Some Facts About A TFSA :
TFSA (Tax Free Savings Account) allows Canadians to make contributions to this plan and pay no taxes on the profits from your investments in your TFSA.
NOTE: A TFSA is NOT An Investment !
The sad reality is that -studies have shown- the majority of Canadians have no idea where their TFSA funds are invested. The single most important question to ask yourself when it comes to your TFSA is this: Do I know and understand where my money is invested?
You will get no benefit from your TFSA unless you are maximizing your returns. A good exercise will be for you to take a look at your investment statement for your TFSA and figure out how much profit you have made since you opened a TFSA plan.
A Mortgage Reduction Strategy:
Facts:
1. If the interest rate on your Mortgage is 5%, this is a real cost of 7% to 8% because you are making mortgage payments in after tax dollars.
2. If you are not earning a guaranteed rate of return of at least 8% then it makes no sense to have funds in your TFSA if you have a balance on your mortgage.
3. The Profits from your Home are Tax Free, just like investments in a TFSA.
Strategies?
1. Cash in your TFSA and use the proceeds to pay down your mortgage.
2. If you need funds for personal use in the future, you can arrange for a line of credit with the equity in your home as collateral.