TAX FREE SAVINGS ACCOUNTS
A Group Tax Free Savings Account (TFSA) is a registered savings program open to all Canadian residents over the age of 18. Group TFSAs allow plan members to invest in an account that will grow on a tax-free basis. They are available as a stand-alone plan or as an add-on to an existing plan and offer the convenience of automatic payroll deduction as well as lump-sum payments. The maximum contribution limit is $5,000 per year regardless of individual income and that amount will be indexed to inflation, rounded to the nearest $500. Contributing to a TFSA will in no way impact the amount of money that a plan member can contribute to his/her RRSP. In fact Group TFSAs complement existing RRSPs and are a valuable component of Group Retirement Plans.
There are many advantages to a Group TFSA
- Funds invested in a TFSA grow tax-free
- Capital gains or dividends are tax-free
- Any unused contribution room may be carried over to future years indefinitely
- Money can be withdrawn at any time and for any reason without penalty, however some restrictions may apply depending upon the investments chosen
- There is full flexibility to withdraw and re-contribute
- As with RRSPs, the plan member can choose from a wide range of investment options such as mutual funds, money market funds, cash deposits, guaranteed investment certificates (GICs), publicly traded securities, and government and corporate bonds
- Earnings within the account and withdrawals will have no affect on a plan member's eligibility for federal income-tested benefits and credits such as the Child Tax Benefit, Guaranteed Income Supplement, Old Age Security benefits, Age Credit, and Goods and Services Tax credit
- Income splitting is permitted for contributions
- TFSA assets can be used as collateral for loan agreements
- TFSAs do not mature at age 71 therefore a plan member can continue to contribute and there is no need to convert them into a retirement income product
- TFSA assets can be transferred to a spouse upon death
Contact the Blevins Team for more information.
