Tax-Free Savings Account (TFSA)

168 responses so far ↓

• 1 nobleea // Feb 26, 2008 at 7:19 pm

  I think this is a great and huge addition to our PF portfolio. I wish the media would make a bigger deal out of it. I like that it’s a flat $5000 for everyone regardless of income.

  I have a question though; contributions are not tax deductible, but what about interest paid on money borrowed to make contributions? If this is a parallel to RRSPs, then the answer would be no. But the contributions are made with after tax dollars, so maybe??
  Oh, wait, I already got the answer. No.

• 2 growthinvalue // Feb 26, 2008 at 7:27 pm

  I’m with you, CC. What a fantastic development. These TFSAs have the potential to create huge wealth for Canadians. The only thing that could make them better would be to make contributions to the TFSA tax deductible as are RRSP deposits, but that’s just me being greedy.

• 3 Kris // Feb 26, 2008 at 7:57 pm

  I’m curious as to what happens if you transfer pre-existing investments into a TSFA. Will it be like an RRSP whereas you have to pay capital gains, if you make a profit, but can’t claim capital losses if you don’t???

  I’m also excited over the fact that I can now hold some ’safer’ investments outside of my RRSPs… which will be very useful when saving for those expenses with a short term horizon.

  This really does add a whole new dimension to tax effeciency!

• 4 squawkfox // Feb 26, 2008 at 8:04 pm

  My mind is racing…

• 5 Canadian Capitalist // Feb 26, 2008 at 8:20 pm

  Kris: There is no explicit mention of how contributions in-kind will be treated but my guess is that it will be just like RRSPs, just because a lot of features of the account are similar to RRSPs. You’re right that TFSA will be a great location for interest-bearing instruments.

  GIV, noblea: I am very enthusiastic about the new account. There is hardly any downside and it is a great place to put savings.

• 6 Mike B // Feb 26, 2008 at 8:40 pm

  I would think contributions in kind from a non-registered account would not be taxed going in as long as the contribution doesn’t exceed $5000, reason being is both are from after tax dollars. But then again it raises the question if you purchase a stock in a non-registered account, transfer it in and then sell the stock in the TFSA, then you could withdraw tax free. I am interested in the details. Food for thought.

• 7 Four Pillars // Feb 26, 2008 at 8:56 pm

  I think this is fantastic and I also think the rrsp vs mortgage vs tsa debate will be pretty neat - we need a new horse to beat to death!

  I think this will encourage saving for sure. It might even help some people with their retirement savings since a lot of people can’t get their head wrapped around the tax deferral of the rrsp and think they are somehow losing money when they pay tax upon withdrawal. The tsa might encourage those people to save.

• 8 thickenmywallet // Feb 26, 2008 at 9:01 pm

  I like the idea. Like to see the details though. Ideally, it should be indexed for inflation .

  The downside is that the financial industry will now flood the market with even more PPN’s as a selling tool to “protect” the contribution in the account. The 2009 RSP season is just going to be ugly in terms of bad products being launched.

  There is also an opportunity to buy mutual fund company stock since there is another avenue for the industry to pump money out of our pockets.

• 9 Warren // Feb 26, 2008 at 9:13 pm

  Great plan by the government to encourage savings, but not necessarily cost them a lot of money. Although I would have liked to see them spend a little more, or reduce taxes with that whopping surplus.

  At any rate, now we have the equivalent of the Roth IRA in the US. Even better, the $5k rolls over like unused RRSP contributions. I think I’ll use my tax refund courtesy of RRSP contributions to fund my TFSA.

• 10 brad // Feb 26, 2008 at 9:27 pm

  I was going to say the same thing about the Roth IRA analogy, but the TFSA is actually much more flexible. With the Roth, you are only allowed to make early withdrawals of up to $10,000 for buying your first home (and maybe also for costs of education, I can’t remember).

• 11 Canadian Capitalist // Feb 26, 2008 at 9:51 pm

  Mike B: It’s not clear how in-kind contributions would work but if it does the way you describe, it will be a huge bonus for people who have investments with very low ACB.

  Mike: You’re right about beating a new horse now. I already saw some articles discussing mortgage versus TFSA.

  Thicken: The budget document mentions that the contribution limit is indexed to inflation in $500 increments. It is true that stupid investments will continue to be so. Bay Street is so good at introducing products to meet new “demand”.

• 12 Pharmadaddy // Feb 26, 2008 at 10:06 pm

  CC:

  I guess I’m exposing my relatively recent arrival to your blog, but where do you stand on the paying down the mortgage or beefing up RRSP contributions debate and what, if any, empirical evidence do you have to support your stance? Just curious as someone who has debated this internally for some time. I ran numbers and it seems that no matter what assumptions I made, contributing to the RRSP always came out on top in the long run.

• 13 Leading Edge Boomer // Feb 26, 2008 at 10:23 pm

  It will be interesting to see if banks and and other financial institutions design high interest TFSA accounts to encourage people to park their cash with them.

• 14 Thicken My Wallet » Blog Archive » How to Profit from A Tax-Free Savings Account // Feb 26, 2008 at 10:26 pm

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• 15 cnidog // Feb 26, 2008 at 10:55 pm

  I’m no financial expert, but I’m not sure the TFSA the greatest thing since sliced bread that the conservatives claim it is.

  Firstly, it is nowhere near what the conservatives originally promised regarding capital gains being tax exempt if reinvested within 6 months.

  Second, it is being pimped as a great way to save for a car, a home reno, etc. If you’re going to have this kind of short-term turn around - where you are cashing out in 3-5 years - you had better invest in something pretty secure. Well guess what! Thousands of people already save for such items in “high interest” savings accounts like PC Interest First (3.78% - 4.0%). Do you think that any of them have ever recorded as taxable income the paltry $189 in interest on their $5000 saved?

  Third, if you suffer capital losses on this money, you won’t be able to write them off. So, once again, you’d probably be wise to restrict this account to low risk investments (unless perhaps you have a long-term outlook and assume that all investments eventually go up).

  And fourth, you can’t write of interest from an investment loan for instruments bought inside the TSFA. So it appears to be of little assistance to people using the smith manouever or cash flow dams to convert non-deductable debt to deductable debt.

  Now don’t get me wrong, the TSFA is still useful. If your non-registered portfolio consists of some secure investments like GICs and some stocks, you may as well put as much of your low risk, interest-earning investments in the TSFA as you can and save a few bucks. It will also offer a small, albeit useful contribution to income splitting. But for me, it ain’t even close to what the conservatives originally promised.

• 16 Canadian Capitalist // Feb 26, 2008 at 11:07 pm

  cnidog: You won’t find me arguing that the TFSA is anything like the capital gains exemption. That said, the original “promise” was very vague and probably impractical. And critics with some justification would argue that the capital gains exemption is a tax break for the risk. Also, since when did campaign promises mean anything?

  If anyone receives $50 or more in interest income, a T5 is issued and has to be reported in taxes. Even for small amounts, I simply add up interest payments and report it in my taxes. Not the worth the risk of “forgetting to declare” in my opinion.

  I do question the notion that TFSA saves a “just a few bucks”, as one prominent economist claimed in a CBC interview today. It’s true that initially the tax savings aren’t huge but over time, the advantages afforded by the new savings scheme is tremendous.

• 17 cnidog // Feb 26, 2008 at 11:21 pm

  CC: Maybe I’m jaded, but I often find that the savings espoused by experts are based on optimistic returns and assumptions about high marginal tax rates. Not everyone is going to earn 10% on average on their investment and the average Joe on the street often doesn’t have a 40% marginal tax rate.

