News Releases

TORONTO, May 11, 2009 – With the 2008 tax filing deadline now passed, many Canadians are anxiously awaiting the arrival of their annual tax-refund. To add to the excitement this year, Canadians are able to protect their tax-refund in a new way. With the average refund more than $1,400 , Canadians can take advantage of what has been heralded as the single most important savings vehicle since the introduction of the RRSP in the 1950's- the TFSA.

Why a TFSA?

• Investments can grow tax-free and can be withdrawn at any time.
• While RSPs are about longer term investing – saving for retirement, the TFSA is a great way to save for mid-term goals (1-5 years) or to supplement retirement savings.
• You can invest in a wide variety of products including high-interest savings accounts, mutual funds, publicly traded securities, GICs and bonds

“This year, Canadians are able to make even more out of their tax-refund by allowing it to grow tax-free in a TFSA. No matter how big or small your refund, the TFSA provides you with a powerful tool to save money without paying any tax on investment earnings or withdrawals. As well, TFSAs are an attractive option for just about every Canadian and are a particularly interesting option for retirees and pre-retirees who are looking for another way to supplement retirement income” said Tina Di Vito, Director, Retirement Strategies, BMO Financial Group.

The amount that Canadians can save by putting their money in a TFSA, as opposed to a taxable account where taxes are owed on earnings, is quite substantial. So how much can you save by making an annual contribution of a $1,400 tax-refund into a TFSA as opposed to the same contribution in a taxable account over 20 years?

BMO Financial Group offers a simple online calculator to help make sense of the benefits you can receive from using a Tax-Free Savings account. For more information please visit: www.bmo.com/tfsa

“While the maximum contribution you can make into a TFSA is $5,000 per year, the account requires no minimum contribution and can be opened with any amount of money. Using your tax-refund for a TFSA is a great way to get started or to top-up an existing TFSA account in order to maximize your contribution.” added Di Vito.

Putting Your Tax-Refund into a TFSA: A Solution for all Ages

Younger Canadians (18 – 30)
The tax-free status of these accounts allows younger Canadians who are just starting to build an independent life for themselves, to accumulate savings for their goals, such as a new car, first home, return to school or travel, faster. TFSAs can be used for any goal imaginable and withdrawals can be made at any time- this provides the flexibility young people are looking for.

Canadians between 30 and 60 years of age
TFSAs give these Canadians an added edge for achieving goals such as saving for education, home renovations, retirement and financial independence. Higher income earners and those with a pension plan are likely to have maxed out their tax-deferred options. TFSAs provide the opportunity for higher effective return than non-registered investments since investment income and capital gains in a TFSA are tax-free. Easy access and flexible withdrawals make TFSAs suitable for emergency funds.

Pre-retirees, retirees and seniors (age 60 and older)
Unlike RSPs, people can contribute to a TFSA after age 71, providing additional opportunities to shelter investment income from tax. Withdrawals from TFSAs do not affect federal income-tested government benefits, such as Old Age Security, the Guaranteed Income Supplement and the age amount credit, so investing in TFSAs can help avoid or minimize claw backs of their benefits. In addition, individuals who are facing required RIF withdrawals that exceed their income needs can use TFSAs to shelter some of the money withdrawn from future tax on income.

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