Take advantage of new limits to maximize contributions to your Tax-Free Savings Account
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Effective January 1, 2013, the annual contribution limit for Tax-Free Savings Accounts has increased to $5,500. While this may be a small portion of your overall savings strategy annually, it can be one of the most powerful.
Other savings vehicles, such as Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs) are geared to specific savings goals during your lifetime; a comfortable retirement and education planning for your children. TFSAs, however, have no specific goal in mind.
This flexibility, coupled with the ability to withdraw and re-contribute capital and income from the plan with no tax consequences, provides Canadians with an effective savings plan for emergency funds, vacation planning, major purchases, and long term estate goals.
Your financial plan should coordinate annual contributions to a TFSA alongside planned savings in RRSPs, RESPs and RDSPs (Registered Disability Savings Plans), depending on your personal situation. This will ensure that you maximize the benefits of each registered savings plan to meet your goals.
Below is a brief summary of the registered plans currently available to meet your financial planning goals:
Overview of the Tax-Free Savings Account (TFSA)
- Available for Canadian residents, 18 years of age and older
- Contributions are not tax deductible
- Unused contributions may be carried forward
- Investment income earned is tax free
- Withdrawals are tax free
- Amount of withdrawal in one year can be re-contributed in future years.
- Wide range of investment options with certain restrictions on prohibited and non-qualified investments
- Income earned and withdrawals do not affect eligibility for federal income-tested benefits and credits
- Attribution does not apply where funds are given to a spouse to invest in their TFSA.
- TFSA of a deceased spouse can generally be transferred to a surviving spouse’s TFSA
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For more information or to receive our complimentary article on Tax Free Savings Accounts, please contact your Richardson GMP Investment Advisor.