Q – I am 76 years old and earn the maximum amount of money allowed through my retirement pension before the Old Age Security clawback. I would like to withdraw money from my investments to travel with my wife and do not want to face any clawbacks or tax consequences. Which account should I withdraw funds from to achieve my goal: my cash account or my Tax Free Savings Account? – Jack S., Toronto, Ontario
A – Tax-Free Savings Accounts are one of the few gifts granted to Canadian investors from the government. To avoid the Old Age Security clawback and taxable dispositions, you and your wife should withdraw the money from the Tax-Free Savings Accounts (TFSAs).
Holding mutual funds inside your TFSA is an excellent way to increase your overall net worth. You can contribute up to $5,000 a year, and any return on your investments grows tax-free. Funds can be withdrawn from a TFSA tax free at any time for any purpose. Investment income earned within a TFSA and any withdrawals from a TFSA have no effect on your eligibility for federal income-tested benefits, such as Old Age Security. You may also elect to replace the withdrawn amount in future years. However, make sure you follow the contribution rules carefully and do not inadvertently overcontribute in any single year. Happy travels, Jack! – R.T.
Robyn Thompson, CFP, is the founder of Castlemark Wealth Management, a boutique financial advisory firm, specializing in customized financial, investment, and retirement planning. Phone 416-828-7159 or email today to firstname.lastname@example.org for a no-obligation, no-charge Castlemark Integrity Financial Planning consultation.
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Notes and Disclaimer
The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.