There are few “gifts” that the government gives us, and the Tax-Free Savings Account (TFSA) is one of them. The ability to invest and grow funds tax-free over a lifetime should not be overlooked.

Yet, many high-net-worth (HNW) individuals are not taking full advantage. According to the latest 2024 statistics (for the 2022 tax year), HNW taxpayers earning over $250,000 left around 35 percent of their contribution room unused. While many of us gripe about high taxes, we certainly aren’t doing a great job of maximizing tax- advantaged accounts. The average TFSA fair market value also falls below the cumulative contribution limit. An investor who contributed the full amount each year since the TFSA’s inception in 2009 could have over $159,000, assuming a 5 percent annual rate of return.

Why the shortfall? Several factors might be at play. When the TFSA was introduced, it was often mistaken for a simple ‘savings account,’ leading some to misconstrue its long-term growth potential. Others treat it as a short-term fund, withdrawing funds instead of allowing them to grow. The opportunity cost is significant. An investor who contributes the 2025 cumulative contribution limit of $102,000 plus $7,000 annually would accumulate almost $675,000 after 25 years at a 5 percent annual rate of return. This could be withdrawn and used completely tax-free! Yet, this assumes that contributions and investment gains are left untouched in the TFSA, allowing for growth.

Another factor may be that some investors have taken a riskier approach with TFSA investments. This can be harmful for two reasons. If an investment realizes a substantial loss, that contribution room is lost forever. And, there is no tax relief. Unlike a non-registered account, TFSA losses cannot be claimed on an income tax return.

How about you? Are you fully maximizing your TFSA? Don’t overlook the potential for significant future tax-free growth. Call for assistance.