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Canadian investors are using their TFSA to build self-directed pension funds that can generate strong long-term returns and provide tax-free passive income in retirement.
The government created the TFSA in 2009 to give Canadians an extra savings tool for building wealth. Since its inception, the TFSA contribution limit has increased annually to the current maximum level of $81,500. This is large enough for investors to build significant personal pension funds to cover their living expenses in the golden years.
The TFSA provides more flexibility than the RRSP in that money can be removed at any time without a tax holdback. TFSA contributions are made with after-tax income. In addition, any funds taken out of the TFSA will open up equivalent new TFSA contribution space in the following calendar year.
All interest, dividends, and capital gains…