TFSA has tremendous flexibility...

The TFSA (Tax-Free Savings Account) has tremendous flexibility in that it allows the account holder to withdraw funds at anytime for any purpose.

In the 2008 Federal Budget, Finance Minister Jim Flaherty proposed the introduction of a new financial tool (account) that would help individuals to save in a more tax-efficient manner. Commencing in 2009, Canadians age 18 and older can contribute $5,000 per year into a Tax-Free Savings Account (TFSA). The amount of annual contribution room will be adjusted for inflation in increments of $500 beginning in 2010. Unused contribution room can be carried forward. Unlike RRSPs, the contribution room
for the TFSA is not based on levels of eligible income. It is a flat amount per year ($5,000 in 2009) for each Canadian over age 18 filing a tax return. Contributions are not deductible for income tax purposes and withdrawals are not taxable. However growth inside the account is exempt from taxes. And, unlike an RRSP which much be collapsed by age 71, there is no upper age limit for the owner of a TFSA in terms of contributions or withdrawals.

The intent is to encourage savings while helping to reduce taxes.

The TFSA – it’s right for Canadians of all ages, income levels and investing needs