TAX FREE INCOME FOR RETIRED BOOMERS!

This is a follow-up to my post of July 2022 about Tax Free Savings Accounts.

I'm a pretty typical retired Boomer.  During my career I cobbled together a Registered Retirement Savings Plan (RRSP) as well as a few open savings accounts.  Now, in my 70s my RRSP has been converted to a Registered Retirement Income Fund (RRIF).  This is mandatory at age 71.  The CRA mandates a minimum annual TAXABLE withdrawal from a RRIF.  The logic being that, while working, taxes were deferred with each contribution to the RRSP.  The time has arrived to begin paying those deferred taxes!

In an effort to minimize taxes, on interest & investment income, I'm making every effort to transfer open account savings to Tax Free Savings Accounts (TFSAs).  TSFAs were introduced in 2009 and every Canadian was allowed to make an annual deposit of $5,000 to a TSFA and any interest or investment income is exempt from tax.  This tax exemption applies whether income remains in the account or is withdrawn.  I withdraw this tax free income on a regular basis throughout the year to enhance my disposable income.    

Back in 2009 the limit for the annual deposit was $5,000 and this amount was indexed to inflation and gradually increased the annual limit in $500 increments.  Over time, this annual deposit increased to the present limit of $7,000.  2015 was a bonus year when the Conservative government boosted the annual limit to $10,000.  The Liberals returned to power the following year and reduced  it in accordance with the original 2009 plan.  Those fortunate enough to have made the maximum deposit each year now have $102,000 plus accrued income in their TSFA.

Remembering that this applies to each person, a retired couple could hold a total of $204,000 in Tax Free Savings!  Applying the best rate of 3.95% from the Fixed Income Deposit Rate chart at the top of this page (updated today), this would produce Tax Free Interest Income of $8,058 annually.  For those not opposed to some downside risk, Tax Free Savings Accounts can hold anything from GICs to stocks, mutual finds, ETFs etc.