When Sophia first heard the term Tax-Free Savings Account (TFSA), the first thing that came to her mind was a low- or no-interest account at a bank. She soon learned that just about every investment option available to her in an RRSP is also available to her in a TFSA plan.
Glenn, 58, is of modest means and has saved less than $50,000 in his RRSPs. He likes the fact that TFSA withdrawals will not affect his income-tested benefits, like the Guaranteed Income Supplement (GIS), when he retires. For every dollar of income from his RRSPs, there will be a fifty cent reduction in his GIS. It may make more sense for Glenn to gradually collapse his RRSP before he retires and deposit the after-tax proceeds in a TFSA.