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The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

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Freedom 55 Financial is a division of The Canada Life Assurance Company and the information you requested can be found here.

Using a TFSA for retirement

Key takeaways

  • More and more seniors are discovering the flexibility of using TFSAs in retirement.
  • The benefits of using a TFSA in retirement.
  • You can continue to contribute to a TFSA in retirement, withdraw money from it for income, and use it for estate planning.

RRSPs, TFSAs and retirement

Many Canadians concentrate on using registered retirement savings plans (RRSPs) to save for retirement. However, more and more are finding out about the flexibility of using a tax-free saving account (TFSA) both to save for retirement and use in retirement for income. 

The benefits of using a TFSA in retirement

There are lots of good reasons to use a TFSA in retirement.

  • You can keep contributing to a TFSA for as long as you live, unlike an RRSP which you must convert to a RRIF at age 71. If you have more retirement income than you need, you can place it in your TFSA, providing you have contribution room.
  • Your TFSA contribution room will continue to grow annually as long as you live.
  • TFSA contribution limits aren’t based on income, so regardless of your income in retirement, you know how much you can save in your TFSA.
  • If you require more income in a certain year, you can withdraw money from your TFSA without paying income tax.
  • The only limit to how much money you can withdraw from your TFSA is the amount you have in it, unlike other retirement plans
  • TFSA withdrawals won’t impact your threshold to receive payments from Old Age Security (OAS) or the Guaranteed Income Supplement (GIS).

How to use your TFSA in retirement

You can use your TFSA to help you achieve several needs unique to retirement. 

Keep contributing

If you’re still earning income in retirement by working part-time or by other means, you can continue to put money into your TFSA (up to your contribution limit) and watch the proceeds grow tax-free. 

The same goes for  income you may not need from your minimum required RRIF withdrawal. 

You may also decide to transfer money from a non-registered investment to a TFSA. You’ll pay tax at the time the investment is sold or transferred, but you can look forward to future tax-free growth and withdrawals. 

Withdraw tax-free income

If you require money to cover a large expense such as a home renovation, a vacation or even long-term care, you can withdraw it from your TFSA without impacting your income tax bracket. 

If you were deferring taking CPP/QPP and OAS benefits until age 70 to maximize their payout, you can use TFSA withdrawals to supplement taxable income from other sources such as a RRIF.

Estate planning

By naming your spouse a “successor holder” on your TFSA, they can take over your TFSA upon your death with no tax complications. 

If you want to leave TFSA money to a child or other survivor, you can name them as a beneficiary, and they’ll get the proceeds tax-free. 

You can also name a charity as a TFSA beneficiary and when they receive the funds, the tax will be offset by the donation tax credit. 

Or you can name your estate as a TFSA beneficiary, in which case the assets may be applied to any estate tax which may be payable.  

What's next?

  • Now that you know more about using a TFSA in retirement, why not meet with your advisor for help managing your money.
  • If you’re a member of a Canada Life employer-sponsored savings plan, we have licensed professionals who can assist you.
  • Contact Canada Life to learn more.

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. 

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