The 2022 Annual TFSA Limit
The CRA has announced the annual TFSA limit for 2022 of $6,000. I’m surprised it was not $6,500, given recent 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 2022 will be $81,500 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 in 2009.
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The contribution room calculator helps you find your contribution room.
Now to state the less obvious – it helps you estimate your TFSA growth, assuming you invest the money in the TFSA.
The TFSA is an investment account – not a savings account. Finally, the tool estimates the tax-free cash flow that your TFSA investments could generate in the future.
The Benefit of the TFSA
Capital gains income, interest income, and dividend income are not taxed in the TFSA.
The only tax you’ll pay is foreign withholding taxes on dividends or interest income that originate outside of Canada.
A maxed TFSA that is invested will undergo compound growth to become an impressive amount of money in a few decades. Let’s go through an example.
TFSA Benefits: Example
Let’s assume you are 30 years old today, and you get the average return of global stocks over the past 122 years of 7.3% (5.3% after inflation).
If you max your TFSA every year and immediately invest in stock index funds, your TFSA value will be about $2,000,000 by age 60 with that 7.3% return.
This $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.