Putting money into a tax-free savings account (TFSA) is one of the ways you can supplement your RRSP, purchase health or long-term care plans, or have extra money to pursue hobbies and travel in retirement.
This registered savings account allows you to earn tax-free investment income and also withdraw your money without paying tax. You can find out the yearly TFSA contribution limit on the CRA website. Unused contribution room is carried forward from year to year.
Also, the full amount of your withdrawals can be put back into the TFSA in future years. Keep in mind that re-contributing in the same year may result in an over-contribution, which would be subject to a tax penalty.
Neither the income earned within nor withdrawals from a TFSA affect your eligibility for federal income-tested benefits and credits such as OAS and the Guaranteed Income Supplement.
A TFSA is a good way to tax shelter your excess retirement or pension income in a flexible account.