Avoid a cash-heavy TFSA
However, many Canadians have failed to take advantage in their TFSA. Recent studies have shown that many Canadians are content to use their TFSAs as cash accounts. The TFSA is at its best when it is churning out tax-free growth and income.
Just like the RRSP, the TFSA holds a contribution limit that investors need to be aware of. The cumulative contribution room in a TFSA stands at $75,500 as of 2021. However, this is different for Canadians who were age eligible after the 2009 year. If you overcontribute to a TFSA, you will be subject to a penalty.
It is hard work to keep up with your portfolio, and sometimes Canadians can neglect to contribute to their registered accounts on a regular basis. Avoid this in your TFSA by setting up an automatic withdrawal, whether it is weekly, bi-weekly, or monthly.
Foreign dividend stocks can be tempting, but TFSA investors need to watch out. Investors will be subject to a withholding tax if they generate dividends from U.S.-based income-yielding equities.