• 18 Canadian Capitalist // Feb 26, 2008 at 11:53 pm

  cnidog: Taxes in Canada are a killer on investments. Even someone earning $38K in ON faces a marginal tax rate of 31.15%. I would definitely agree with you that TFSA won’t bail us out of poor investing. We still need to invest responsibly to achieve financial success.

• 19 nobleea // Feb 27, 2008 at 12:06 am

  i see the opposite.

  if you have a stock position that is sitting on massive gains (either from being very speculative or having held it for a long time), you can transfer it in to the TFSA, sell, and then withdraw it and reinvest it outside.
  this way you still get the ‘benefit’ of capital losses outside the TFSA, but don’t pay capital gains on the upside.
  since it’s a cumulative contribution amount, plus spousal plan options (?), in 5 years, you could be sheltering 50K in gains ($9000 a year tax savings at 36% marginal rate)

• 20 DividendMan // Feb 27, 2008 at 12:14 am

  I read a comment that you cannot take a loan to invenst money into this registered account and claim the interest as a deduction, is that true?

• 21 Canadian Capitalist // Feb 27, 2008 at 12:42 am

  DividendMan: It’s true. Refer to Page 274:

  Because the investment income within, and withdrawals from, a TFSA will not be taxable, interest on money borrowed to invest in a TFSA will not be deductible in computing income for tax purposes.

• 22 WhereDoesAllMyMoneyGo // Feb 27, 2008 at 1:02 am

  I think the transfer from non-registered accounts in-kind of securities with an unrealized capital gain will trigger a deemed disposition - not sure, but that’s my guess.

  There are many opportunities for the TFSA. Including from an estate planning perspective: you can roll-over the assets of the TFSA to a successor account holder tax-free (say a spouse). The remaining spouse can transfer to the children tax-free as well.

  You can contribute to an RRSP in a high tax year, and withdraw in a low tax year and immediately put funds in a TFSA.

  It’s great for those who are low tax bracket now and low tax bracket in retirement as it might be the retirement savings vehicle of choice while the RRSP becomes the short term savings vehicle. The TFSA withdrawals won’t affect income tested benefits and credits so it would make more sense to use it for retirement for people in this situation, and the income tested benefits and credits might not be available to people before they are 65 so any funds in an RRSP can be withdrawn before then without affecting those benefits.

  I can see many strategies for this, and yes more fodder for some old debates!

• 23 Pablo // Feb 27, 2008 at 1:24 am

  Wow! This is so fantastic. Finally something like a Canadian version of the American Roth but without all the penalties. I can’t wait to open an account in 2009. What a great place to store your tax refund.

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• 27 0xCC // Feb 27, 2008 at 9:27 am

  The potentially interesting part about the ‘no deduction for interest on money borrowed to invest in a TFSA’ thing is that there is potential that the brokerages could calculate margin availability based on the value of both the TFSA and non-registered accounts. So in effect you could be able to borrow against the value of the TFSA for investment outside the TFSA and deduct the interest. The brokerage house has their ‘assets’ covered because if you do get a margin call you could withdraw from your TFSA to cover it.

  This TFSA has the potential to be a very nice little financial tool. The only slight catch with it is that you have to do a little bit of planning for it to really pay off. This is going to be an amazing tool for young people just starting out. They can save for a down payment on a house, they can save for buying a car, they can start up an investment account without starting up an RRSP and being scared that the RRSP money is locked away ‘forever’ and then they can make a contribution from their TFSA to their RRSP when it makes sense to them.

• 28 Eric // Feb 27, 2008 at 9:29 am

  So what kinds of things can you put in a TSFA? Is it all the stuff currently elligible for RRSP or are there more/less restrictions? Withdrawals are still taxed as income in that year correct?

• 29 0xCC // Feb 27, 2008 at 10:09 am

  Everything that is eligible for RRSPs are eligible for the TFSA. Withdrawals are *not* taxed at all which is the main reason for the account. Contributions do not generate a tax deduction so withdrawals do not generate tax. The TFSA is basically the inverse of an RRSP. RRSP contributions are tax free but withdrawals are taxed, the TFSA contributions are taxed but the withdrawals are not. In both accounts the investments inside the account grow tax-free.

• 30 0xCC // Feb 27, 2008 at 10:13 am

  Just to be clear when I say that TFSA contributions are taxed I mean that you pay whatever tax you had to pay to generate the cash (whether that is income tax, tax on interest, tax on capital gains, tax on dividends doesn’t really matter) so it isn’t like that is an additional tax on cash that is contributed to a TFSA, you just don’t get a tax deduction on contributions like you do with an RRSP.

• 31 Steve Heath // Feb 27, 2008 at 10:13 am

  I think the biggest benefit, that I can see, is for my elderly relatives that all have RRIF’s and can no longer contribute to their RRSP’s, this will help them a lot since all of their income is interest on savings, and by the time we all become seniors it might be a very significant part of our retirement savings.

• 32 Canadian Capitalist // Feb 27, 2008 at 11:43 am

  Steve: Exactly. I’m surprised that the naysayers don’t realize how great a savings tool the TFSA will become over time. In just 10 years, between an individual and spouse, the TFSA will have more than $100K in contribution room alone. It’s hard to find a downside to the account - it will be a great place for emergency savings, saving for a renovation or a vacation or an automobile, saving for a downpayment. Seniors and others receiving income-tested benefits can withdraw without worrying about how it will affect their benefits. Overall, I think it is a great new tool for savings.

• 33 Dave from GP // Feb 27, 2008 at 11:44 am

  I wonder what the financial institutions will charge as a fee to “manage” such an account?

• 34 victor // Feb 27, 2008 at 2:13 pm

  thanks for you article.i will share it with my boomerpartner on meet on BoomerMingle.com . c o m

• 35 Greg // Feb 27, 2008 at 3:45 pm

  Hello,
  Most articles on the new TFSA mention the tax savings are identical to an RRSP. You either pay tax up front or at withdraw time. Am I missing something? It appears to me if 5,000 dollars in an RRSP grows for 20 years to become 25,000 you have pay tax on 25,000 as you withdraw. 5,000 dollars in a TFSA that grows to 25,000 in 20 years only paid tax on the original 5,000?

  Anyone able to point out where my thinking is incorrect?

• 36 Canadian Capitalist // Feb 27, 2008 at 4:13 pm

  Greg: The $5K you put in a RRSP was before taxes, so you would have received a tax refund for your RRSP contribution which can also be put back into the RRSP. If your tax rate during contribution and withdrawal are exactly the same, the RRSP and TFSA would offer identical benefits.

• 37 Keith // Feb 27, 2008 at 6:03 pm

  I am willing to forgo a tax reduction from an RRSP contribution today in order to receive a tax free withdrawl from a compounded investment or deposit.

• 38 Randy Tait // Feb 27, 2008 at 7:04 pm

  If you could find a way to get this account big-fast you would have a seriously unbalanced and unfair advantage over most people.
  What exactly can this TFSA invest in? So far I hear, stocks, bonds and GIC’s.
  No real estate, or owning your own mortgage investing available?

• 39 nobleea // Feb 27, 2008 at 7:27 pm

  Should be able to own anything you can own in RRSPs. Stocks, options, bonds, GIC, ETF, mutual funds, bullion, and your own mortgage too. But I think the admin fees to set that up are pricey, plus I assume you have to have the 200K (whatever the mortgage amount is) in your TFSA first before you can loan it out to yourself in the form or a mortgage.

