March 19, 2018 by Paul
Should I Contribute to My TFSA When I’m 68?
Bruce Sellery, financial journalist and bestselling author of Moolala, discusses the many reasons retirees should use Tax-Free Savings Accounts (TFSAs). In an excerpt from his article in Money Sense, Bruce says that any assets you have could benefit from the tax shelter the TFSA provides:
Money that you withdraw from an RRSP or a RRIF is taxed as income. But TFSA contributions are made with after-tax income, so you don’t pay a second time when you pull the money out. This means that whatever you draw from the TFSA will not impact “income-tested” benefits like Old Age Security or the Guaranteed Income Supplement.
Remember, too, that you can’t contribute to an RRSP after age 71 and you’ll have to start withdrawing money from your RRIF, according to the amounts the government mandates. If you don’t spend all of that money, a TFSA can be a good place to put it, so it can grow tax-free for as long as you live.
If you have money in a non-registered investment account, it might be better to keep it in a TFSA instead so you don’t have to pay tax on the gains. Now, depending on how much you want to transfer over, you may not be able to do it all at once—the cumulative contribution limit for a TFSA is $57,500 and is currently growing by $5,500 per year.
Two other things to think about: First is the estate planning benefit of a TFSA. Assets in that account can pass tax-free to your heirs, which isn’t the way it works if your money was in a non-registered account. And second, if you’re holding onto some money for emergencies, a TFSA might be a good place to store it.
About Bruce Sellery
Business journalist and television host Bruce Sellery is on a mission to help people get a handle on their money so they can live the life they want. In his talks, Bruce is an essential guide for those who could use a spoonful of sugar when it comes to the medicine of managing their money and he does it all the while making you laugh aloud during his engaging talks.