RRSP Q&A: Will there be a tax hit if I withdraw from a TFSA?

From February 16 to 19, 2010, MoneySense.ca’s top financial planners are answering your RRSP questions. For the full list of questions answered — or to submit a question of your own — click here.

I’m 36 years old, single with no dependents and live alone. I have no plans to change this. I currently have two jobs, full time as an office manager, part time as a theatre usher earning a combined total of less than $35,000 a year. I have a TFSA worth approximately $8,000.

I’ve been told that as a single person, when it comes time for me to start withdrawing from my TFSA, I could take a huge hit tax wise. Is this true and what is the best thing for me to do to fix this? —Christine9933

Warren Mackenzie and Ken Hawkins: There is no tax paid on money you take out of a TFSA, no matter how large the amount  or how much you made while it was in your TFSA.

Next question: Should I max out my RRSP contributions or invest some money in something else?

Back to main RRSP Q&A page.

What do you think? Let us know in the comments.