  Now that I’ve thought about it, not being able to claim capital losses for stock held inside the TFSA is really of no consequence. Capital losses can only be applied against capital gains. You’re just reducing the tax hit of capital gains, you’ve already lost the money. TFSA does the same thing, and better by not taxing you on capital gains, period. Having a capital loss outside the TFSA is only useful if you have capital gains outside the TFSA.

  CC, did you mean to say “If your MARGINAL tax rate during contribution and AVERAGE TAX RATE at withdrawal are exactly the same, the RRSP and TFSA would offer identical benefits.”? Or am I not understanding the situation?

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• 41 webb // Feb 28, 2008 at 1:13 am

  This is especially good because it also illustrates that an RRSP provides effectively tax free growth - which most people don’t understand. When you compare the RRSP after tax result with the TFSA and see that they are the same - and then consider that the TFSA is truly tax free growth the tax effectivness of the RRSP becomes clear.

  Here is a defining example. Assuming 35% marginal tax rate throughout. Put $1000 in an RRSP - you get $350 tax reduction so that your out of pocket cost is actually $650. At the same time put $650 into a TFSA. The cost for each is the same (although the RRSP balance shows as $1000 - but that is before redemption). Say you wait until these two accounts double in value. RRSP now shows as $2000. and the TFSA shows as $1300. Cash them in - you pay $700 tax on your RRSP (35% Marg Tax Rate) and have $1300 after tax - double your actual $650 cost. Also you cash in your TFSA - no tax. Same $1300. Both give you effective tax free growth as long as your tax rate is the same. Because of impact of GIS and OAS clawback, clawback of age amount and other social clawbacks such as pharmacare deductibles the effective marginal tax rate for the RRSP is often higher in retirement than while working.

  It is interesting to note that even the so called advantage of a tax refund for an RRSP contribution is illusory. Is it any better to have to put $1000 in an RRSP to get $350 back than just putting $650 in the TFSA instead. Both leave you with $650 less in your pocket at the time of contribution and both are worth the same at redemption.

• 42 Wealth Manager // Feb 28, 2008 at 1:18 am

  I’m surprised nobody has pointed out we have yet another debate brewing here: that being TFSA vs. RESP.

  Sure you miss out on the CESG but on the flipside, if your children don’t head off to a qualified institution or you’re out of RRSP room…yikes.

  At least I’ve got a year to think through how I may be able to best fit this into my overall strategy.

• 43 The Financial Blogger | The Tax-Free Savings Account (TFSA) – A Creative Financial Approach // Feb 28, 2008 at 7:02 am

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• 44 nobleea // Feb 28, 2008 at 11:54 am

  One of the big benefits, I think, is for families that have one big income earner, and a stay at home parent. The spousal RRSP should be maxed out, then after the holding period (3 yrs), the stay at home parent can withdraw enough each year to reach the exemption limit and then move that cash over to the TFSA. All that money has now become tax free from the time it was earned to the time it will eventually be spent.
  This would have to be done in 3 or 4 yr spurts (due to attribution rules). For a high income earner in the top bracket, this could have the effect of saving approx 2K every year in taxes and even more in the future due to the tax free withdrawals of the TFSA.

• 45 Mark L // Feb 28, 2008 at 3:15 pm

  I think this new TFSA is one of the best ideas to come out of government in a long time. If a young person is able to put money into this account over their entire working life, they will have a a lot of money to withdrawl tax free in their retirement. As a bonus, they may still be able to collect old age pension and other available government money. The only downside I see to this, is the provinces (especially Ontario) taxing the income generated in the plan each year. I also see future federal governments scalling this program back or making people include the income generated in the plan be includeing in Net Income for eligiability in various social programs, once they realize how much tax revenues this plan will cause future governments to forgo. Starting next year, take full advantage of this plan !!

• 46 Anonymous // Feb 28, 2008 at 3:56 pm

  What a joke, I can not believe people for for these government scams - are you all really *this* stupid?

  The money you put into this is *after tax* - Rev canada has already taken 33% or more of your income out of your pocket before you can even think about investing it. So lets say you invest it at what 4% tops? Inflation sits around 2% so you are making 2% and you dont pay tax on this - big deal! Its peanuts compared to the wad of cash that has been ripped out of your back pocket already.

  And what about the cost of managing these accounts? Taxes pay the wages of people whose job it will be to police the rules -so you are going to have to pay more taxes for the privilege of not paying taxes!

  Come on people wake up and smell the ripoff.

• 47 Canadian Capitalist // Feb 28, 2008 at 6:07 pm

  webb: Very few people pay a higher average tax on RRSP withdrawals than the tax rate on their contributions. That’s a key advantage of RRSPs and will remain so.

  Wealth Manager: Tomorrow’s post will compare RESP with a TFSA.

  MarkL: It’s certainly possible that the rules can be changed in the future. Look at how many rules have been changed/tinkered with in RESPs and RRSPs in just the past few years.

  Anon: The TFSA now allows you to earn a 2% real return compared to 0.64% you would have in a taxable account using your example. That is 3 times more than earlier. How does that qualify as a “ripoff” or a “scam”?

  Now in the first year you are right that your savings amounts to peanuts. But in 5 short years, a household of two adults can save $660 in taxes by taking full advantage of these accounts. I don’t know about you but it is not peanuts anymore to me.

• 48 dcml // Feb 28, 2008 at 11:55 pm

  It is absolutely good news to those who have investments in their non-RRSP account. They can gradually move their investments into TFSA ($5000 a year) and don’t have to pay any tax on any capital gains, dividend income, etc. There is also a lot less works to be done at income tax time for someone who did a lot of trading during the year as there won’t be any need to calculate and report the capital gains/losses inside the TFSA. Last but not least, don’t forget that you can have both RRSP and TFSA at the same time.

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• 50 JW // Feb 29, 2008 at 12:09 pm

  I ran a few scenarios in Excel: deposit $5000 per year into a TFSA vs. a regular non-registered account. The assumption is that returns will be fully taxable in the regular non-registered (which is only valid for fixed income investments)

  Case 1: 40% marginal rate, 4% annual return
  In TFSA after 20 years: $148,890
  In regular non-reg. after 20 years: $126,445
  Benefit: $22,445 or 17.8% more savings

  Case 2: 30% marginal rate, 4% annual return
  In TFSA after 20 years: $148,890
  In regular non-reg. after 20 years: $131,652
  Benefit: $17,239 or 13.1% more savings

  Case 3: 40% marginal rate, 6% annual return
  In TFSA after 20 years: $183,928
  In regular non-reg. after 20 years: $142,860
  Benefit: $41,068 or 28.7% more savings

  Case 4: 30% marginal rate, 6% annual return
  In TFSA after 20 years: $183,928
  In regular non-reg. after 20 years: $152,018
  Benefit: $31,910 or 21% more savings

  So as a long term investment tool, the difference is not peanuts.

• 51 JW // Feb 29, 2008 at 12:21 pm

  My question about the TFSA is whether the provinces are obliged to treat returns in such accounts as tax-free for the purpose of provincial tax payable. I believe the rule outside of Quebec is that the provinces have to accept the federal definition of net income and can only fiddle with the tax rates on net income and certain tax credits?

  If so, then would this mean that the provinces must treat returns within a TFSA as non-taxable income or have to exit the agreement to let Ottawa collect their provincial income taxes for them?

