What is a TFSA? 

With a tax-free savings account (TFSA), you get a registered investment or savings account that lets you put aside up to $6,000/year. Interest accumulated by this account will not be taxed. 

How does a TFSA work?  

You open a TFSA with a financial institution and deposit money or various investments. Your investments then have a chance to grow and you won’t have to pay any taxes on that growth – even when you take money out of your TFSA. 

Your TFSA investment options 

A TFSA doesn’t have to be a savings account at a bank. You can use it to invest in:

  • bonds, 
  • stocks, 
  • mutual funds, 
  • segregated funds,
  • insurance GICs/trust GICs and 
  • exchange-traded funds.

Whether you’re saving for a dream vacation, a down payment on your first home, or retirement – a TFSA from Sun Life can help. 

Find out more about what you can do with a TFSA from Sun Life by connecting with an advisor near you.

TFSA and taxes 

Do you pay taxes on a TFSA?

Money deposited into a TFSA have already been taxed. That’s why you won’t need to pay tax when you make withdrawals in the future.

Plus, you don’t pay tax on any income you earn in your TFSA.

For this reason, money in a TFSA is not tax deductible. For tax-deductible retirement savings, we recommend you check out a registered retirement savings plan (RRSP) from Sun Life.

TFSA contributions

The limit is $6,000 in 2021. But the amount you can save depends on your personal TFSA contribution room.

Your TFSA contribution room starts building up from the year you turn 18 or when the Government of Canada first introduced TFSAs, which was in 2009.* This means if you’ve never put money into a TFSA before, your contribution limit could be as much as $75,500 (in 2021).

The best way to find out how much money you can contribute to your TFSA is through ‘My Account’ on the Canada Revenue Agency (CRA) website.

*You can contribute to a TFSA only for the years you are a legal resident of Canada.

The annual TFSA limit for 2021 is $6,000.

The federal government may change the TFSA contribution limit from year to year. Although that limit increase has varied, it’s generally increased in line with inflation.

Year TFSA contribution limit
2009-2012 $5,000
2013-2014 $5,500
2015 $10,000
2016-2018 $5,500
2019-2021 $6,000

Then you might be able to deposit a total of up to $75,500.

Remember, any unused TFSA contribution room automatically rolls over from one year into the following year.

You automatically carry forward unused contribution room to future years.

Only if you’ve been a non-resident of Canada for an entire year - during which time you won’t have earned any contribution room.  

TFSA withdrawals

You can usually withdraw any amount from your TFSA. It may take a few days to withdraw your money, depending on your investment.

You can withdraw money whenever you want, for any purpose. However, you’ll want to check if the product (insurance GIC, trust GIC, segregated fund, mutual fund) you’ve invested in has any withdrawal restrictions or penalties prior to withdrawing funds.

Just remember that the specific terms of the investments you hold in a TFSA could mean it’ll take a few days for you to receive your money.

The amount you withdraw is added to your contribution room in the next year, in addition to the annual maximum. If you’ve carried unused contribution room forward from previous years, you may be able to add more than the annual maximum.

Yes, you can. But not until the next year.

Each time you deposit funds it counts as a contribution – no matter the total amount in the account. So lets say you deposit $1,000 and then withdraw it and deposit $1,000 again later in the same year. Then you’re considered to have contributed $2,000.

Then you may trigger an accidental over-contribution.

Over-contributions may lead to tax penalties from the CRA. Making a transfer avoids that problem. An advisor can help you with this.

Don't make more deposits in a calendar year than the annual limit, which is $6,000 in 2021. If you know you have additional room, however, you can add up to your maximum contribution limit.

TFSAs and RRSPs

If you've already maxed out your TFSA contribution room, you still have options. Consider contributing to an RRSP to boost your retirement savings instead.

There are many clever ways to make the TFSA and RRSP work together to improve your wealth. As a general rule, RRSPs are a good choice for longer-term goals such as retirement. But TFSAs work better for more immediate objectives, such as a new home or a car.

Take a look these comparisons to understand the differences between a TFSA and RRSP.

Then you may consider getting a non-registered account. These are taxable accounts that allow Canadians to hold a variety of investments – with no contribution limits.

Unlike a TFSA, you’ll be taxed on any money and investment growth you have within a non-registered account.

How to open a TFSA and start investing 

Any Canadian resident who’s 18 or older with a valid social insurance number (SIN) can open a TFSA.

Our advisors are ready to help you open your Sun Life TFSA. They can help you make well-informed financial decisions and maximize your savings. They can also address any questions and concerns you may have.  

Talk to your advisor or find an advisor near you to learn how a tax-free savings account fits into your financial future. Remember, there’s no cost to talk to an advisor. 
 

Find an advisor to open a TFSA from Sun Life

1The TFSA contribution limit has changed over the years. 2009-2012 - $5,000; 2013-2014 - $5,500; 2015 - $10,000; 2016-2018 - $5,500; 2019 - $6,000.  For future years, the amount may be increased in increments of $500 to correspond with the rate of inflation.

2Beneficiary designations are not permitted in Quebec for GIC or mutual fund TFSAs.