TFSA (Tax-free savings accounts) for seniors in Canada

TFSA (Tax-free savings accounts) are now available according to Meagan Fitzpatrick in the Vancouver Sun today:

For Canadians whose New Year’s resolutions involve saving more money, the introduction of the federal government’s new tax-free savings account is good timing. It’s one of several new tax measures that took effect Thursday, but is the biggest one that will affect the most Canadians.  The new tax-free savings account is being billed by the government as "the single most important personal savings vehicle" since the registered retirement savings plan was created 50 years ago. 

Canadians 18 years old and over can deposit up to $5,000 every year in a TFSA and although the contributions are not deductible, income earned and withdrawals made from the fund will not be taxed. Funds can be taken out at any time, for any purpose, and unused room in the account can be carried over to the next year.  The government says the TFSAs offer flexibility because the full amount of withdrawals can be put back into the account later.

As she goes on to explain:

Seniors, sometimes frustrated by the rules governing RRSPs and registered retirement income funds, are expected to particularly enjoy the flexibility of the new bank accounts.  When seniors turn 71 they are required to transfer their RRSP fund into an RRIF and use it as income. They are also required to make minimum withdrawals every year. With a TFSA, there are no such requirements.

The Vancouver Sun had a complete guide to TFSA’s (tax-free savings accounts) by Joanne Chianello on December 20, 2008.  You can also download a pamphlet on TFSA’s from the Federal Government.

The arrangements for setting up a Tax-Free Savings Account (TFSA) are fairly straightforward but there is a website that can provide other helpful information at taxfreesavingsaccountinfo.com.