• 52 Canadian Capitalist // Feb 29, 2008 at 3:04 pm

  JW: I believe the provinces have to play along for exactly the reason you cite. But I don’t know enough to say for sure. People routinely underestimate how corrosive taxes are on investment gains as your numbers clearly show.

• 53 Kerr // Mar 2, 2008 at 3:13 am

  Is there a way to house a real estate investment in the new TFSA? If so, what would happen after 5 years when the investment is sold and there was a net profit?

• 54 Canadian Capitalist // Mar 3, 2008 at 1:30 pm

  Kerr: I might be wrong but I don’t see how you can out a real estate investment within a TFSA. For example, you can hold a mortgage within a RRSP but it doesn’t make sense for small mortgages due to the fees involved. Holding a mortgage within a TFSA will not be an option in the initial years after it is introduced due to the $5K annual contribution room growth.

• 55 Binda // Mar 6, 2008 at 10:59 am

  I am new in Canada. I hardly understood RRSP it means we put our money in RRSP but we can’t withdraw whenever we need for other than Mortgage. Second the hot news of budget of 2008 is TFSA. My questions are :
  how much money should I diposit for the statrt?( minimun)
  What happen if I couldn’t diposit every year or same amount?
  After how lomg we can withdraw our money? Should we pay any charge for this? if ther is no any penalty or charge then thats difference this TFSA and Saving account that we currently have.

  Can somebody help to clear about this.
  thank you

• 56 Canadian Capitalist // Mar 6, 2008 at 11:52 am

  Binda: The annual maximum allowed contribution to a TFSA is $5,000. The minimum is up to you.

  You don’t have to contribute every year or even contribute the same amount every year. Your contribution room increases by the amount of contribution you did not make.

  I believe there won’t be any restrictions on when you can withdraw your money. Regarding fees, we have to wait and see what the financial institutions come up with.

  I highly recommend reading the brochures and media articles on the new account. You can find them under the category TFSA.

• 57 Patrick // Mar 7, 2008 at 3:01 pm

  cnidog - it’s not $5000 they can save for 3-5 years. It’s $5000 PER YEAR. If you’re saving for 5 years, that’s $25000 in the account for an average of 2.5 years, so it earns about $2500 in interest at 4%, and you’d be saving about $1200 in taxes at the highest bracket. Sign me up.

  (And yes, I do claim my bank account interest as income. Does that make me a chump? I didn’t know it was considered optional.)

• 58 Christine // Mar 7, 2008 at 3:56 pm

  Patrick: You are right - reporting interest income is NOT optional. By law, everyone has to report it regardless of whether their financial institution issues them a T5 or not.

• 59 tax free savings accounts — award tour // Mar 17, 2008 at 8:06 pm

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• 60 JamesW // Apr 5, 2008 at 10:16 am

  I see that Ontario has confirmed that TFSA will be tax-free for provincial tax purposes.

• 61 jimbo // Apr 7, 2008 at 1:16 pm

  So whats the deal if, after it’s ready, I take my TFSA income and use it to contribute to RRSP. Then taking the return back into TFSA now that there is room of course.

  Am I getting a tax break on tax free money? sounds too good to be true. Can someone with a head for math tell me if there is a real advantage there?

• 62 steve // Apr 23, 2008 at 10:21 pm

  I have played a lot with the TFSA, using the actual taxation math, not simply average or marginal tax rates. (remember, income tax is time dependant… the tax brackets are indexed)

  I simply cannot make a case for doing anything other than maxing your TFSA (if you can) and dumping the remainder into your RRSP.

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• 64 Walter // May 23, 2008 at 2:03 am

  I think you people have gotten all wrong..
  the TFSA has been running for as long as I have been alive. It’s call your home. it’s the same thing tax free…
  And NO an RRSP is not better then a non registered accounts, because people alway assumes that an investment is sold every year which it’s not thats not long term investing folks…and bonds are not a good investment outside an RRSP..

• 65 Canadian Capitalist // May 23, 2008 at 10:51 am

  Walter: You’ll have to elaborate a bit more because I don’t understand your point about how RRSP is not better than taxable accounts. TFSA is not the same as home ownership. It will allow you to save for a trip, stash your emergency fund or save for a car and not pay tax on interest earned within the account. How do you accomplish that using a home?

• 66 Walter // May 23, 2008 at 11:44 am

  Re: RRSP bad list:
  manditory withdraw required over 71 (as a%)
  loss of tax credits. divdends, other.
  restrictive types of investments. (everything must be arms legth)
  cannot levage.
  limited contribution amounts per year.
  and the list goes on.
  Non: is the opposite of a RRSP with one really big one that would be to deduct interest payments from regular income.

  My last point regarding your home as the same as the TFSA.
  it’s just that as canadains the biggest investment that one has is their home. I’ve been in real estate since I was 17 and as equity buildings one can remove that equity and do what ever with it with the biggest thing being that there is no limit to the amount that you can contribute each year..plus when you sell your home it is all tax free..In short if people looked at everything as if were a investment they would understand things better.

• 67 Canadian Capitalist // May 23, 2008 at 12:01 pm

  Walter: Sure, there are drawbacks but can you work around them? Absolutely you can. And don’t forget the really big advantage: you are saving tax at the marginal rate when contributing and (for the vast majority) paying less taxes during withdrawal and tax deferral on all income earned within the RRSP. Now, let’s look at your list:

  - mandatory withdrawal: If you have too much, retire early and plan your withdrawals years ahead.
  - loss of tax credits: Keep Canadian equities in a taxable account. Even if you don’t, depending on how much tax you pay on dividends, a RRSP might still come out ahead. Interest and foreign dividends are not taxed within a RRSP allowing money to truly compound.
  - restrictive types of investments. So what? I’m only interested in bonds, stocks and ETFs anyway and they are all eligible.
  - cannot leverage. So? It’s really hard to make money by leveraging to invest in equities.
  - limited contribution amount. How many people are able to save 18% of their pay check?

  Bottomline: There is nothing stopping you from doing a RRSP and investing outside and it all depends on everyone’s financial situation. For most people, who have a paycheck and regular earned income and don’t have a pension at work, a RRSP is a really good savings option.

  Taking out equity for consumption (say buying a car) means you have to pay interest with after-tax income. And what about people who already own their home? Ultimately, a RRSP, TFSA or paying down the mortgage are all options that could be ideal under different circumstances. IMO, it is good to have all these options and that’s why I think the TFSA is an excellent idea.

• 68 Walter // May 23, 2008 at 2:02 pm

  Canadian Capitalist, I think we’re talking about the same thing but, in a difference of using the same tools under the tax rules. And yet there are stats to my points. if you use the theory of bowwering 100k to invest, the interest will always be deductable at your top marginal rate every year reguardless of the investment out come. by doing this it’s a forced savings where as an RRSP is optional/choice. As we are all human beings the best why to become financially secure is to enter into a forced savings method. which most people don’t do…it’s also know as pay yourself first…as all canadains force them selves to purchase their home the saving for that asset is in fact a forced savings plan which is leveraged. To pull equity out of ones home to purchase consumables are not good but, in fact Stats Can has stated that a greater number of Canadians have been do just that. It would be better if this (TFSA)was a required contribution vs an optional one.

  (this is a little off topic but) Canadians have been following suit with the US regarding an ever smaller amount of savings and yet consumerizim is on the increase.. Canadians on avgerage have little or no room in their disposable incomes or savings to cover an increase of interest payments, as interest rates will start rising this year. Which is determined by inflation. we’ll see how this plays out over time..

