4 Better Strategies For Your TFSA

TFSA, Calgary

The truth is, most Canadians still do not understand what a TFSA is, never mind, what to do with it.

A Tax Free Savings Account (TFSA) is an account that you can set up through most financial institutions in Canada. The government allows you to put "after tax" money into this type of account and to grow it on a "tax-free" basis. Within the account you may invest your money in Stocks, Mutual Funds, Segregated Funds, GIC's, ETF's, etc - basically, whatever is available at the institution you've opened the account with. If you receive a gain from your investment you DO NOT have to pay tax to the government on that gain.

It's really of no value to have a TFSA if you do not know what it is and what your investment options are. Most banks will just get you to open the account and let your money sit in it earning little or nothing at all. They then loan your money back to you, your family and friends at higher interest rates in the way of credit cards, mortgages and car loans. They do not want you to understand how it works because you wouldn't do it any longer.

Related article: Using the Bank's Money to Build Your Wealth

Here are 4 good strategies for your TFSA:

1.) Emergency Savings. Everyone should have 3-6 months saved up for an emergency. Loss of job, going home for a funeral, illness, furnace breakdown. Make sure your investment choices are both liquid (Easyily accessible) and invested in something that can earn at least 3%.

2.) Funeral Planning. This is a great way to save up 10 or 20 thousand dollars for your final expenses. This is especailly beneficial for someone who doesn't qualify for life insurance at a reasonable rate, because of age or health status. Final expenses may extend beyond the cost of a funeral and include such items as credit card balances, accounting fees, taxes, and other expenses associated with your estate.

3.) Retirement Planning. The TFSA is a great way to have some money kind of "hid away",  because it doesn't interfere with the calculation in determining "OAS Clawbacks". We also like to use it to transfer a client's RRIF payment in the case where they don't really need the money now, but want to save for any future Long Term care needs.

4.) Employer Stock Option Plan. Many employers offer various investment plans to their employees as a bonus or a way to encourage loyalty. If the TFSA is an option within your company I would jump on the opportunity. All that growth in the form of dividends, free money and stock growth will be yours to keep and grow on a tax-free basis. That's a big score for you.

To recap. A TFSA is not a bank account to be used to move money in and out monthly. It is of no value to you if it isn't growing - the tax on nothing is nothing. However, if used properly it is one of the best investment vehicles we have in Canada.

Let's plan your worry-free retirement:  To find out how, Call us at 587-755-0159 or complete the form below to get started.


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Willis & Nancy Langford


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