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Why TFSAs Are Golden in Retirement
For retirees, TFSAs offer unique advantages that become even more valuable:
- Withdrawals are completely tax-free
- Don't affect OAS or GIS eligibility
- No mandatory withdrawals at any age
- Contribution room carries forward and continues growing
- Withdrawals restore contribution room the following year
Strategic TFSA Uses in Retirement
Emergency Fund Location
Keep 1-2 years of expenses in your TFSA as an emergency buffer. When you withdraw, there's no tax hit, and you regain the contribution room next year.
Protect OAS from Clawback
OAS clawback begins at $86,912 (2024). By drawing income from your TFSA instead of your RRIF, you can keep taxable income below the threshold and preserve your full OAS.
Hold High-Growth Investments
Since all gains are tax-free, consider holding investments with higher growth potential in your TFSA. Capital gains and dividends compound without any tax drag.
TFSA vs RRSP Withdrawal Order
In retirement, the order you withdraw from accounts matters:
- Early retirement: Draw RRSP/RRIF first to reduce future mandatory withdrawals
- Higher income years: Draw TFSA to avoid climbing tax brackets
- Lower income years: Draw RRSP/RRIF to fill lower brackets
- Always: Leave TFSA to grow tax-free as long as possible when practical
💡 Note: Consider drawing RRSP strategically in your 60s before age 71 mandatory conversions, then moving withdrawn funds to your TFSA.
Contribution Room for Long-Time Canadians
If you've never contributed and were 18+ in 2009, your cumulative room is substantial (over $95,000 by 2026). Even in retirement, continue maximizing contributions when possible.
⚠️ Important: Keep careful records of contributions and withdrawals. Over-contributing results in a 1% monthly penalty on excess amounts.
TFSA for Estate Planning
Name your spouse as a "successor holder" rather than a beneficiary. This allows them to take over the account directly, preserving the tax-free status without affecting their own contribution room.
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About Maple Wealth Guide
Maple Wealth Guide is an independent Canadian financial education website. Our team of educational writers researches and explains investment concepts, retirement-related topics, and personal finance information for Canadians aged 50 and over. We are not licensed financial advisors and do not provide personalized recommendations. All content is for educational purposes only.