Summary of "What is a TFSA?"
The video explains the Tax-Free Savings Account (TFSA) as a flexible Canadian savings and investment vehicle suitable for various financial goals such as emergency funds, large purchases, or retirement. Key points include:
- What is a TFSA?
- A tax-sheltered account where investment returns (interest, dividends, capital gains) are not taxed.
- Can hold various investments: GICs, bonds, stocks, mutual funds, ETFs.
- Available to Canadians aged 18+ with a Social Insurance Number, with no maximum age limit for holding the account.
- Can be opened at banks, credit unions, investment firms, or online platforms. Multiple accounts are allowed but contribution room is shared across all accounts.
- Contribution Rules:
- Annual contribution limits are set by the government and indexed to inflation.
- Unused contribution room carries forward indefinitely.
- Contribution room can be checked via the Canada Revenue Agency (CRA) Notice of Assessment or online CRA My Account.
- Over-contributing results in tax penalties, so careful tracking is important.
- Withdrawals can be made anytime tax-free, but re-contributions should ideally be made in the following calendar year to avoid over-contribution penalties.
- Tax Advantages:
- Withdrawals are not considered taxable income.
- Contributions are not tax-deductible (unlike RRSPs), so no immediate tax refund benefit.
- Investment growth and withdrawals remain tax-free.
- Considerations:
- TFSA is a flexible option for saving and investing but may not be the best fit for everyone depending on individual financial situations.
- Consulting a registered financial advisor is recommended to tailor savings strategies.
Source/Presenter: Ontario Securities Commission, referenced via GetSmarterAboutMoney.ca
Category
Business and Finance
