What is a TFSA for dummies?

What is a TFSA for dummies?

A TFSA allows you to set money aside in eligible investments and watch those savings grow tax-free throughout your lifetime. Interest, dividends, and capital gains earned in a TFSA are tax-free for life.

Can you lose money on TFSAs?

The TFSA amplifies the risk of permanent investment losses in two ways. Not only do you lose your contribution room, but you also won’t be able to claim your capital losses to reduce your income tax.

What is TFSA example?

For example: You contribute $5,500. Later that same year, you withdraw $2,000. The next year or another year in the future, you could add back the $2,000 you withdrew plus the allowable annual amount.

Is a TFSA a good idea?

Withdrawals from a TFSA can be made at any time. Whatever you withdraw will get added to your contribution room the following year, so that tax free space never gets lost (unlike the RRSP). All this makes TFSAs great for retirement planning. It forms the cornerstone of the simple retirement plan.

What are the disadvantages of a TFSA?


  • You can’t convert existing savings accounts.
  • There are limits to how much you can invest.
  • Over-investing carries penalties.
  • ‘Leftover’ contributions don’t roll over.
  • Withdrawals will affect your contribution limits.
  • No real benefit if you earn under the tax threshold.

Is a TFRA account real?

A Tax-Free Retirement Account or TFRA is a retirement savings account that works similar to a Roth IRA. Taxes must be paid on contributions going into the account. Growth on these funds are not taxed. Unlike a Roth IRA, a tax-free retirement account doesn’t have IRS-regulated restrictions for withdrawals.

What is a TFSA and how does it work?

TFSAs let you save money on taxes because the gains on investments in the account are not taxed and withdrawals can be made tax-free. There is an annual contribution limit to TFSAs; in 2021 that limit is C$6,000.

How many TFSAs can you have?

Because TFSAs are so popular and plentiful and you can open as many as you want, it’s easy to lose track of how much you’re contributing.

Can a TFSA be used to secure a mortgage?

A TFSA can, for example, be used to secure a mortgage or similar. This may come with the stipulation that you can’t withdraw funds from the TFSA until the loan has been paid off.

Related Post