Rejoice at the federal government’s holiday gift to Canadians: The yearly Tax-Free Savings Account (TFSA) contribution limit is finally going up in 2019 from $5,500 to $6,000.
Of course, it’s not really a gift at all, just a scheduled update. The actual TFSA yearly limit was set at $5,000 back in 2009 when the investment account was first created but is indexed to inflation every year since and rounded to the nearest $500 to simplify things for investors. The exception was 2015 when the TFSA limit was hiked up to $10,000 for that one year.
This new limit, announced last week, means that someone who has never contributed to a TFSA and was old enough to have one since its inception will have a cumulative contribution room of $63,500 come Jan. 1, 2019.
|Year||TFSA Annual Limit||TFSA Cumulative Limit|
Investing ideas for your TFSA
Herman VanGenderen has more than $100,000 in his TFSA. He grew his money by focusing on Canadian and foreign stocks, diversification and dividends. Here’s what you can learn from his near-perfect TFSA investing strategy. Or you can buy during depressed markets like this investor (he has nearly 40% of his investments in BP stock), whose portfolio experts commend for having a clearly-defined approach.
Simple, ETF portfolio
Patti has more than $57,000 spread out across 19 holdings. Experts give her a simple, two-ETF solution to make sure she’s well-diversified and making bank in the long term. Here’s another example of someone who’s just starting out with TFSAs, looking for a simple, no-fuss approach to start building wealth in the account. Or, if you’re more comfortable with risk, you could go the route of this 31-year-old Toronto police officer, who focuses on aggressive, equity index funds.
Out of the box (and not recommended)
There are some strategies that work for investors—but you shouldn’t necessarily try to recreate. For instance, this man suggests buying stocks and holding on to them forever and ever, while experts worry that he’s not diversifying enough. And this investor transfers Canadian dividend stocks “in-kind” to and from his unregistered account annually, a strategy that seems to work but doesn’t hold up upon closer inspection.