The TFSA account is relatively new and often referred to as a younger sibling to the RRSP.

The choice of investing in your TFSA or RRSP first is still a debated question but what isn’t up for debate is your contribution amount per year and how much you accumulate in contribution room.

The TFSA contribution limits starts accumulating once you turn 18 unlike RRSP where you need to have income declared to accumulate contribution room. It’s the perfect vehicle to create a passive income machine with dividend investing.

How much you can contribute is based on your accumulated limit, and how much you have contributed. Your TFSA contribution room is pretty easy to calculate – check out the amazing calculator below with mind-blowing math.

Make note of this; the TFSA account is the best way to start investing. Students should start here, and build a six figure portfolio faster than they can imagine with a simple ETF model portfolio.

2023 TFSA Contribution Limit

The TFSA contribution room for 2023 is $6,500 for a total contribution of $88,000 since inception.

Here are the TFSA limits by year since the introduction of the account in 2009 with a total TFSA room since inception at $88,000.

wdt_ID Year Yearly Limit Cumulative Comment 1
2009
5,000
5,000

2
2010
5,000
10,000

3
2011
5,000
15,000

4
2012
5,000
20,000

5
2013
5,500
25,500

6
2014
5,500
31,000

7
2015
10,000
41,000

8
2016
5,500
46,500

9
2017
5,500
52,000

10
2018
5,500
57,500

11
2019
6,000
63,500

12
2020
6,000
69,500

13
2021
6,000
75,500

14
2022
6,000
81,500

15
2023
6,500
88,000

16
2024
6,500
94,500
Estimate
17
2025
6,500
101,000
Estimate
18
2026
6,500
107,500
Estimate
19
2027
7,000
114,500
Estimate
20
2028
7,000
121,500
Estimate
21
2029
7,000
128,500
Estimate
22
2030
7,500
136,000
Estimate

All of the profits made within a TFSA is completely tax free including the withdrawals. This is a game changer for retirement. Imagine never paying taxes in retirement, wouldn’t it be amazing? … and yet it’s possible with a diligent investment.

Future contribution limits are indexed to inflation rounded to the nearest $500. You can always review the detail over at the Canada Revenue Agency (CRA), but to see how profitable a TFSA can be, continue reading.

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TFSA Contribution Calculator

It’s pretty simple to calculate your contribution with the table above. The formula is the total for the current year minus your contribution to date minus the total for the year before you turn 18.

For example, if you turned 18 after 2011, the formula would have the following parameters:

Total for 2023 is $88,000
Contribution to date, say $10,000
Total before turning 18 is $10,000

We are left with the following math: $88,000 – $10,000 – $10,000 = $68,000

Now that you can easily calculate your potential, and actual TFSA contribution room. My suggestion is that you try and maximize your TFSA contribution each year if you can.

A dividend growth investing approach will easily beat inflation and provide solid returns towards a tax-free retirement.

Accessing Your Contribution Details

As soon as you file a tax return, you should have an account with the Canada Revenue Agency, and you can always check the status of your contribution room under your account. Financial institutions are required to report the contributions, but they do it leisurely.

You simply need to create an account. It’s pretty useful to have the account and you can manage your direct deposit for your tax return.

TFSA Withdrawal Rules

You can withdraw tax-free at any time but you cannot contribute that money until the new year. If you were to contribute the maximum over the first few months of the year and then withdraw it in August, you can only add it back come January 1st of the following year.

TFSA Over-Contribution Penalty

If you happen to over contribute, the extra contribution will be subject to a 1% penalty per month. I recently handled an RRSP over-contribution and it’s more paperwork than you want.

If you realize you have over-contributed, quickly withdraw the amount and start filling the forms. Get ahead of it to avoid surprises.

TFSA Growth Opportunity

Having the account is step one in building wealth, the next step is putting your money at work. When you do and you start early, time can do wonders when partnered with compound growth.

Below is a graph and table showing the potential growth. Choosing between investing in your RRSP or TFSA first is a good problem to have and the perfect solution is based on your situation. Investing in a RRSP requires diligence in how you handle the tax refund to truly reap the benefits.

The better you do in your TFSA the less it will impact your OAS clawbacks and the more you can retain from your CPP payments in retirement.

How you decide to grow this tax-free account can have a major impact later in life, and that’s why it’s an investing account and not an emergency account. Investing is important if not critical.

Before you think the 10% growth in the table below is not possible, my TFSA market value is outlined below in the table, and keeping up with the 10% and doing better.

Check out my stock portfolio to see what I hold. Dividend investing is true passive income.

It’s true what they say: “The first million is the hardest!”.

wdt_ID Year Yearly Limit Cumulative 5% Growth 10% Growth Dividend Earner Spousal 1
2009
5,000
5,000
5,250
5,500
Not Tracked
Not Started
2
2010
5,000
10,000
10,762
11,550
Not Tracked
Not Started
3
2011
5,000
15,000
16,550
18,205
Not Tracked
Not Started
4
2012
5,000
20,000
22,628
25,525
Not Tracked
Not Started
5
2013
5,500
25,500
29,534
34,128
$41,742
Not Started
6
2014
5,500
31,000
36,786
43,590
$52,820
Not Started
7
2015
10,000
41,000
49,125
58,949
$56,307
Not Started
8
2016
5,500
46,500
57,356
70,984
$70,200
Not Started
9
2017
5,500
52,000
65,999
84,034
$78,900
$13,308
10
2018
5,500
57,500
75,074
98,487
$96,937
$58,818
11
2019
6,000
63,500
85,128
114,986
$129,467
$82,596
12
2020
6,000
69,500
95,684
133,030
$153,993
$95,906
13
2021
6,000
75,500
106,769
152,933
$181,601
$113,194
14
2022
6,000
81,500
118,407
174,827
$176,147 YTD
$146,512 YTD
15
2023
6,500
88,000
131,152
199,459

16
2024
6,500
94,500
144,536
226,555

17
2025
6,500
101,000
158,587
256,361

18
2026
6,500
107,500
173,342
289,147

19
2027
7,000
114,500
189,359
325,762

20
2028
7,000
121,500
206,177
366,038

21
2029
7,000
128,500
223,836
410,342

22
2030
7,500
136,000
242,902
459,626

23
2031
7,500
143,500
262,923
513,838

24
2032
7,500
151,000
283,944
573,472

25
2033
7,500
158,500
306,016
639,069

26
2034
7,500
166,000
329,192
711,226

27
2035
7,500
173,500
353,526
790,599

28
2036
7,500
181,000
379,078
877,909

29
2037
7,500
188,500
405,906
973,950

30
2038
7,500
196,000
434,077
1,079,595

TFSA Investing Strategy

Before you delay investing by learning about all various strategies, start with the simplest one, and buy the S&P500 index. The index covers the top 500 companies in the US – all international conglomerates.

VFV is an ETF purchased in Canadian dollars tracking the S&P500 index. It’s my go to benchmark.

When trying to build wealth or outperform an index, you need the right tools to find your winning investment. As a DIY investor, my winning tool is Stock Rover. It allows me to build the most powerful dividend stock screeners. Stock Rover is powerful! It’s like having  a supercar in your hands, take the time to learn the tool.

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