Investors saving for retirement, a vacation, education, or simply a rainy day can cheer the recent announcement from the Liberal government that the maximum total contribution limit to $57,500 this year from $52,000 in 2017.
This additional increase will benefit approximately 10% of Canadians who invest in a TFSA, allowing investors to capitalize on tax-free capital gains and dividend income on eligible investments.
Having access to tax-free savings can be a big deal for investors who have already seen big capital gains in recent years. Those who started investing when the program was first launched have likely seen their account balance grow substantially higher in recent years due to the extended bull market which appears to still have legs.
For those who have not contributed the maximum amount each year, the good news is that each year, contribution room rolls over, allowing for the opportunity for investors to catch up and invest up to the full amount over time, or all at once, depending on circumstance.
Any gains or losses from a TFSA trading account are not taxable or tax-deductible, meaning most investment advisors will suggest the high-growth or high-dividend companies one chooses to invest in may do better in a TFSA over time, with more conservative investments better held in other registered accounts such as an RRSP.
As always, consult an investment advisor before setting up a TFSA.
Invest wisely, my friends.
