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How to get around OAS clawback with a TFSA

by | Jan 22, 2012 | OTHER, SELF-PUBLISHED

Q – I am 76 years old and earn the maximum amount of money allowed through my retirement pension before the Old Age Security clawback. I would like to withdraw money from my investments to travel with my wife and do not want to face any clawbacks or tax consequences. Which account should I withdraw funds from to achieve my goal: my cash account or my Tax Free Savings Account? – Jack S., Toronto, Ontario

A – Tax-Free Savings Accounts are one of the few gifts granted to Canadian investors from the government. To avoid the Old Age Security clawback and taxable dispositions, you and your wife should withdraw the money from the Tax-Free Savings Accounts (TFSAs).

Holding mutual funds inside your TFSA is an excellent way to increase your overall net worth. You can contribute up to $5,000 a year, and any return on your investments grows tax-free. Funds can be withdrawn from a TFSA tax free at any time for any purpose. Investment income earned within a TFSA and any withdrawals from a TFSA have no effect on your eligibility for federal income-tested benefits, such as Old Age Security. You may also elect to replace the withdrawn amount in future years. However, make sure you follow the contribution rules carefully and do not inadvertently overcontribute in any single year. Happy travels, Jack! – R.T.

© 2023 by Robyn K. Thompson. All rights reserved. Reproduction without permission is prohibited. This article is for information only and is not intended as personal investment or financial advice.

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