The contribution rules for Tax-Free Savings Accounts were changed by the federal government in the 2015 budget. Much of the coverage on the changes has been focused on how they will impact seniors. But what about younger Canadians?
Under the old rules, the contribution room generated started at $5,000 a year in 2009. The annual limit was set to increase in $500 increments based on inflation. The first $500 increase took place in 2013. Looking ahead and assuming a 2 per cent rate of inflation, the annual dollar limit would have increased to $16,500 per year by the year 2068, starting from $5,500 in 2013.
The changes may not mean much to younger contributors since under either scenario, the cumulative amount of contribution room for a 30 year old in 2027 would be a minimum of either $84,000 (original rules) or $130,000 (new rules). For a couple, this would be $168,000 (original rules) or $260,000 (new rules). It seems unlikely that the majority of younger Canadians would run into either limit.
Preet Banerjee