Young people can take advantage of decades of TFSA contribution room to accumulate enough savings to be well positioned for retirement when the time comes.

But for those close to, or already in retirement, TFSAs have not been around long enough to be a large portion of retirement savings. It’s more likely that you have built up a substantial portfolio in your RRSP and non-registered accounts.

Consider using these strategies to make the most of your TFSA in retirement.

Continue tax-free savings

Taxes may be the single biggest expense in retirement, especially once you convert a large RRSP to a RRIF. Forced minimum withdrawals often put retirees in the position of having to take out more money than they need, pushing them into a higher tax bracket.

Instead of waiting until age 72 it may make more sense to start withdrawals earlier if you’ll be at a lower tax rate. Even if you don’t wait, just because you must withdraw a minimum RRIF amount, it doesn’t mean you have to spend it all if you don’t need to.

You will still have immediate tax consequences, but if you redirect the surplus to your TFSA it will continue to grow and provide totally tax-free income in the future, whether generated from interest, dividends or capital gains.

You can no longer contribute to a RRSP after the year you turn 71, but there is no age limit for contributions to a TFSA, so you can tax shelter any new savings indefinitely.

If you have a non-registered portfolio you can make transfers “in kind” of stocks, bonds, ETFs and mutual funds.

Supplementing Income

TFSAs are a great way to supplement income in retirement. The withdrawals don’t affect your eligibility for programs like the Guaranteed Income Supplement and Age Tax Credit, and don’t result in Old Age Security clawbacks.

If you have an occasional large one-time expense such as home repairs, a new vehicle, or even a long-anticipated dream vacation, you can withdraw funds from your TFSA and then re-contribute them in a future year.

Useful estate planning tool

Many older Canadians are concerned about the tax consequences of passing away with a large balance in their retirement accounts. If you don’t have a spouse you can name as beneficiary, RRSPs and RRIFs are terminated when you die, and all the money is reported as income on your final tax return. This can result in a substantial tax bite.

Since balances in TFSAs are not subject to taxes upon death, they can be used as a valuable estate planning tool.

If you have a spouse, make sure you name each other “successor holder.” That way the account continues to exist, and the surviving spouse becomes the new account holder.

If you want a child or other heir to receive your assets, name them as designated beneficiaries. Beneficiaries receive the assets tax free. They can also contribute any amount they receive to their own TFSA as long as they have contribution room available.

Final thoughts

Tax Free Savings Accounts give retirees the potential to save money indefinitely in retirement and the flexibility to make withdrawals without affecting eligibility for government programs.

Smart planning will help you use the TFSA to preserve the wealth you have worked hard to build and ensure a tax-free inheritance for the people you care about.

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