TFSA Q&A

We’re now 19 days in to the New Year, and 19 days in to the existence of the new TFSA accounts. What’s a TFSA you ask? That’s a good question as many people either know little about the TFSA’s or have other questions on just how exactly they work. So let’s open the HCCU blog up for a little TFSA Q&A.

What is a TFSA?

The basics behind the TFSA are as follows. On January First 2009 the Federal Government of Canada introduced a new savings vehicle called a Tax Free Savings Account or TFSA. A TFSA consists of contributions that are made within pre-defined limits and the investment income earned on the TFSA deposits is tax-free. For 2009 you can deposit $5,000.00 in to a TFSA account offered by financial institutions such as the Hamilton Community Credit Union. Each year thereafter the contribution room will increase by at least an additional $5,000.00.

Here at the HCCU we offer two different options for investing in a TFSA. You can either deposit the money to a TFSA savings account, where the money is available to you at any time, or lock it in to a TFSA GIC for a term of 1 to 5 years at corresponding rates of interest.

You can withdrawal these funds at any time, providing they are not locked in to a GIC, but can not redeposit this amount until the following year unless you still have the available contribution room. The withdrawn amount gets added to your contribution room for the following year, just like any unused contribution room carries forward to the following year.

This should explain the foundation of a TFSA, but if you have any other questions regarding these please post them in the comments below and we’ll be sure to answer them over the coming weeks.