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The best (and worst) ways to use a TFSA

White Rock Senior Wealth Advisor says maximizing your TFSA is part of a strong Total Wealth Plan
Scotia Wealth Management Senior Wealth Advisor, Dave Lee, offers Total Wealth Planning in White Rock. To book an appointment, call 604.535.4743 or email

BC residents over the age of 18 are getting another $6,000 of contribution room for Tax Free Savings Accounts in 2022, bringing the cumulative contribution room to $81,500 for those who’ve been residents of Canada, and at least 18 years of age, since 2009.

“Although the term ‘Savings’ is in its name, a wide range of investments are eligible for TFSAs, including most investments that can be held in an RRSP or RRIF account,” says Dave Lee, Senior Wealth Advisor, Scotia Wealth Management. “I joke that they should have named it a Tax Free Investment Account instead — that would help more Canadians understand how to take full advantage of it.”

Is the TFSA a good rainy-day fund?

Many people use low-interest savings products for their TFSA, but Dave says there are better options available.

“The great advantage of TFSAs is that investments can grow and compound without tax on the interest, dividends or capital gains. So rather than using the TFSA for short-term savings or a ‘rainy day fund,’ most investors should use their TFSA for the investments that are likely to grow the most.”

For affluent investors who’ve already used up their RRSP contribution room, the TFSA is a great long term retirement planning asset. Rather than it being the first place you draw from, it’s often better for the TFSA to be the very last account you tap into, so you can maximize the tax-free benefits.

Use your TFSA for flexible, high yield investments

“The beauty of the TFSA is in its flexibility. You can use it for anything,” Dave says. “The contribution room is flexible too — it’s not ‘use it or lose it,’ it’s available for future years.”

When you withdraw from RRSPs, that contribution room is gone for good. But if you withdrew $10,000 your TFSA to replace your roof in 2021, as of Jan. 1, 2022 you’d have $16,000 of contribution room: the $6,000 that everyone gets, plus the $10,000 you withdrew the year before.

“There’s no tax on withdrawals from TFSAs, and probate can be avoided if a beneficiary is named. When a spouse is named as the beneficiary (or more accurately, ‘successor annuitant’), the surviving spouse can maintain the tax-free status of the investments for the rest of their lifetime,” Dave says. “Investment earnings inside TFSAs also don’t contribute to the calculations for Old Age Security (OAS) clawback.”

Dave can help you maximize your TFSA, as part of a Total Wealth Plan. Call 604.535.4743 to book an appointment in White Rock, or email to discuss investments, life insurance, retirement planning, estate planning, generating income and minimizing your taxes. Follow him on Facebook, Twitter and LinkedIn for more financial insights.

ScotiaMcLeod, a division of Scotia Capital Inc.