• 69 Canadian Capitalist // May 23, 2008 at 3:54 pm

  Walter: I’m a huge proponent of saving and a big fan of paying down the mortgage. I also believe that homeowners (as long as they buy a home that fits well within their budget) tend to come out ahead because of the forced savings in the form of a mortgage. But, I think there is a vast difference between leveraging to purchase a personal residence and leveraging to invest due to the fact that evidence suggests most people are poor investors. They chase returns and buy yesterday’s winners, they sell at the wrong time, pay no attention to taxes and expenses, boast about their “hot” stocks but not their dogs (i.e. have no idea what their returns are) etc. Leveraging just magnifies these bad habits. If they didn’t have the discipline to save a little bit, how will they have the discipline of investing a large chunk of borrowed cash wisely?

• 70 Walter // May 23, 2008 at 4:17 pm

  Canadian Capitalist, you are correct about people and their poor investment style but, that goes back to the lack of education in investing. Keeping in mind that 80% of mutual funds don’t equal the return of the exchange. The easist way is to buy the market vs paying for a poor performance from a fund manager year after year.
  say that, It just goes to show that the 2 of us are above the norm of investing then the average canadian.
  Your comment about “paying no attention to taxes and expanses” I not sure if your referring to the average Canadian or to the politicians who don’t have a clue as to what a balance sheet looks like!

  I still know that an RRSP is a bad deal at the end of the day. Have you read the report from the senate on the negitive effects of an RRSP to lower to medium income earners? Its a good read.

• 71 Donovan // Jul 9, 2008 at 9:42 pm

  take 5000/year over 35yrs @ 7.5% = 721000.00 tax free show me a pension that gives that kind of return.

  p.s
  on the 35 year you will be earning $54000.00 in interest sounds pretty god to me.

• 72 DAvid // Jul 10, 2008 at 1:53 am

  Donovan,
  However, due to inflation, the buying power of your $54,000 in 35 years will purchase about $22,000 of goods.

  The TFSA is only one part of a well managed financial plan. It’s limitation is the $5,000 annual cap, and the lack of a tax return on today’s money.

  If you were earning $70,000 and therefore in the 33% tax bracket (BC), for $5000, you can buy about $7500 of RRSP. At 7.5% this accrues over 35 years to $1,156,887, and at year 35, generates $86,766 in annual taxable income. If on withdrawal, this income is taxed at your average tax rate (currently 25.73% in BC), you would have $65,864.37 to spend.

  I believe the RRSP is about $11,800 or 22% better.

  DAvid

• 73 Walter // Jul 10, 2008 at 12:35 pm

  Donovan, A pension plan is not quite the same thing as this type of an account. Besides at 7.5% in bonds is not easy to get these days.. 5-5.5% is about right. I don’t belive for a moment that people won’t use this as a regular bank account and there fore your calculations will be wrong as the account would be =< $5k at anytime going forward..

• 74 Andrew // Jul 13, 2008 at 12:43 pm

  David,

  You’ll note that the allowance will be inflation adjusted, at an increase of 500 per year! This was not included in Donovan’s calculation either…

  Source:
  http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080226/budget_taxes_080226/20080226?hub=TopStories

  Exerpt:

  How the Tax-Free Savings Account Will Work

  Starting in 2009, Canadian residents age 18 or older will be eligible to contribute up to $5,000 annually to a TFSA, with unused room being carried forward.
  Contributions will not be deductible.
  Capital gains and other investment income earned in a TFSA will not be taxed.
  Withdrawals will be tax-free.
  Neither income earned within a TFSA nor withdrawals from it will affect eligibility for federal income-tested benefits and credits.
  Withdrawals will create contribution room for future savings.
  Contributions to a spouse’s or common-law partner’s TFSA will be allowed, and TFSA assets will be transferable to the TFSA of a spouse or common-law partner upon death.
  Qualified investments include all arm’s-length Registered Retirement Savings Plan (RRSP) qualified investments.
  The $5,000 annual contribution limit will be indexed to inflation in $500 increments.
  (Source: 2008 Budget)

• 75 Andrew // Jul 13, 2008 at 1:34 pm

  Savings for married couple over 35 years at initially $5000 each per year, increasing by $500 each per year thereafter.
  Compounded Annually

  Date Value Interest Rate Interest Lump Sum
  1 1. January 2009 10000 5.00% 500 $11,000.00
  2 1. January 2010 $21,500.00 5.00% $1,075.00 $12,000.00
  3 1. January 2011 $34,575.00 5.00% $1,728.75 $13,000.00
  4 1. January 2012 $49,303.75 5.00% $2,465.19 $14,000.00
  5 1. January 2013 $65,768.94 5.00% $3,288.45 $15,000.00
  6 1. January 2014 $84,057.38 5.00% $4,202.87 $16,000.00
  7 1. January 2015 $104,260.25 5.00% $5,213.01 $17,000.00
  8 1. January 2016 $126,473.27 5.00% $6,323.66 $18,000.00
  9 1. January 2017 $150,796.93 5.00% $7,539.85 $19,000.00
  10 1. January 2018 $177,336.78 5.00% $8,866.84 $20,000.00
  11 1. January 2019 $206,203.61 5.00% $10,310.18 $21,000.00
  12 1. January 2020 $237,513.80 5.00% $11,875.69 $22,000.00
  13 1. January 2021 $271,389.49 5.00% $13,569.47 $23,000.00
  14 1. January 2022 $307,958.96 5.00% $15,397.95 $24,000.00
  15 1. January 2023 $347,356.91 5.00% $17,367.85 $25,000.00
  16 1. January 2024 $389,724.75 5.00% $19,486.24 $26,000.00
  17 1. January 2025 $435,210.99 5.00% $21,760.55 $27,000.00
  18 1. January 2026 $483,971.54 5.00% $24,198.58 $28,000.00
  19 1. January 2027 $536,170.12 5.00% $26,808.51 $29,000.00
  20 1. January 2028 $591,978.62 5.00% $29,598.93 $30,000.00
  21 1. January 2029 $651,577.55 5.00% $32,578.88 $31,000.00
  22 1. January 2030 $715,156.43 5.00% $35,757.82 $32,000.00
  23 1. January 2031 $782,914.25 5.00% $39,145.71 $33,000.00
  24 1. January 2032 $855,059.97 5.00% $42,753.00 $34,000.00
  25 1. January 2033 $931,812.96 5.00% $46,590.65 $35,000.00
  26 1. January 2034 $1,013,403.61 5.00% $50,670.18 $36,000.00
  27 1. January 2035 $1,100,073.79 5.00% $55,003.69 $37,000.00
  28 1. January 2036 $1,192,077.48 5.00% $59,603.87 $38,000.00
  29 1. January 2037 $1,289,681.36 5.00% $64,484.07 $39,000.00
  30 1. January 2038 $1,393,165.43 5.00% $69,658.27 $40,000.00
  31 1. January 2039 $1,502,823.70 5.00% $75,141.18 $41,000.00
  32 1. January 2040 $1,618,964.88 5.00% $80,948.24 $42,000.00
  33 1. January 2041 $1,741,913.13 5.00% $87,095.66 $43,000.00
  34 1. January 2042 $1,872,008.78 5.00% $93,600.44 $44,000.00
  35 1. January 2043 $2,009,609.22 5.00% $100,480.46 $45,000.00

• 76 Andrew // Jul 13, 2008 at 1:39 pm

  The $5,000 annual contribution limit will be indexed to inflation in $500 increments.

