The TFSA is Your Ticket to Tax Freedom

Make sure you contribute $5,000 for each resident adult in the family every year.

Earnings are not taxed either in the plan or when they are removed. It provides an excellent parking place for transferred assets from the higher-income taxpayer to lower-income taxpayers in the family.

The TFSA is an absolute gift to your future financial freedom. It will help you create a tax-free pension. Given its full accumulation period (age 18 to date of death, every resident of Canada has the opportunity to become a millionaire, by simply investing $5,000 each year. Being very conservative, if you deposit $5,000 each year, indexed by 2%, for 50 years in a TFSA that earns only 4.5% interest on those deposits, the balance after the last deposit will be over $1,103,000.

Excerpted from Essential Tax Facts: 2013 Edition. © All rights reserved.