One recurring theme here on the LifePast50 Finance page will be making $ by not paying taxes.  One thing we’ve learned is that the tax benefits of contributing to a Registered Retirement Savings Plan are now costing us when we withdraw.    And, of course, we continue to pay income and/or capital gains taxes on $ invested outside an RRSP.  But along comes the Canadian Tax Free Savings Account (TFSA).

Starting January 2009, you will have another great way to earn non taxable investment income with the introduction of the new Tax-Free Savings Account (TFSA) by the Federal Government.  Canadian residents and retirees in particular are able to contribute up to $5,000 per year without being taxed on investment income or capital gains. And while there is no tax deduction for contributions, the Tax-Free Savings Account is extremely flexible and can be used to help meet both short- and long-term investment goals.   Some advantages for those in the LifePast50 category include:

- the ability to withdraw funds any time without being taxed

- and, you can recontribute (in the next year) the amount withdrawn without penalty; just like having an account in the Turks and Caicos.

- funds can be deployed in many investment vehicles from mutual funds to GICs to brokerage investment accounts.

- a contribution can be made in a spousal account to further split investment income and

- if you don’t contribute the maximum amount, unused contributions can be carried forward

If you have any investment $ outside tax sheltered accounts I can’t see why we souldn’t take advantage of this new program – heck, we’ve got to get even with Jim Flaherety and his Finance Department for killing income trusts!