Comment 62818

By Borrelli (registered) | Posted April 28, 2011 at 14:01:39

Hi Mr Grande,

You're right, you can definitely get better rates than the 2% I used as an example there, but that's not really the point. What I was trying to highlight is that banks promote simple TFSA savings accounts as the main use of TFSAs, but this obscures the fact that most TFSA 'power-users' (if I can characterize them as such) wouldn't think of wasting their limited TFSA room on a measly savings account with 2-3% return--they would use their TFSA to shelter investments with higher returns like stocks. With the TSX up more than 14% between 2009 and 2010, you can see why. There are many investors forums online where this strategy is eagerly promoted because, well, it's more profitable.

RE: your second question, you pay absolutely no taxes on ANY withdrawals from your TFSA, ever. Check out that pamphlet I linked to above, from the GoC website:

"Your contributions to a TFSA are not deductible for income tax purposes but the investment income, including capital gains, earned in your TFSA is not taxed, even when withdrawn."

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