The 2023 Annual TFSA Limit
The CRA has announced the annual TFSA limit for 2023 of $6,500 (source). That’s up from $6000 in 2022 due to inflation.
Unused contribution room from prior years accumulates since the year you turned 18, or 2009, whichever came later.
So, your total TFSA room in 2023 will be $88,000 if you were born in 1991 or prior.
TFSA Contribution Room Since Inception
The TFSA came into existence in 2009. This table shows you the TFSA room for every year since the TFSA’s birthday.
You can find your exact TFSA room with my Google Sheets TFSA contribution room calculator linked below.
The calculator models future TFSA growth based on the last 122 years of historical stock returns.
Access the resources that I use to manage and grow my money.
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The Benefit of the TFSA
The TFSA is an investment account, not a savings account. You only benefit if you hold income-producing assets in the TFSA.
Such income includes capital gains, interest, and dividends. The TFSA’s benefit is that it protects you from taxes on investment income.
To understand the true benefit of the TFSA, it helps to understand how taxes apply to investment income.
The only tax you pay in the TFSA is foreign withholding taxes on dividends or interest income that originate outside of Canada.
TFSA Benefits: Example
A TFSA that is maxed annually can grow to become an impressive amount of money in a few decades. This is only possible if it is invested.
Let’s go through an example with 30-year-old Cadence.
Cadence is ready to invest in stocks and expects to get the average return of global stocks over the past 122 years of 7.3% (5.3% after inflation).
She maxes her TFSA every year and immediately invests in total market stock index funds.
At her 7.3% return estimate, Cadence expects to have a $2,000,000 TFSA value by age 60.
Her $2,000,000 TFSA could then generate a sustainable $60,000 in tax-free income per year, using a 3% safe withdrawal rate.
This example assumes the TFSA exists for 20 more years and that the current contribution room increases each year with inflation.
