Tfsa Innovative Canadian Tax Free Savings Account
Tax and taxes are the source of income of every nation to keep its government running
. Government taxes it can be said go all the way in history back to the Romans and Roman Legions. They are used and utilized to support all government projects which presumably could help in keeping peace and order. It also generates more work opportunities for its people, funds economic infrastructures, and provides public services and utilities. Like what Benjamin Franklin, a former US President, once said, "There is nothing more certain than death and taxes". There is quite a humor in that statement but after more than a decade, it certainly is true.
Most of you may agree that taxes are eating away our earnings but as responsible and law-abiding citizens, we have to pay our taxes.
On January 1, 2009, Canada, one of the first nations to implement tax collections, took a big leap and launched a Tax Free Savings Account. It is an account that provides tax benefits for saving in Canada. It was founded by the Honorable Jim Flaherty, a Canadian federal Minister of Finance, in the 2008 Federal Budget. What does this entail?
With the implementation of the TFSA, any Canadian who is at least 18 years of age or older, and who has a valid Canadian social insurance number can invest and save for their future.
Under the TFSA, contributions, withdrawals of investment income or contributions from the account are tax free. Up to $5,000 per year can be placed into a TFSA and can then be withdrawn at any point of time, free of charge. It doesn't have any expiration as well. This is beneficial for the seniors who just depend on their Registered Retired Savings Plan (RSSP).
Registered Retired Savings Plan (RRSP) on the other hand, is a retirement plan that allows payment of taxes to be delayed thus can somehow alleviate the impact of taxes on their finances. It is maybe similar to TFSA since it also provides financial security but they actually differ.
Under this plan, any income earned by an individual is usually tax free as long as it remains in the plan. However, there is a deduction for contributions, and withdrawals of contributions and investment income are all taxable. In line with this, there is an age limit for contributing to this plan and that's when an individual reaches 71 years old, he is given an option to withdraw them; transfer them to a RRIF (Registered Retirement Income Fund) - a retirement fund that you establish and register in order to provide income during your retirement; use them to purchase an annuity for life; or use them to purchase an annuity spread over a number of years.
With the world economy being unstable today, it is best that we should start investing for our future now. Financial accounts such as RSSP and TFSA can help you secure your future. Both have unique features that can be combined to maximize the benefits of both plans. There is nothing worst than having a good financial life today and not investing for the future.
by: Terry S Vostor
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