Half of Canadians don’t know what they can hold in their TFSAs
Despite near doubling of TFSA annual dollar limit, most Canadians are unaware of the basic investment options, CIBC poll reveals.
TORONTO — A recent poll by CIBC finds that 50% of Canadians are unsure what they can hold in a Tax-Free Savings Account (TFSA).
Despite their lack of knowledge, the majority (80%) of Canadians have never talked to a financial advisor on how to make the most of their TFSA, with half admitting they need advice.
“It seems most people still view TFSAs as rainy day funds rather than vehicles to help them achieve their longer-term financial goals, such as building up your retirement nest egg or saving for a down payment on a house,” says David Scandiffio, President, CIBC Asset Management.
With the annual TFSA dollar limit nearly doubling to $10,000, TFSA balances are expected to increase significantly over time, becoming a more and more substantial part of investment portfolios. That means longer-term investment options that produce higher returns, such as stocks and mutual funds, should be considered rather than only short-term or low-risk savings vehicles, such as cash or GICs, says Scandiffio.
Yet, the poll findings show that the majority of Canadians still view TFSAs as largely savings accounts, with only a small percentage of Canadians able to accurately identify mutual funds (29%), GICs (28%), bonds (23%) or stocks (22%) as being investment options for TFSAs.
The poll also finds that Canadians are confused about TFSA contribution rules, with 38% saying they don’t know what happens to unused TFSA contribution room and another 13% who think the unused contribution room is lost after the current tax year, when in fact it is carried forward and accumulates over the years.
For example, if you were at least 18 and a resident in Canada since 2009, but have never contributed to a TFSA, your cumulative contribution limit now stands at $41,000 – and will rise by $10,000 annually.