Include a TFSA in your retirement plan

(NC)—Since its introduction in 2009, millions of Canadians have opened a Tax Free Savings Account or TFSA, according to the Canada Revenue Agency. But if you're still unsure whether it's for you, financial expert Barb Kwasnik, a Calgary-based managing director from Desjardins Financial Security Independent Network, has some helpful tips to share.

What's new in 2013? Starting this January, the annual contribution amount has been raised to $5,500 a year. Your annual contribution limit will appear on your Notice of Assessment after your tax return has been processed. If you have a left over balance, this will added to your contribution limit in the following year.

Lots of advantages and uses: One great TFSA advantage is that there usually isn't a minimum deposit required to open an account, which makes it easy to pay yourself first. Many people open a TFSA to save for a dream vacation, home renovations and a new car— basically short- or long-term projects. You can also invest your money anyway you choose and you will have access to the funds at anytime, all tax-free. It's also worth noting that your withdrawals won't compromise your eligibility to receive federal benefits like the Guaranteed Income Supplement, Employment Insurance or the Canada Child Tax Benefit. Any withdrawals you make can be replaced in the following year.

Does a TFSA make sense as a retirement savings tool? First of all, it's an excellent retirement savings alternative if you've maxed your RRSP contributions. Remember, your TFSA deposits are tax-free and tax-receipt-free. In other words, you will not receive a tax receipt for your deposits nor will your withdrawals be taxed like an RRSP. This means more money will stay in your pocket. So from a taxation point of view, the TFSA is a very creative savings tool.

Remember to diversify within your annual limits: Consider shaking things up with a little diversification. You can choose TFSA investment options like mutual funds and guaranteed investment funds or GIFs.

For more information about the TFSA, speak to your financial advisor. Or for immediate answers, visit Desjardins Financial Security Independent Network online at www.dfsin.ca.

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