The Tax-Free Savings Account is still the most underrated retirement savings account in Canada. Many Canadians treat their TFSA as a short-term, low-risk investment account, which is a huge mistake. Below are 4 TFSA strategies to maximize its key feature, tax-free growth.

If you're like many other Canadians, your retirement income consists of a pension, CPP, OAS, RRSPs, and TFSA. Figuring out how to draw upon these incomes tax-efficiently is the biggest task for retirees.

More often, it makes the most sense to use your Tax-Free Savings Accounts last in retirement. This does two things. First, you can draw down your taxable investments like RRSPs faster lowering your taxes owing on your estate. Secondly, you allow your TFSA interest to compound longer which again, lowers your taxes.

The Tax-Free Savings account can increase the value of your estate by minimizing taxes. In an RRSP, you have to claim 100% of the account value upon the last death of a married or common-law partnership.

That means if you die with $400,000 in your RRSP, you will have to pay taxes as if you earned $400,000 in the year of death. That tax bracket is 48% or higher depending on your province.

Common retirement strategies nowadays are to draw down your RRSPs quicker, pay the taxes while living, then re-contribute the money into your TFSA to avoid future taxes.

For the uber-rich, you could consider gifting money to your children who are 18 years old or older. If your TFSAs are maxed, and you don't need all of your money for retirement, consider gifting money to your children to kickstart their TFSA growth.

Often, 18-year-olds are just trying to survive between post-secondary education, entry-level jobs, and establishing some independence. They usually don't have $6,500 laying around each year to max out their TFSAs.

Why not kickstart their savings by gifting your children their TFSA contributions so start earning tax-free growth?

Example:

You gift your 18-year-old $6,500/year for 10 years. That's $65,000. Your 18-year-old leaves the money alone until age 65. At a 6% interest rate, that money is now worth $787,487.17.

Pretty awesome legacy if you ask me.

Note: I wouldn't do this if you still have contribution room in your own TFSAs. You will achieve the same result and maintain full control over the account. Once you gift money, you lose authority over the money.