  This doesn’t quite make sense…perhaps every 3-4 years will be the $500 increment? What do you reckon?

• 77 Andrew // Jul 13, 2008 at 1:44 pm

  Sorry bout the refinements…Here is for one contributor, with 500 increase every 4 years.

  Year Number Date Value Interest Rate Interest Lump Sum
  1 1. January 2009 5000 5.00% 250 $5,000.00
  2 1. January 2010 $10,250.00 5.00% $512.50 $5,000.00
  3 1. January 2011 $15,762.50 5.00% $788.13 $5,000.00
  4 1. January 2012 $21,550.63 5.00% $1,077.53 $5,000.00
  5 1. January 2013 $27,628.16 5.00% $1,381.41 $5,500.00
  6 1. January 2014 $34,509.56 5.00% $1,725.48 $5,500.00
  7 1. January 2015 $41,735.04 5.00% $2,086.75 $5,500.00
  8 1. January 2016 $49,321.79 5.00% $2,466.09 $5,500.00
  9 1. January 2017 $57,287.88 5.00% $2,864.39 $6,000.00
  10 1. January 2018 $66,152.28 5.00% $3,307.61 $6,000.00
  11 1. January 2019 $75,459.89 5.00% $3,772.99 $6,000.00
  12 1. January 2020 $85,232.89 5.00% $4,261.64 $6,000.00
  13 1. January 2021 $95,494.53 5.00% $4,774.73 $6,500.00
  14 1. January 2022 $106,769.26 5.00% $5,338.46 $6,500.00
  15 1. January 2023 $118,607.72 5.00% $5,930.39 $6,500.00
  16 1. January 2024 $131,038.11 5.00% $6,551.91 $6,500.00
  17 1. January 2025 $144,090.01 5.00% $7,204.50 $7,000.00
  18 1. January 2026 $158,294.51 5.00% $7,914.73 $7,000.00
  19 1. January 2027 $173,209.24 5.00% $8,660.46 $7,000.00
  20 1. January 2028 $188,869.70 5.00% $9,443.49 $7,000.00
  21 1. January 2029 $205,313.19 5.00% $10,265.66 $7,500.00
  22 1. January 2030 $223,078.84 5.00% $11,153.94 $7,500.00
  23 1. January 2031 $241,732.79 5.00% $12,086.64 $7,500.00
  24 1. January 2032 $261,319.43 5.00% $13,065.97 $7,500.00
  25 1. January 2033 $281,885.40 5.00% $14,094.27 $8,000.00
  26 1. January 2034 $303,979.67 5.00% $15,198.98 $8,000.00
  27 1. January 2035 $327,178.65 5.00% $16,358.93 $8,000.00
  28 1. January 2036 $351,537.58 5.00% $17,576.88 $8,000.00
  29 1. January 2037 $377,114.46 5.00% $18,855.72 $8,500.00
  30 1. January 2038 $404,470.19 5.00% $20,223.51 $8,500.00
  31 1. January 2039 $433,193.69 5.00% $21,659.68 $8,500.00
  32 1. January 2040 $463,353.38 5.00% $23,167.67 $8,500.00
  33 1. January 2041 $495,021.05 5.00% $24,751.05 $9,000.00
  34 1. January 2042 $528,772.10 5.00% $26,438.61 $9,000.00
  35 1. January 2043 $564,210.71 5.00% $28,210.54 $9,000.00

• 78 Walter // Jul 13, 2008 at 1:45 pm

  I’d hate to say it but, your asumptions aren’t right.. Your assuming that A) someone wouldn’t withdraw anything from the account in 35 years and B) no allowance for the bond price to fall netting a possible negitive return…
  on top of that if this TFSP is the same as a RRSP then one could prepay any amount (as long as you don’t over claim it)
  For example deposit $100,000. And every year claim the 5+K as its the same method that can be used in an RRSP.

• 79 Andrew // Jul 13, 2008 at 2:05 pm

  Walter,
  Point A) Everyone is different in their savings habits. If you treat the TFSP as an untouchable investment vehicle, then this assumption holds true.
  Point B) If you think that 5% (keeping in mind inflation is accounted for) is unreasonable…what do you think would be a reasonable average return rate to use? Also keeping in mind that there are many RRSP elibible investment vehicles with varying return rates.

  I do not believe you can prepay. You can only contribute retrospectively to your cumulative yearly limit.

• 80 Canadian Capitalist // Jul 13, 2008 at 4:39 pm

  Great discussion guys. Some clarifications:

  1. Andrew, your comment # 77 is more reasonable. The $500 increment will kick in only if the cumulative inflation-adjustment exceeds $500. Assuming a 2% inflation, it will take roughly 4 to 5 years before the limit will be bumped up to $5,500.

  2. Walter, you cannot prepay either for RRSPs or the TFSA. It’s true that you can make a contribution but not claim a deduction for RRSP but that is only if contribution room is available.

  3. While $5K limit sounds a bit low compared to RRSPs, keep in mind that this is after-tax. For someone in a 40% tax bracket, making the full contribution is equivalent to adding $8,300 to their RRSP.

  4. I agree with DAvid’s point in #72 which is why RRSPs will be superior for people in the middle and top brackets. The RRSP allows income taxes to be deferred to future years.

  5. Ultimately, the TFSA, RRSP and mortgage paydowns are simply savings tools and we have to pick a combination that makes the most sense for our financial and tax situations.

• 81 DAvid // Jul 25, 2008 at 7:56 am

  Andrew said: “You’ll note that the allowance will be inflation adjusted, at an increase of 500 per year! This was not included in Donovan’s calculation either…”

  The RRSP is ‘inflation adjusted’ at the rate of increase in your paycheque! Since this could increment at a rate in excess of inflation, in my opinion, it is the better option.

  The TFSA seems to have been created to return Canadians to the habit of saving. The interest-free offering is just the bait to get us hooked. I expect the TFSA will be underused by most Canadians as is the RRSP.

  DAvid

• 82 Walter // Jul 25, 2008 at 11:49 am

  DAvid, I think Andrew has included the $500 for inflation at a reasonable every fourth year.
  Your point “The RRSP is ‘inflation adjusted’ at the rate of increase in your paycheque! ” Only if your paycheck rises besides, the RRSP was exposed to be inflation adjusted but, the government refused to rise the rates for years as it was only in the last few years that they promitted the RRSP limit to be increased. I’m assuming that this is what is going to happen to the TFSA as well.
  I do agree completly with you on the fact the people will underuse this plan. A simple fact is that Canadains are not savers..

• 83 Kevin // Aug 10, 2008 at 12:48 am

  Ok, this is a good thing. Anyone that disagrees doesn’t really invest. Currently we are taxed on our money, then we invest it and they tax us again on essentially the same money. It’s not perfect but at least we are making more money from the original money.

  I just have a question and would like to know if anyone knows the answer. If I set up an incorporated investment business, then personally invest in it and pay myself distributions, is there any conflict of interest here?

  If there is not and this would be legal, essentially I could make myself extremely rich with no tax. An example of what you can do is invest your $5000.00 per year into a real estate investment corporation and become the main share holder. Use the invested money as a down payment on an income producing rental property. When the rents and profits are collected I then pay all of the profits to my main shareholder (myself).

