A Tax Free Savings Account (TFSA) is an investment account that lets you earn interest on your money, without having to pay tax on the interest you earn. You can use your TFSA for any savings goals. You can withdraw from a TFSA at any time without having to pay tax.
You can invest money in a TFSA using a variety of products, but there’s a limit to how much money you can put in it.
Unused annual contributions can be carried forward to future years, and withdrawals can be put back in the TFSA the following year without reducing contribution room, meaning it's super flexible as well. It’s no wonder why it has become one of the most popular ways Canadians save money.
A TFSA can be invested in a variety of products like savings accounts, GICs, Mutual Funds*, ETFs*, and Index-Linked GICs*. The choice is very personalized, your PenFinancial Advisor can help.
You have to be at least 18 years old to invest in a TFSA, and the government sets limits on how much money you can put into a TFSA.
Over-contributing to a TFSA carries hefty penalties, so be sure to know your limit.
TFSAs and RRSPs work in different ways. The money you contribute to a RRSP actually reduces your income and offers you tax breaks in the year you contributed. Great, but when you begin to withdraw from a RRSP down the road, you’ll be taxed on that money as income.
The money you contribute to a TFSA doesn’t reduce your income for the year, so don’t expect a big tax refund because of it. But on the bright side, when you withdraw from your TFSA, it doesn’t count as income.
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