By Pierre S. Goulet, CFP, FMA, FCSI
Practice Manager - Financial Planning & Insurance, SISIP Financial Services
Like every Canadian, serving and former members of the Canadian Forces need to put money aside in order to achieve their financial goals and objectives. These may include purchasing a home, financing their children's education, investing for their retirement, starting a small business or taking that big vacation.
With a Tax Free Savings Account (TFSA), Canadians 18 years of age or older who have previously filed an income tax return can contribute up to $5,000 every year into an account that grows tax-free.
Other benefits and features of the TFSA
- Any amount of the funds can be withdrawn at any time, for any purpose without tax consequences.
- Income earned as well as withdrawals will not affect eligibility for benefits such as Canada Child Tax Benefit.
- Unused contribution room from the previous year(s) is carried over into the following year(s).
- Funds withdrawn can be put back in the following year(s).
- It is a great savings option for those with little or no RRSP contribution room left.
- You can contribute to your spouse's TFSA.
How does a TFSA differ from a RRSP
The RRSP is primarily designed to save for your retirement; the TFSA is like an RRSP for everything in your life. Both plans offer tax advantages, but there are key differences.
- RRSP contributions are deductible from your taxable income, thereby reducing the amount of taxes you pay in any given year, by deferring the tax bill into the future. Your contributions to a TFSA will not be tax deductible but you will not be taxed on any investment income or capital gains.
- Withdrawals from an RRSP are added to your income, unless you use them for the Homebuyers Plan or Lifelong Learning Plan. Withdrawals made from your TFSA do not impact your taxable income or your contribution room.
The TFSA allows for great flexibility in helping you meet your financial goals and objectives. Contact your local SISIP Financial Services (SISIP FS) financial planning advisor today!
Not yet a SISIP FS client? Our services are available to you for as little as $5.00 per month, for recruits to Master Corporals inclusively, and to Officer Cadets, Second Lieutenants and Lieutenants. All other ranks, and former CF members, are charged a rate of $10 per month.
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This article is for general information purposes only and is the opinion of the writer.
