A Case Study Actual TFSA Client Account with a Value of $97,499
Value as of January 5, 2017

Is this the value of your TFSA? If it is lower, you should ask yourself why. Perhaps it is time for you to get a 2nd Opinion on your investment portfolios. We provide you with a 60-minute complimentary consultation to review your portfolio construction and make sure that it is aligned with your objectives. That of course includes maximizing your return on a risk adjusted basis, even if it is only a $52,000 investment like the TFSA above.

Speaking of return on a risk adjusted basis: the above TFSA account value, implying a 16.3% annualized rate of return since 2009, was not achieved by taking excessive risk in the account. It was not one or two high risk stocks. It was not a microcap, emerging market or sector fund like biotech or gold. We steer our clients away from those high risk areas. It was a well diversified equity portfolio with a risk classification of ‘medium’, as it would be for most global, large cap equity portfolios. Given the objectives for this portfolio and the long time horizon we were given by the investor, we deviated from our base case portfolio construction and created a customized solution to maximize the risk adjusted return for our client.

TFSA is the most democratic of investment accounts we have in Canada. Whether someone is well off or teetering on the verge of bankruptcy, every person who is 18 or older in a given year receives a certain annual contribution limit. That limit was $5,000 per year for the years 2009 through 2012, and due to inflation adjustment it was increased to $5,500 for 2013, 2014, 2016 and 2017. For 2015 the annual additional maximum contribution limit was set at $10,000. The contribution limits are cumulative, meaning that for a person who was 18 or older in 2009, and have not opened a TFSA account yet, the total allowable contribution is $52,000.

Although the contributions are not tax deductible, any withdrawals, including any growth in value, are not taxable either. It does not even appear anywhere on a taxpayer’s income tax filing, although the CRA does keep track of the contributions and withdrawals to assess severe penalties if the contribution limits are exceeded.

TFSA is short for Tax Free Savings Account, although it should have been called Tax Free Investment Account. A savings account conjures images of people standing in line at the bank branch and transferring some of their funds from their chequing account to a savings account earning 1% or 2% a year. That is not what the TFSA was designed to do. It was meant to be invested in growth portfolios to amass large gains inside the tax sheltered account over a long time period. This way when the time comes to support your life style in retirement, you can do so without any taxes to be paid or interruptions to other government programs such as Old Age Security.

This type of tax planning is part of our value proposition to you. We look forward to getting to know you and create the optimal strategy combined with the right execution to achieve your objectives.

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