# TFSA Savings Calculator

Use our TFSA Savings Calculator to calculate how much you can accumulate by making regular deposits in a TFSA account, and how much you could save in income tax.

## Savings Account

## What is a TFSA Savings Calculator?

In Canada, one of the most popular savings and retirement planning tools is the Tax-Free Savings Account (TFSA). As the name implies, the TFSA is a registered savings account that helps savers earn returns on their investments tax-free. First introduced in 2009 by the Canadian government, the TFSA has helped Canadians sock away $300 billion of tax-advantaged capital towards their retirement or other such significant event.

Given its substantial taxation benefits, there is a solid case for why many people choose to max out their TFSA limits each year. The Hardbacon TFSA Savings Calculator was built on the premise of allowing people to see the differential in returns that can arise between investments that grow in regular investment accounts and those that grow within a TFSA. Some of the main uses of the calculator include:

- Calculating the expected amount your investments can grow to on a tax-free basis over a set number of years.
- Viewing the difference between the amount you can build in a TFSA versus a regular investment account.
- Working backwards to the rate of return that you need to earn or monthly deposit that you need to make to achieve your investment objectives.
- Budgeting how much you can deposit in each period to max out your available contribution room in each year.

## How to use the Hardbacon TFSA Savings Calculator

The beauty of the TFSA Savings Calculator lies in its simplicity. With a few inputs, you can envision your financial future quickly and easily. The main inputs that the calculator needs you to enter before it churns out a result are:

**Current TFSA balance**: This number should reflect the amount that you have in your TFSA at present. It is entirely okay if this number is currently zero. Everyone has to start from somewhere, so making the first step towards your savings goals is commendable regardless of the amount.

**Available contribution room**: There is an upper limit towards how much you can contribute to a TFSA each year. You cannot contribute indefinitely. Each year, the government will set a limit for how much can be contributed. This limit is constant for all Canadians. For reference, the limit for the 2019, 2020 and 2021 years was $6,000 for each year.

**Investment horizon**: The investment horizon is the total time period (measured in years) that you expect your investments to grow over.

**Regular contributions**: Enter the amount that you reasonably expect to be able to contribute to your TFSA in each period. The calculator enables you to select your choice of frequency between daily, weekly, bi-weekly, semi-monthly, monthly, bi-monthly, quarterly, semi-annually and annually.

**Expected annual rate of return**: The annual rate of return is the average yearly percentage growth that you anticipate your investments to increase by. This expected rate of return depends on the asset mix that you have invested in. If you have invested in multiple asset classes (such as stocks, bonds, real estate, etc.), it is worthwhile to do a weighted average of the expected returns on each asset class to get the most accurate input.

**Marginal tax rate**: The marginal tax rate is the rate applied at the highest tax bracket that corresponds to your level of income. Canada follows a progressive tax system where the higher your income, the higher your tax rate becomes.

## Understanding the results of the TFSA Savings Calculator

Once you have entered all of the required inputs, you are ready to view the results. On the right, you should see a title marked ‘Result’. Under this title, you will have three subheadings:

**Final estimated value**: This value tells you how much your investments will grow to (on a tax-free basis) if they are invested in the TFSA for the time horizon you entered and at the rate of return you assumed.

**Tax savings**: Tax savings refers to the amount that you can expect to save by not having to pay tax on the dividends, capital gains, interest, etc. that you earn on your investments. Recall that this is the primary benefit of the TFSA.

**Final estimated value in a non-registered account**: One of the purposes of this calculator is to illustrate how attractive investing in a TFSA can be over time. To that end, we have also included a comparison of what your investment value would look like if it was invested in a regular, non-tax advantaged account that incurred taxes at your marginal tax rate. Ideally, you will see a meaningful difference between this number and the ‘Final estimated value’ above.

## Learn more about the TFSA Savings Calculator Inputs

While the TFSA Savings Calculator is designed to be user-friendly, it is important to enter assumptions as accurately as possible to ensure that you are generating reliable results. To find out more about each input and where you can find the right number, read on below:

**Current TFSA balance**: If you already have a TFSA set up with a broker, your existing TFSA balance is a number that you can find by contacting your broker directly or viewing the account online (if those capabilities are available). If you have not set up a TFSA just yet, you can enter ‘0’ in this field.

**Available contribution room**: The annual upper limit on your TFSA contribution room is set by the Government of Canada each year, and available on their website. Your available contribution room starts accruing from the year you turn 18. For example, if you turned 18 in 2016, then your available contribution room would be $34,500, which is calculated as follows:

- 2016: $5,500
- 2017: $5,500
- 2018: $5,500
- 2019: $6,000
- 2020: $6,000
- 2021: $6,000

**Investment horizon**: Your investment horizon depends on how long you expect to continue contributing to the TFSA. For example, if you are 25 years old and are targeting retirement at 50, you might choose to input your investment horizon as 25 years.

**Regular contributions**: The volume and frequency of your contributions is entirely up to you. A good way to ensure that you can max out your TFSA limit each year is to create a personal finance budget. Calculate your total inflows on one side from your job, side gig and/or other income sources. Next, subtract the monthly outflows you generally see. These outflows may include rent, food, entertainment, and other expenses. Ideally, you should have some money left over. This surplus can be your ‘regular contribution’.

**Expected annual rate of return**: Even in the same asset class, annual rates of returns vary each year. However, over the long term, stocks have averaged between 7% to 10% annually. Similarly, bonds have averaged between 3% to 6%. If you have multiple assets in your TFSA, calculate a weighted average of your returns for optimal results.

**Marginal tax rate**: In Canada, the Government of Canada publishes the marginal tax structures that individuals have to abide by. To understand what rate you should enter, think of the highest number on your cumulative income, and use the table to understand where you stand. For example, if you make $100,000 as a salary and $20,000 in a side gig, your total income is $120,000. Therefore, your marginal tax rate for 2022 would be 26% going by the table where any taxable income over $100,392 up to $155,625 is taxed at 26%.

## Frequently Asked Questions

##### What is a TFSA?

Initiated in 2009, the TFSA is a savings vehicle for individuals aged 18 and older to save and invest money on a tax-free basis. All amounts contributed to the TFSA, and all income earned on these contributions is entirely free of tax, making it a valuable tool for people of all ages. To be eligible for a TFSA, individuals must be resident in Canada, above 18 years of age, and with a valid Social Insurance Number (SIN).