By Cyndy Batchelor, BCom Financial Advisor & Partner O’Farrell Financial Services
If you have managed to save some money over the past year and want to know where to invest it in tax efficient manner, here are a few things to consider before making that decision.
Q: If I have not contributed to a TFSA in the past how much can I put in today?
A: The TFSA limit for 2021 is an additional $6,000 for a total of $75,500. If you have never contributed, you may contribute the entire $75,500 (if you were born before 1991). If you have contributed in the past and made withdrawals prior to 2021, you may contribute any unused room you have plus any withdrawals you made – to confirm the amount, you can verify with your MyCRA account or TIPS at 1-800-267-6999.
Q: Do the Investment Income and Earnings in my TFSA affect my contribution room?
A: No, investment income and changes in the value of your TFSA do not affect the contribution room of your TFSA.
Q: When will I need the money?
A: Are you investing this for a short-term goal, like buying a car or a vacation next year or is this part of your overall retirement plan? A great advantage of a TFSA is it’s tax free status – so if you are able to use it as a long term retirement strategy, there are potential tax savings in other areas of your financial plan.
Q: What can I invest my TFSA in?
A: Like an RRSP, you are able to invest your TFSA in just about anything, including mutual funds, stocks, bonds, ETFs and cash or high interest savings products. Your TFSA is not necessarily just a “Savings Account”. Depending on your risk tolerance and your overall financial plan you and your financial advisor can determine the best investment strategy for your TFSA funds.
If you have more questions, please reach out to us! See our ad in this week’s North Dundas Times for contact information.