains, and even make withdrawals – at any time, for any reason – without paying tax.
Any Canadian resident who has reached the age of majority in their province can open a TFSA. The age of majority is 19 in Newfoundland and Labrador, New Brunswick, Nova Scotia, British Columbia, Northwest Territories, Yukon and Nunavut. In all other provinces, it is 18. Bear in mind that you need to have a valid social insurance number to open a TFSA. To open your TFSA, please ask us for assistance.
Contribution room accumulates every year starting at age 18, and can be carried forward indefinitely. You can contribute to your TFSA irrespective of your income and can continue contributing even when you’re retired – it’s a lifelong plan.
As of January 1, 2022, you can contribute an additional $6,000 to your TFSA to benefit from tax-free growth. With the contribution room from 2009 through 2022, you will be able to contribute up to $81,500 to grow tax free (assuming you were at least age 18 in 2009).
You can make withdrawals for any reason, and unlike a Registered Retirement Savings Plan (RRSP), you can do so tax free. Plus, the amount you withdraw is added back to your available contribution room the following calendar year. Remember that, unless you have adequate unused contribution room, you have to wait to recontribute any amounts you have withdrawn in any given year until January 1 of the following year. Otherwise, the Canada Revenue Agency may assess excess contribution penalties. In addition, any income or capital gains earned on deliberate overcontributions could be subject to 100% tax. There is no requirement to make withdrawals at or by a certain age. As a result, you can let your investment earnings continue to grow tax free.
5 Years $28,232 $29,877 10 Years $62,712 $69,858 15 Years $104,824 $123,363 20 Years $156,258 $194,964 25 Years $219,075 $290,781
This chart shows how $5,000 contributed annually and earning 6% interest per year would grow inside of a TFSA compared to a taxable investment account. Assumes tax rate of 32% outside TFSA, with interest income taxed annually. All contributions made at beginning of year. Annual compound rate of return of 6%. For illustration only and not indicative of future returns. Excludes fees and commissions. Actual tax rates and rates of return will vary.
You can use your TFSA to meet a wide range of financial goals, including:
Consolidating your assets can help simplify your financial affairs and ensure your advisor is aware of your full financial picture. If you hold TFSA assets at another financial institution, you can transfer them to us through a “qualifying transfer,” rather than by withdrawing and recontributing. A qualifying transfer can help avoid delays and adverse tax consequences, and we can help make it quick and easy.
Whether you need to open your TFSA, make your 2022 contribution or switch to a new TFSA strategy, please contact us for assistance.
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