  If anyone knows the answer to this please let me know. I will be talking to my accountant as well but if this is the case, a lot of already rich people will make themselves a lot more rich.

  Anyways, just a thought for all of you doubters out there.

• 84 DAvid // Aug 10, 2008 at 6:24 am

  The corporation will pay taxes on the income it generates, and you will pay taxes on the distributions you withdraw. The only untaxed portion to you would be the original $5000.

  There ‘aint no thing as a free lunch.

  DAvid

• 85 Traciatim // Aug 10, 2008 at 9:48 am

  Hey David, I realize the corporation will pay income tax on the money, but if the shares are held within the TFSA, the distributions would go there as well. How would the distributions become taxable after they are paid to the TFSA?

• 86 Canadian Capitalist // Aug 10, 2008 at 10:17 am

  Kevin, DAvid, Traciatim: I’m not 100% sure on this but shares of small business may not be eligible property for holding within the TFSA. That would make the following point moot but still:

  When passive income is received by a corporation, it is taxed at a rate equivalent to the highest income tax rate applicable to individuals. So, I don’t think Kevin’s idea would work even if distributions from the corporation to the TFSA are taxed or not.

• 87 DAvid // Aug 10, 2008 at 11:54 am

  I stand corrected on the tax free withdrawal of the income distributed by the company. However, I cannot see the TFSA allowing a corporation to be operated within it, as it operates in similar fashion to an RRSP.

  DAvid

• 88 Walter // Aug 10, 2008 at 1:34 pm

  DAivd that is correct, the TFSA is expose to be the same as a RRSP in which a small company at non arms length are not allowed as an investment. Plus Kevin your question regarding the 5k as a down payment for an investment property wouldn’t work either as you cannot borrow against the TFSA nor could it hold real estate directly.

• 89 Kevin // Aug 10, 2008 at 1:44 pm

  Thanks for your help guys.

  So if I understand correctly, distributions of a company are done from profits after tax, they are not considered an expense for the company. Is this correct?

  My understanding of the TFSA is that we would not be taxed on the distributions, this is what I am finding from every source that I check.

  Do you guys know if we can use oil & gas trusts as our investments within a TFSA? Also does anyone here have experience with oil & gas trusts? From everything I find and hear they seem great and have extremely high returns on them on a monthly basis. The downside that I have heard is that eventually the money that you initially invested may be lost.

  I don’t know much about them so if anyone here has any experience or any good source of info on this I would appreciate it.

  Thank you,
  Kevin

  Oh and I just stumbled upon this site and I like it so far, thanks for the good info

• 90 Walter // Aug 10, 2008 at 4:46 pm

  Kevin, for someone who writes “Anyone that disagrees doesn’t really invest.” Your asking allot on topics that is outside of the TFSA. A simple yes is in regards to the issue of a dividend payment as in, its always after the company has paid tax.

  Part two of your question regarding oil& gas trusts; there too the answer is yes you can purchase these inside your TFSA. and the downside would apply to any and all companies as there is no guarrenty that any company wouldn’t fail. These companies payout a high percentage for a reason, its sometimes called a risk premium..
  One last thing regarding income trusts, keep in mind that the government has changed its policy on them and they are now forced to change thier taxing model to be more inline with a stardard company for tax purposes..only when a company changes we’ll know by how much less the payout maybe if at all.

• 91 Kevin // Aug 10, 2008 at 9:22 pm

  Hi Walter,

  My comment about people not really investing is actually in regards to another forum. I copied and pasted this comment onto this forum. On the one that I originally posted this there was a guy that was totally blasting the TFSA and tried to make it sound like it was useless, that is what got me on that saying.

  In regards to my investments, I am currently investing in a revenue properties and am just beginning to further my knowledge in other types of investments. The TFSA sounds like it may offer a lot more opportunities to help to avoid taxes.

  Anyways, no harm meant to anyone here.

  Thanks again for everyones help

• 92 Walter // Aug 10, 2008 at 10:08 pm

  Kevin no problem,

  here are some sites for educating one self about the stock market and companies evalulation.
  https://www.csi.ca/student/en_ca/home.xhtml
  http://investopedia.com/
  http://www.fool.com/
  http://moneychimp.com/
  plus the stock exchanges have education programs.

  Now keep in mind that these sites are for education about stocks NOT about tax issues..

• 93 Almo // Aug 22, 2008 at 2:31 pm

  I like the idea. I am in. simple.

• 94 Michael // Sep 22, 2008 at 6:32 pm

  Invest your money, pay no tax on the capital gains, and pay no tax when withdrawing your investment, up to $5,000? Sweet!

• 95 Bob // Sep 29, 2008 at 3:07 pm

  Here’s a question. If I have a TFSA where I invest $5,000 and buy some high perfoming stock why I then sell for $20,000 and take the $20,000 cash out of my TFSA. Do I have a $20,000 top up available or just a $5,000 top up?

• 96 Phil // Oct 9, 2008 at 2:24 am

  The rule is “you can replace what you remove”. If you withdraw the full $20,000 out of your TFSA then your new contribution room is $20,000 until the next year when you are granted an additional $5,000 (or more) as the the Federal Government’s annual addition.

• 97 Dan // Oct 19, 2008 at 4:03 pm

  I’m interested in knowing how a small business owner can take advantage of the TFSA. For example, let’s say I own a small business that is incorporated. Can I contribute $5000.00 worth of shares of my company to my TFSA each year and and then pay myself dividends on those shares tax free? If I contributed $5000 of shares every year, conceivably, I could eventually hold %100 of my company’s shares in my TFSA and all the dividends I pay out to myself would then be tax free. I’m I dreaming? I’ve read the CRA’s QA and it says “certain shares of small buisnesses” can be held in a TSFA.

• 98 Walter // Oct 19, 2008 at 4:59 pm

  Hi Dan,

  just to give you a quick answer “yes”. I have to ask this? Why would you payout a dividend vs an interest payment on those shares? as a dividend payment is with after tax dollars (from the company) vs a dollar for dollar deduction for an interest payment?(with no tax paid)

• 99 Canadian Capitalist // Oct 19, 2008 at 7:30 pm

  Dan: You should consult your accountant. My understanding is that most small businesses would not meet the criteria for qualified holdings.

• 100 Margot // Nov 5, 2008 at 6:18 pm

  I would like to know if it is possible to invest $5000 in several FTSAs, each at a different financial institution

• 101 Canadian Capitalist // Nov 5, 2008 at 9:05 pm

  Margot: No. The TFSA limit of $5,000 applies to an investor’s total contribution across *all* their accounts. There are severe penalties for exceeding the contribution limits.

• 102 Walter // Nov 5, 2008 at 9:09 pm

  Margot: yes you could but what would the point being? as these account/s are know to the CRA and they’ll know if you have more then one account. Penities will apply if your over the 5k amount regardless of how many accounts you choose to open..

• 103 Margot // Nov 5, 2008 at 10:26 pm

  Thank you, Canadian Capitalist and Walter, for your prompt replies. I had inquired from two banks and both said I could have more than one TFSA for $5000 each. Obviously they didn’t know what they were talking about.

• 104 Walter // Nov 5, 2008 at 11:04 pm

  NP, Margot: just a note of caution about banks. As most banks have investment advisors and not all of these people really know much more then what products that they can sell, not what is the right choice for that client. ie: the basics on taxes when looking at an investment, even if you ask them about the buying and investment with borrowed money and is that interest amount tax deducible. most times you’ll get a “no” mean while the answer is “yes”.

