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Forget financial new year’s resolutions – I like the idea of tidying up your finances before Dec. 31, so you can coast into the new year in good shape. One of the things you should pay attention to in the next six or so weeks is your tax-free savings account. Here are five TFSA moves to make before the end of 2024:

  • If you plan a withdrawal, consider doing it now: To avoid any risk of over-contribution penalties, a good rule is to wait until the next calendar to replace money withdrawn from a TFSA. If you make the withdrawal in late 2024, you can put the money back any time you like once the new year begins.
  • Max out your contribution for 2024 and map out 2025: The limit for this year is $7,000, and the same applies to next year. Of course, unused room can be exploited at any time. But if you get your money invested now, you have the potential to start earning tax-free gains immediately. A solid move for next year is to figure out how much you can afford to contribute, divide that amount by 26 and then have money electronically transferred to your TFSA investments each payday of 2025.
  • Invest, don’t be a market-timer: Stocks surged this year and, with all the uncertainty in the world now, it’s reasonable to wonder about a correction. Sitting in cash may seem appealing, but returns from risk-free parking spots for money are down to between 2 and 3.5 per cent. Further declines can be expected every time the Bank of Canada cuts its overnight rate. If you’re nervous about putting a lump sum into the markets now, try a few monthly or quarterly additions.
  • Make sure you picked a successor holder or beneficiary for your TFSA: For spouses, the best choice is often the successor holder. It means your spouse or common-law partner would take over your TFSA on your death tax-free, regardless of how much TFSA room they have.
  • Log into the Canada Revenue Agency MyAccount portal and find out how much lifetime TFSA unused contribution room you have: CRA by now should have accurate information on how much you added to your TFSAs up until the end of 2023. Beware using CRA’s numbers early in the year because they may not be up to date.

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Ask Rob

Q: Interesting article about TFSAs. But the follow-up question needs to be: When should I withdraw from a TFSA? I will have a $15,000 special withdrawal next spring. Should I take it from my TFSA or invested savings? How do you decide when to withdraw money from a TFSA?

A: Money in a TFSA grows tax-free, so why disturb it if you don’t have to, i.e. you have other savings? It’s worth noting that you can recontribute money withdrawn from a TFSA, but this is best done in the calendar year after the withdrawal to avoid potential issues with over-contributions. Non-registered money is more flexible.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.


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