Let’s Talk About TFSAs

February 11, 2021
The new year is a great time to talk about TFSAs!

With the start of 2021, it’s a good time to talk about the Tax-Free Savings Account, an important part of your investment portfolio.

In 2008, the Canadian Government announced the creation of the Tax-Free Savings Account (TFSA), a registered savings account that would allow Canadian residents over the age of 18 to make contributions that would grow tax-free and access those savings with tax-exempt withdrawals.

The basic rules of a TFSA are simple – each year the government announces a maximum contribution amount that can be made in to a TFSA. Like your RRSP contributions, the TFSA contributions are cumulative, starting in 2009 (or the year you turn 18 if that is later than 2009). Any withdrawal amount from a TFSA can be added back on as contribution room the following year, and any earnings and growth do not count towards the contribution limit. Overcontributions are subject to a 1% penalty per month that they remain in the TFSA.


As of 2019, Client A has maximized their TFSA contributions at $69,500, and did a withdrawal of $20,000.
In 2020, the contribution annual limit is $6,000. Client A can contribute $6000 PLUS the $20,000 withdrawn from the previous year, for a total contribution of $26,000.

Another great perk of the TFSA is that withdrawals are not counted as part of your income that year, so they have no impact on income-tested government benefits, such as Employment Insurance, Old Age Security or the Canada Child Benefit.

There are many investment options that can be held in a TFSA – mutual funds, segregated funds, GICs and stocks. It is important to consider your risk tolerance and investment goals before choosing any of these products.

If you would like to talk about opening a TFSA or contribute to your existing account, please contact our office and speak with one of our advisors.

Wishing you health, happiness and prosperity this year.

Stay safe and stay well.