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TFSA Myths

 Five Common TFSA Myths

The Tax Free Savings Account (TFSA) is a breakthrough in Canadian finance. The TFSA acts as a high interest savings account where you can grow and withdraw your money completely tax free, whenever you want. Of course, this financial breakthrough has started the rumor mill going as well. Many people are confused about what’s true, what’s false and what the TFSA can really do to help them through the financial hardship. 

We’ve outlined the top five myths surrounding the Tax Free Savings Account so you can get a better grasp on TFSA and reap the rewards.

Myth 1:  TFSA will negatively impact my OAS, GIS of CCTB:

Fortunately, this is not true. A TFSA will have no impact on your other government benefit plans. Old age security, guaranteed income supplement, Canada pension plans and any other government supplement program, will remain separate from your TFSA. Your TSFA is your money; no one can touch it, regardless of what other accounts you have set up. You can breathe a sigh of relief knowing that, for once, the Government is actually on your side.

Myth 2: TFSA must be withdrawn at a certain time:

Again, not true. The TFSA can be withdrawn at any time, without incurring a withholding fee. Whether you want to use your TFSA as a retirement fund, or use your TFSA as a rainy day fund, or even want to use your TFSA towards your first car purchase or trip around the world, you can withdrawal the amount whenever you feel like it. The only stipulation is that there is a $5000 limit per year ($10,000 for spousal TFSA). How, when, why and where you choose to spend the money is entirely up to you.

Myth 3: TFSA account can only be used as a savings account:

Well, your TFSA can be used as a savings account. However, that’s not the only way you can use it. Many people choose to use their TFSA for stock trading pros as a way to use their options/shorting strategies without their gains being taxed as income. Wouldn’t it be nice to actually keep the money you have earned on the stock market? Well, with a TFSA, you actually can!

Myth 4: TFSA cannot be used in connection to the foreign market:

Wrong again! You can also choose to invest your TFSA in a strong dividend company and withdrawal these dividends tax free. If you are currently receiving foreign dividends, then you are being taxed at a marginal rate. If you choose to put your dividends in an RRSP, then they are tax-free, until you want to withdrawal the money. TFSA is your best option as there are no taxes. None. Take advantage of the American market without the annoying tax costs!

Myth 5: TFSA is a hassle is hard to understand:

Not at all. TFSA is, essentially, a high interest savings account and works in the exact same way. No muss, no fuss, just tax free savings to spend as you see fit. We do recommend that you spend time with a qualified financial planner who can assist you with whatever you want to use your TFSA for.

 
 

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