What is TFSAMaximizer™?
TFSAMaximizer™ is an investment and tax strategy designed to convert RRSP savings into Tax Free Savings Accounts (TFSAs) over time. For many Canadians in higher income brackets, RRSP savings can represent a significant future tax liability. By taking advantage of the 10-20 years before retirement to convert these funds into a TFSA, a Tax Free retirement becomes a reality. Deferring taxes with RRSPs is good, but Tax Free is better!
How is a TFSA different from an RRSP?
Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TFSAs) are both tax advantaged registered accounts.
RRSPs offer a tax deduction upon contribution but withdrawals are fully taxable at your highest tax rate in the year you make the withdrawal. In the year you turn 71, RRSPs must convert to Registered Retirement Income Funds (RRIFs) and a minimum annual withdrawal is imposed. This withdrawal is fully taxable as income in your marginal tax rate in the year it is withdrawn.
TFSAs earn tax-free investment income with no taxes on contributions, interest earned, dividends or capital gains. TFSAs do NOT offer a deduction on contribution but funds can be withdrawn tax free at any time. Funds withdrawn from a TFSA can also be replaced.
For Canadians in high income tax brackets, RRSPs can represent a significant future tax liability. Transferring RRSPs into a Tax Free Savings Account (TFSA) using TFSAMaximizer™ can result in a huge tax savings.
What are the advantages of a TFSA over an RRSP?
TFSAs are more advantageous to Canadians in higher income tax brackets (> 35%) who expect to continue earning a higher income after retirement. RRSP withdrawals, required by law after age 71, can represent a future tax liability. Withdrawals from TFSA accounts are 100% tax exempt and therefore preferable.
Do I Need to Have a TFSA account?
Yes, a TFSA is required for each investor in TFSAMaximizer™. Accounts will be opened by your TFSAMaximizer™ Investment Advisor as part of the setup process.
Can I use my existing TFSA account for TFSAMaximizer™?
No, TFSAMaximizer™ requires a special purpose TFSA account. This fully managed account is designed to maximize contributions and investment returns. You are still free to make contributions and withdraw funds at any time.
Do I need to close my existing TFSA or transfer my balance?
Yes, in order to maximize annual investment returns, we recommend that you transfer the full balance in your TFSA to your special purpose TFSAMaximizer™ account. This may be as easy as transferring an existing cash balance or may involve liquidating current holdings. A TFSAMaximizer™ Investment Advisor will assist in this process.
Can I work with my current financial advisor?
TFSAMaximizer™ requires a specialized Investment Advisor to implement the strategy and advise on the special purpose trustee accounts and portfolio options specific to TFSAMaximizer™. You can continue to work with your existing Financial Advisor on all of your other investment accounts.