Despite TFSA limit reduction, Canadians have lots of tax-free saving room

Penticton, B.C. — The new federal government made good on one of their campaign promises this week, reducing the tax-free savings account (TFSA) contribution limit to $5,500 annually. The reduction rolls back the $10,000 limit put in place by the previous federal government.

For many Canadians, the change is likely being met with apathy or disregard, at the very least.

“Many people still are not taking advantage of the TFSA,” says Stacey Agecoutay, an investment specialist with Valley First, a division of First West Credit Union. “It’s been well noted in recent years that Canadians aren’t saving as much as they used to, so many likely have several thousand dollars worth of TFSA contribution room despite the reduction.”

The upside to the announcement is that the $10,000 limit for the 2015 tax year counts toward unused contribution room.

“The extra $4,500 in TFSA contribution room for this year, if unused, carries forward into future years,” says Agecoutay. “The opportunity to take advantage of it won’t disappear.”

Agecoutay adds it can be difficult for Canadians to find the funds necessary to make the maximum contribution to a TFSA—but investment experts are skilled at identifying solutions to these types of financial scenarios.

“In the case of a TFSA, one of the best sources of funds is existing investment money—many people are unaware they can simply move from one investment bucket to another,” says Agecoutay. “The TFSA maximum contribution may be most easily accomplished by a simple in-kind transfer of investments.”

Agecoutay recommends that people sit down with their financial advisor to help with all the ins, outs and options of budgeting, saving and investing.

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Submitted by David Kropp
Manager, Communications
Valley First