The New TFSA Contribution Limit!

How Big Could Your TFSA Get If You Contribute The Max Each Year?

The TFSA is an amazing account and it just got a little bit better. The contribution limit for 2024 is an additional $7,000. This means that as of January 1st 2024, anyone over the age of 18 in 2009 will have $95,000 of TFSA contribution room if they’ve never contributed before!

What makes the TFSA so amazing is the tax free compounding and when this compounding starts to take hold the results are incredible (just take a look at some of the projections below).

It’s reasonable to expect that many of us with TFSAs will see them reach $1,000,000+ at some point in the future. It’s just a matter of time. We’ll share some projections below but its pretty reasonable to expect that TFSAs could reach $5M, $7M or even $10M+ (in future dollars).

In fact, having TFSAs that reach $1,000,000+ is pretty common in many retirement projections that we do at PlanEasy.

Often, from an income tax and estate planning perspective, we want to draw down TFSAs last in retirement (or sometimes they’re also draw down strategically to avoid higher marginal tax brackets). We’re also strategically shifting assets from RRSPs/RRIFs into TFSAs over time. This leads to some very large TFSA balances and very little tax on the estate (depending on future investment returns of course).

TFSAs: Why You Should Have One

If you have read any other PlanEasy posts, you will know by now that we think TFSAs are amazing, and that you should open one if you haven’t already.

Anyone who is 18 years old with a valid SIN can open a TFSA account. The basic idea is that it’s a “savings account” (which is poorly named because it can hold way more than just savings) that allows you to grow your money completely tax free.

How Do TFSAs Work?

Money placed inside a TFSA will grow completely tax-free. (It’s helpful to think of a TFSA as a box and there’s no income tax on things placed inside or taken out of the box).

Many different types of investments can be placed inside a TFSA (GICs, stocks, bonds etc.) and while they’re inside the TFSA they will not be taxed.

Withdrawals can be made at any time and in any amount. You can choose to withdraw whenever you like, all your savings or just part, and unlike an RRSP, you won’t be taxed on withdrawal.

Contribution room also comes back the next year. Any withdrawals get added to your new contribution room next January 1st

The TFSA Contribution Limit Keeps Getting Bigger

This amazing tool started in 2009. Every year, you can contribute a certain amount, which is the same for everyone. So, if you opened a TFSA this year, you could contribute $7,000, right?!

Well, you could, but since TFSAs started in 2009, you are allowed to contribute as much as the contribution limits for every year for the past 16 years if you turned 18 or older that year. For example, if you turned 18 in 2012 you would have TFSA contribution room accumulating as since 2012.

Here are the past TFSA contribution limits for each year:

2009 – $5,000
2010 – $5,000
2011 – $5,000
2012 – $5,000
2013 – $5,500
2014 – $5,500
2015 – $10,000
2016 – $5,500
2017 – $5,500
2018 – $5,500
2019 – $6,000
2020 – $6,000
2021 – $6,000
2022 – $6,000
2023 – $6,500
2024 – $7,000 – NEW!

This leaves us with a grand total of $95,000 as of January 1st 2024 if you were 18 or older in 2009. You could hypothetically contribute the entire amount to a TFSA if you have never opened one before.

This annual TFSA contribution limit increases with inflation each year so we can try to predict future TFSA contribution limit increases. If we expect 2% inflation each year, this is how the annual TFSA contribution limit may evolve in the future (Disclaimer: This is just a guess, pure estimates, do not use this for financial decisions).

Here is an estimate of possible future TFSA contribution limits for each year:

2025 – $7,000
2026 – $7,000
2027 – $7,500
2028 – $7,500
2029 – $7,500
2030 – $7,500
2031 – $8,000
2032 – $8,000
2033 – $8,000
2034 – $8,500
2035 – $8,500
2036 – $8,500
2037 – $9,000

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Cumulative TFSA Contribution Room By Age

Because you only start to accumulate TFSA contribution room when you turn age 18 its important to understand what your specific cumulative TFSA contribution room is. This amount will vary by age. The table below assumes no contributions and no withdrawals.

Someone born in 1991 or earlier, who turned 18 in 2009 or earlier, will have the highest cumulative TFSA contribution room at $95,000 in 2024.

But someone born in 1995, who turned 18 in 2013, will have missed the prior 4-years of TFSA contribution room between 2009 and 2012, so their cumulative TFSA contribution room will only be $75,000 in 2024. And someone born in 2001, who turned 18 in 2019, will have missed the prior 10-years of TFSA contribution room between 2009 and 2018, so their cumulative TFSA contribution room will only be $37,500 in 2024.

TFSA Growth Over Time

If you’ve been diligently maximizing your TFSA since it was introduced then it will be worth significantly more than the $95,000 in contributions made. In the table below we benchmark TFSA growth based on asset allocation. The investment growth is based on long-term growth assumptions and provides a good benchmark to understand how your TFSA is doing.

For example, if you had been maximizing the TFSA since 2009 in an 80/20 portfolio of equities/bonds then you could expect to have around $154,519 by the end of 2024. This assumes a low-cost index portfolio with fees of 0.25% or lower. This of course may be higher or lower depending on your actual investment fees and investment growth but it provides a good benchmark.

Be Careful About Over-Contributing

TFSAs are great, but because they have unique rules they can be a bit confusing. Sometimes it can be hard to keep track of how much you have contributed each year. The most common way that people over-contribute is when they use it as the name suggests, as a savings account, and withdraw and deposit from it multiple times in a year… don’t do this!

For example, if you contribute $1,000 in January, and then withdraw that $1,000 in May, if you choose to re-contribute it again later in November, you will have technically contributed $2,000 into your TFSA that year, even though this is the exact same money.

Essentially, once you deposit money into your TFSA, even if you later withdraw it, it will still count towards the contribution limit.

Also be sure to remember the 18 year old age rule. A 21 year old  opening up a TFSA for the first time today does not have the same contribution room of $95,000 that a 45 year old person would have as of Jan 1st 2024. The 45 year old person turned 18 prior to 2009, meaning that every year since TFSAs started, they were entitled to TFSA contribution room, but not the 21 year old.

The consequence for over-contributing is paying 1% on the amount which has gone over the contribution limit, every month until you withdraw the excess. For example, if you over-contribute $1,000 and do not withdraw it for 6 months, you will have to pay $60. If the CRA believes you purposely are over-contributing to your TFSA, you will have to pay 100% tax on anything that went over the limit.

How Large Could Your TFSA Get In The Future?

The TFSA is great, it allows your savings and investments to compound tax free. Let’s fantasize for a moment about how large your TFSA could get in the future if you make max contributions and let compounding run wild.

This is a popular topic and something we’ve written about before. My wife and I have a personal goal is to have our TFSAs reach a combined $1M in less than 20-years. This is actually a fairly realistic goal (we hope anyway) and it’s likely we will see our TFSA grow even more in the future.

For someone who’s contributed to the maximum amount since 2009 when the TFSA started it’s not unreasonable to expect they would currently have a balance over $100k+ if they’ve been investing for the last 10+ years.

Let’s assume their TFSA currently sits at $137,249 including investment growth and we can see how it may evolve in the future if they continue to max it out each year.

Max TFSA Contributions

Future Dollars
5.55% Return

Max TFSA Contributions

Today’s Dollars
5.55% Return – 2.0% Inflation

Amazing isn’t it? Having over $2M tax free in the future is a pretty good reason to max your TFSA contribution limit each year.

Estimate Of Future TFSA Contribution Room

Assumes 2.0% Inflation