Many newcomers indicate that they make it a top priority to purchase an investment product shortly after arriving in Canada. In fact, an RBC poll revealed that of newcomers living in Canada five years or less, 71 per cent of them own an investment product, with a tax-free savings account (TFSA) being the most popular option at 40 per cent.
Opening up a TFSA may be a good option for new Canadians who wish to invest shortly after moving to Canada. It is designed to help you save and invest money and the return you earn is tax free. You can withdraw funds whenever you need, making it a flexible way to save for your future goals. Additionally, you don’t need to have earned an income to be able to contribute to a TFSA. So newcomers can open up a TFSA and start saving right away.
Here’s what you need to know about TFSAs:
As a newcomer, you benefit from the fact that you don’t need earned income to save or invest in a TFSA. There is, however, a maximum amount of money you can deposit into your TFSA each year. All Canadian tax residents who are at least 18 years of age have the same contribution room of up to $6,000 a year. You must be the age of majority in your province of residence and have a valid Social Insurance Number to open an account.
You don’t need to have the full $6,000 to get started. Unused contribution room accumulates and can be carried over from year to year. 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 penalty tax.
Income earned and TFSA withdrawals are not included as income for tax purposes. This means the TFSA offers a high degree of flexibility and will help to minimize your income tax. The money you deposit to your TFSA can help you achieve your short, medium or long term goals.
A TFSA can be a great way to help save for your future. Talking to a financial advisor can help you understand the benefits of a TFSA and the investment options available to you.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors 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 any of its affiliates.