What is a TFSA?



TFSA stands for Tax-Free Savings Account. However, you’re best to ignore the last two words because they’re a little misleading (but I’ll talk about that another time).


The key words here are “tax-free.” And those are delicious words. Because in Canada, we pay an absurd amount of tax.


You see, any growth your investments or your savings earn in a regular account (or a non-registered account as it’s called) is fully taxable at whatever your top tax rate is.


For instance, if your top tax rate is 40%, then you have to give 40% of your growth to the government. So, if you earn $1,000, then $400 of it goes to the government and you’re left with $600.


However, if you held those same investments in a tax-free savings account, then you would pay zero tax on your growth, because it’s “tax-free.” You’d keep the full $1,000.


And as a financial advisor, I highly recommend you go for option two.

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Disclaimer:

This article is for educational purposes only and is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Opinions expressed are those of the owners and writers only. Every effort has been made to compile this material from reliable sources, however, no warranty can be made as to its accuracy or completeness. It may also include forward looking statements concerning anticipated results, circumstances, and expectations regarding future events. Forward-looking statements require assumptions to be made and are, therefore, subject to inherent risks and uncertainties. There is significant risk that predictions and other forward looking statements will not prove to be accurate. Please consult an appropriate professional regarding your particular circumstances. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or the fund facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual Funds and Segregated Funds provided by the Fund Companies are offered through Worldsource Financial Management Inc., sponsoring mutual fund dealer. Other Products and Services are offered through Rhys Martell/Well-Built Plans Financial.


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RHYS MARTELL  |  financial advisor