Saving for a new home just got $500 easier. On Jan. 1, 2013, the contribution limit for Tax Free Savings Accounts (TFSA) rose to $5,500 annually. The maximum that you can currently contribute is now $25,500.00. The interest earned is in addition to.
TFSAs are a great way to save. Until 2009, when TFSAs were introduced, many people put together the down payment for their first home by withdrawing money from their RRSPs under the Home Buyers Plan (HBP.)
The HBP is a huge drag on retirement savings. Today, you can withdraw up to $25,000 from your RRSP to buy a first home, and then return it to your account over 15 years. The problem lies with the payback.
The $500 contribution increase to TFSAs starting in 2013 isn’t a huge amount in the scheme of things. However, the announcement serves to highlight the utility of TFSAs as a superior down payment savings tool.
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