Fifth of Canadians have maxed-out on TFSAs

People of all incomes stand to benefit from tax-free account

TORONTO — Almost one in five Canadians have maximized the contribution room in his or her tax-free savings account, according to documents from the Canada Revenue Agency supplied to the Financial Post. It’s not just high-income Canadians who appear to have maxed out their TFSA, which offers a lifetime exemption from taxes on any investment gains. Right across the income spectrum, significant percentages of Canadians appear poised to benefit from the increase in contribution limits.

Debate continues to swirl in Ottawa about the April Conservative budget, which increased the annual limit to $10,000 from $5,500 and as of 2015, allows $41,000 worth of accumulated total contribution space. Liberal Leader Justin Trudeau told reporters following the budget he would reduce the annual limit back to $5,000, the level it stood at before it was indexed to inflation.

“The TFSA itself up to $5,000 is an encouragement to people to save, but the reality is there’s not a lot of people who at the end of the year have $10,000 laying around that they can invest,” Trudeau said.

The CRA documents show that of the 10.7 million TFSA holders in the country, as of 2013, almost 1.9 million had contributed the maximum to their account. In the income category of $20,000 to $24,999, 124,150 Canadians had maxed out their limit, which was about 17 per cent of all account holders at that income level. On the other end of the spectrum, 97,630 people in the $150,000 to $249,999 category had maxed out their contributions as of 2013, which was close to 32 per cent of people in that income category.

“TFSAs are primarily used by low and middle-income Canadians, and by seniors. Of those who maxed out their TFSA, 60 per cent earn less than $60,000. By cancelling the doubling of TFSAs, Trudeau is increasing taxes on these middle-income Canadians. Doubling TFSA contribution limits makes saving for retirement easier. The Liberal position is yet another example of Trudeau’s high tax, high debt agenda,” said a Conservative party source.

The CRA stats show 267,000 Canadians who make less than $20,000 had contributed the maximum and 1.1 million Canadians making less than $60,000 were also contributing the maximum to their TFSA.

Some of the low-income statistics could be attributed to retired seniors who have already accumulated wealth.