Opening a TFSA may be a good option for newcomers who wish to invest shortly after moving to Canada. An RBC poll revealed that of newcomers who have been in Canada for five years or less, seventy-one percent of them own an investment product and among them forty percent had invested in TFSAs, making it the most popular option.
What is a TFSA?
TFSA stands for a ‘tax-free savings account.’ It is an investment product designed to help you save and earn tax-free returns.
Eligibility criteria to invest in TFSAs
- No earned income is required to start investing so you can open a TFSA immediately after moving and start saving right away!
- There is a limit on the amount you can deposit in a TFSA — up to CAD 6,000 per year for 2019.
- You must be the age of majority in your province of residence.
- You will need a valid Social Insurance Number (SIN) to open a TFSA account.
Must-know information for contributions to TFSAs
- The TFSA annual room limit varies for each year, is indexed to inflation, and rounded to the nearest $500.
- It’s not mandatory to contribute the entire eligibility amount during the year.
- The unused contribution accumulates and can be carried over to the following year. For instance, if the annual limit is $6,000, and you contribute $4,000 during 2019, the unused contribution of $2,000 will be added to your contribution limit for 2020. Therefore, if the limit set for 2020 is $6,000, your total eligible limit will be $8,000.
- If you withdraw from your TFSA, the full amount of your withdrawals can be put back in future years. Just be careful, as re-contributing in the same calendar year can result in an over-contribution that is subject to a penalty tax.
- Withdrawals from TFSA are tax-free but contributions made to a TFSA are not tax-deductible.
- TFSAs don’t have a lock-in period for funds, ensuring you can withdraw money whenever you need it.
About Arrive x RBC
Arrive and RBC are committed to helping set you up for financial success in Canada. We know that figuring out your financial life in Canada is more than just finding a bank account; it’s also about finding the right partner to invest in your financial success. RBC is the largest bank in Canada* and here to be your partner in all of your financial needs.
Learn about your investment options in Canada by registering for our upcoming webinar.
* Based on market capitalization
Disclaimer:
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.
Source: RBC
