Each year brings changes that can affect financial planning, so the beginning of the year is a good time to reassess your portfolio to be sure that you are still poised to hit your objectives or if one of those changes has either positively or adversely affected your plans. One such change that you should know about is that the yearly Tax-Free Savings Account (TFSA) contribution limit has finally been increased. The annual limit has been stuck at $5,500 for 5 of the last 6 years, but has been set at $6,000 for 2019.
TFSAs are popular saving vehicles that, when used properly, are an effective investment and financial planning tool. The ability to make contributions and withdraw money at any time, tax-free, while having a wide variety of investment options works out well for many people, as long as you avoid making mistakes such as over-contributing or missing out on an opportunity.
It is important to understand how TFSAs work and the associated rules. For example, while you can make a withdrawal from your TFSA at any time, you cannot re-contribute the funds until the next calendar year. Another thing to know is that you can name your spouse or a non-spouse beneficiary to receive the funds tax-free when you pass away.
TFSAs are different than RRSPs in that you do not get an immediate tax deduction for the contribution. Both are tax sheltered investment growth vehicles, but with TFSAs, you don’t pay tax when withdrawing funds like you do with RRSPs. This could make TFSAs the better option for your personal financial plan.
The question is which is best for you as part of your life planning. To learn more about TFSAs and get answers to your questions, contact us at BlueRock Wealth Management. We are happy to meet with you to discuss whether your current financial plan is working for you and discuss what we can do to help you meet your life planning goals.