The cumulative maximum tax-free savings account, or TFSA, contribution limit currently stands at $109,000. But this is not everyone’s limit. Your own personal limit depends on your age, your contribution history, as well as your withdrawal history and your residency status.
Let’s figure out where you stand.
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When did you turn 18?
The table below maps out the yearly contribution limits since the TFSA was first introduced in 2009.
Assuming you are a Canadian resident, your own personal limit can be calculated by turning to the year you turned 18 and adding up the yearly contributions since that year. How much have you already contributed? And how much room is unused?
Many investors are behind on their TFSA contributions. According to the Canada Revenue Agency, the average unused TFSA contribution room across all ages is just under $50,000. This means that there’s a large amount of money that Canadians are essentially leaving on the table.
The opportunity
If you are one of the many who have yet to even come close to maximizing your TFSA contributions, it’s never really too late. Although it is of course better to start contributing as early as possible.
Usually, Canadians tend to start thinking more seriously about savings and financial strategies as they get older. But if you’re reading this, then maybe now is the time to really get serious about it – regardless of age.
The tax-savings that accrue over a lifetime of tax-sheltered investment returns is significant. It can make a big difference in achieving your financial goals. Simply put, the TFSA is arguably one of the best investment vehicles available to investors today.
Consider steady and secure dividend stocks
Of course, when selecting the right dividend stocks for your TFSA, a focus on predictability and safety is a good way to go. Enbridge Inc. (TSX:ENB) is an example of a dividend stock that’s ideal as a TFSA investment. It’s currently yielding a very generous 5% AND it’s backed by extremely predictable and secure cash flows.
Enbridge’s track record of dividend payments is a reflection of this fact. The company has been paying dividends for more than 70 years. Also, the company has 31 consecutive years of annual dividend increases under its belt.
As you search for the right dividend stocks for your future TFSA investments, Enbridge stock should surely make the shortlist.
Canadian banks
Another set of companies that have survived and thrived through numerous crises is Canadian banks. These banks are backed by Canadian regulations which are aimed at keeping them operating with solid financial backing. This means that they must strike the right balance between minimizing risk and maximizing returns, while maintaining financial stability.
And this is exactly what they’ve done. Toronto-Dominion Bank (TSX:TD) is one of Canada’s top banks. It’s also a blue-chip stock that has survived and thrived in all markets. This is because of the bank’s conservative risk culture, well-capitalized balance sheet, and scale and North American presence.
In the last 30 years, TD Bank stock has paid out a dividend. This dividend has grown more than 1,500% and it’s been reliable through the good and bad times – another example of reliability and consistency.
The bottom line
Wherever we stack up in our tax-free savings account journeys, today is a good time to remind ourselves of the benefits of maximizing our contributions as early as possible – more tax-savings, greater returns, and of course, the compounding effect.
