This article has 22 comments

  1. Thanks for the mention. I like your approach of laying out solid reasons why retroactive TFSA room is a bad idea, as opposed to my approach of using sarcasm. However, my way may have been a little more satisfying 🙂

  2. The TFSA was introduced to encourage average Canadians to save over the long term. It’s not about handing over a huge tax shelter in one go to specific class of taxpayers. The proposed retroactive TFSA isn’t a savings plan; it’s a capital gains exemption for older people with money.

  3. Leading Edge Boomer

    I generally like Malcom Hamilton’s views. I have gained a lot of insight from reading his articles. However, I think he is missing the mark on this isssue. Even the best of us can not be right all the time.

  4. Well, I’m of the camp that thinks the TFSA in its current form is a pittance. The size of my TFSA is a rounding error compared to my total portfolio. A plan like this would at least make the TFSA something worth having a serious look. In its current form, I’ll need to wait at least a decade before it’s worth giving some real serious thought.

  5. I agree with Phil – those of us who are a bit older and have larger portfolios aren’t going to see much TFSA benefit in terms of retirement savings.

    That said, the fact I can now save cash and not pay taxes on the interest is a big factor in my reversal on emergency funds. We now have $20k in our EF. Half is in our TFSAs and the other half will be put into the TFSA in January.

  6. Young Canadians can bennefit from this too. Saving money for a new home is better with the TFSA account than the RRSP and using the Home Buyer’s Plan in my opinion. As a young Canadian, you have no idea how much money you’ll actually be taking out from your RRSP account when you retire. That makes it hard to gauge how benneficial the RRSP account really is. In addition, there are no restrictions on when you can take the money out from the TFSA if you’re on the fence as to whether to buy a home or not. It’s nice to be able to access this cash easily. Your TFSA account can accumulate gains quickly in a short period of time. I put my TFSA account into Manulife at $19/share and I’m happy to be very ahead of the game right now.

  7. Amen. Older, well-off Canadians don’t need any more help.

  8. I think the government should create a special program for people in their late-50s and beyond who had all their money in equities and lost more than 40% last year. It would provide each of them with a book on proper asset allocation.

    We all took a hit last year. Older people who took unnecessary risks, whether because of greed or ignorance, don’t deserve special treatment.

  9. Malcolm’s plan also is not adjusted for inflation. If he was being realistic, he should have included a formula reducing the contribution room in the same manner as it will increase in the future.

    Also, to take it even further, Suppose my parents had bought $5000 of stock in 1950, when they were 20 years old, and held it, could they claim this as a deposit to their retroactive TFSA and pay no taxes on it? Great benefit for them!

    Malcolm’s proposal is just the old lifetime capital gains allowance in another guise.

  10. If older people were dumb enough to have a large portion of their retirement nest egg in stock equities, well they were taking on risk. RISK! — that 4-letter word.

  11. For older Canadians, 5000 dollar inflation adjusted limit for annual TSFA is still very good.

    At the age of 65, money from RRSP can be taken out and contributed to TSFA. There is still a lot of time to contribute to TSFA for most people including Baby Boomers.

    I think changes will be made to TSFA. In fact, I think the contribution limits might be decreased instead of increased in the long run so that government will get more in taxes.

    In Canada, a person with a 50k income gets to contribute both 9k to RRSP and 5k to TSFA. In the US, a person with a 50k income gets to contribute to 5k to a traditional IRA or 5k to a Roth IRA (professionals recommend Roth IRA in most cases). As in this hypothetical example, the contribution room in Canada is 2.8 times larger than the US. RRSP will be taxed eventually, but the contribution room in Canada right now is fairly high already.

    Anyways, I think everyone wants to invest tax free. We should be grateful for what we have in Canada.

  12. Canadian Capitalist

    @DH: I have no doubts that younger Canadians *can* benefit from this program. A 35-year old gets $80K in extra contribution room, which isn’t small potatoes really. But the question is: who benefits disproportionately and who pays for the proposal. The answer is it is the relatively wealthier Canadians who benefit and everyone pays (in the form of lost tax revenues). That is not fair at all.

    I think saving for a HBP inside a RRSP is a great idea. Don’t forget the RRSP contributions are made with pre-tax dollars, so a home downpayment fund can accumulate much faster with pre-tax dollars. Coupled with TFSA as it is currently implemented, it should be plenty of tax sheltered saving room for most people.

    @Henry: I saw your comment on MJ’s blog when I looked up the link. I don’t know much about US retirement savings system but don’t US residents have an opportunity to contribute to 401(k)s? Regardless, I agree with you that we already have plenty of tax sheltered saving room in Canada. In the example where a person earns $50K, between a RRSP and TFSA they can save 28% of their pre-tax income! Anyone saving at that rate is likely to do alright regardless of what the markets are doing.

  13. I think its a bad idea. As has been mentioned, it would benefit a minority of Canadians, yet cost the majority (in terms of lost tax dollars to fund the government.

    I don’t know what % of Canadians actually have TFSA’s, sure people talk about it, but in the end, I wouldn’t be surprised if most aren’t even taking full advantage of them (much like RRSPs).

    We don’t need any additional benefits for wealthy Canadians and further division of socio-economic classes.

  14. CC: I was confused between 401k and IRA. It is possible to contribute to both 401k (15k limit) and Roth IRA(5k limit).

    Roth IRA is identical to TFSA.

    401k is similar to RRSP.

    You are correct. 401k + Roth IRA is a large contribution room. US and Canada is similar and my previous post is incorrect.

  15. I fully agree with increasing the yearly limit for TFSAs…$5000 isn’t much. But sweet Christ, haven’t the Boomers and elderly gotten enough already?

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  18. At 30 I’m all for a retroactive TFSA, I have been fortunate to double my $5k in the last 4 months and would love to dump more money in the TFSA.

  19. one more thing, the TFSA is not that popular as many would like to think, people have no money..we always talk about finances in my circle of friends and not one has a TFSA account..infact, some didnt know anything about it till a few months ago.

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