• 105 John // Nov 7, 2008 at 7:20 pm

  Do you have to open an account for the accumulated room to add up, or does everyone accumulate contribution room starting from 2009 if they are 18 or older even if they have never opened an account?

• 106 Walter // Nov 7, 2008 at 9:32 pm

  John its the latter.

• 107 rdavies // Nov 9, 2008 at 9:57 am

  if the main advantage of rrsp vs tfsa is the individual marginal tax rate at time of withdrawal, wouldn’t you want the rrsp for years when your tax rate is low (i.e. at retirement or loss of employment) and the tfsa for use when your marginal tax rate is higher or increasing (i.e to buy your car or whatever) while you are still working?

• 108 Canadian Capitalist // Nov 11, 2008 at 11:05 am

  rdavies: Yes, since withdrawals from a RRSP are taxed, it is best for retirement years. TFSAs are better for pretty much everything else. Note that withdrawal from a TFSA creates an equal amount of contribution room; withdrawal from a RRSP doesn’t.

  John: Just like a RRSP, a TFSA contribution room accumulates regardless of whether an individual has an account or not.

• 109 Ideas for your Tax-Free Savings Account (TFSA) // Nov 16, 2008 at 10:31 pm

  [...] the Tax-Free Savings Account (TFSA) was announced in Budget 2008, the Government called it “an RRSP for everything else in your [...]

• 110 R Norman // Nov 28, 2008 at 1:25 pm

  The tax free savings account real advantages don’t amount to a hill of beans.
  Because the $5,000 contributions are made with tax paid dollars unlike RRSP contributions, the only advantage is that the income on the 5,000 is sheltered.
  If we are lucky the GIC rate on the 5,000 would be a whopping 3% or only $150 would be tax sheltered.

  I am sure most investors will be very reluctant to invest the 5,000 in the equity markets after seeing there equity investments tumble 30% or more.

  More meaningfull would be for the Government to revise the minimum RRIF withdrawals to help the many who have seen there RRSP nest eggs tumble in value. But I suppose the government will at best. hold onto the strings of the RRSP/RRIF accounts and at best defer the amonts to be reported.

• 111 Traciatim // Nov 28, 2008 at 4:32 pm

  Yes Norman, GICs are the ONLY use for the TFSA . . . ever think of putting all your foreign dividends in there and keeping your eligible Canadian dividends outside?

  Also, have you compared that 3% CIG if you are putting in 5K a year for 20 years tax free vs taxable each year. Sure it doesn’t sound like much this year, but it ads up extremely quickly.

• 112 Canadian Capitalist // Nov 28, 2008 at 5:32 pm

  Norman: Like Traciatim points out, the TFSA is an excellent savings vehicle. Just in the first year, a couple contributing $10,000 to their respective TFSAs will save $200, assuming they earn 4% and are taxed at a 50% rate. It adds up in subsequent years and in a few short years are looking at significant tax savings.

• 113 plandry // Dec 1, 2008 at 1:48 am

  I have a question. Everything I read says that if you make a withdrawal from your TFSA, you can replace that amount “at a later date.” Does it matter when this later date is? One “financial advisor” at my bank today told me that if you invest $5000 on Jan 1 and then withdraw some during the current year, whatever you withdraw cannot be replaced until the next year when it is added to your contribution room. That seems ridiculous to me…anyone know if that’s true?

  For instance, if I put $5000 into a TFSA at bank A on Jan 1, then withdraw $2000 on Jan 2 and put it into bank B….am I over-contributing? Is this allowed?

  Thanks.

• 114 walter // Dec 1, 2008 at 10:58 am

  Plandry, since the CRA is overseeing the contribution limits for your account and not your bank. The calculation would be correct. However you would be able to contribute any time after the withdrawal date. Just think of it as the same as an RRSP, where your contribution limits are only done on a yearly bases..

• 115 plandry // Dec 1, 2008 at 11:43 am

  I’m still confused about this…here is a direct quote from ING’s website:

  “If you take money out of your Tax-Free Savings Account, you don’t lose the contribution room. You get it back in the following year.”

  This makes it sound like any withdrawal’s you make cannot be replaced until the following year.

• 116 Canadian Capitalist // Dec 1, 2008 at 12:31 pm

  plandry: The financial advisor is right. When you withdraw money from a TFSA, that amount is added to the contribution room for the *next year*.

  So, your example wouldn’t work. If you contribute $5,000 to your account on Jan 1, withdraw $2,000 on Jan 2, then you *cannot* contribute anymore to any of your TFSA accounts in that calendar year. If you do, you’ll deemed to have made an overcontribution, which attracts a penalty.

• 117 walter // Dec 1, 2008 at 9:16 pm

  Canadian Capitalist, I would disagree with you on that last point as I understand it.

• 118 Canadian Capitalist // Dec 1, 2008 at 11:40 pm

  walter: Here is a quote from the CRA webpage:

  “The TFSA dollar limit is $5,000 in 2009, and will be indexed to inflation and rounded to the nearest $500 in later years. Unused TFSA contribution room can be carried forward to later years. The total of TFSA withdrawals in a calendar year is added to the TFSA contribution room for the next calendar year.”

  Link to CRA webpage

• 119 Brad // Dec 6, 2008 at 12:22 am

  I’m looking for some information about the interest payment that walter is talking about in msg# 98. that and any resourses about the differences between a limited company, incorporated and such as i am looking to start my own company. and since this is a forum on TFSA’s i am curious about whether or not mutual funds are a good idea for this type of account since i only have mutuals in RRSP’s….

  brad

• 120 walter // Dec 6, 2008 at 7:43 pm

  Brad,
  re: mutuals in this account is your choice.. just note that a mutual fund is a product and it does carry a yearly % charge.
  Plus, I hate mutuals as 85% of all mutuals don’t beat the index. I never could see the benefit of paying them 2.5% for non performance.

  re: the difference between a limited and an incorpated company you can just google that to find what is the best for you business.

  re: interest payments vs dividend, well brad before you start your business you’ll really need to educate yourself well before you get started.

  But, an interest payment from a company is dollar for dollar deducted from the company’s income statement (without tax payable) and is shown as an expense to the business vs a dividend can only be paid out with after tax money..

• 121 Vinny // Dec 7, 2008 at 4:03 pm

  I’d like to know if there are any advantages/ disadvantages of opening a TFSA through a Bank or some other institution, like a Trust?

• 122 walter // Dec 7, 2008 at 7:41 pm

  Vinny, there is little to no differents..

• 123 Vinny // Dec 9, 2008 at 1:31 pm

  Thanks walter; Apart from using the money to invest freely in the stock market, I guess by opening a TFSA account with TD or CIBC or BMO will only allow me to invest in products they offer. So I guess I really need to shop around for good low risk high return invests deals from financial institutions before putting $5K into an account.

• 124 walter // Dec 9, 2008 at 9:39 pm

  Vinny,
  low risk, high return.. not as a product with all their fees. Just look at buying the banks. or the ETF of the banking stocks. There is so many different ways to invest monies nowadays. Even if this cash isn’t needed for a long time you could even pickup so government bonds..

• 125 walter // Dec 10, 2008 at 9:12 pm

  Jo,
  what does that web site have to do with the TFSA???
  I’ve looked through it and it talks about learning english, selling cookies and etc. give me a break Jo stop trying to cross advertise another useless web site..

• 126 Oxymoron // Jan 1, 2009 at 11:33 am

  If you have $5000 that you consider disposable and you are not adverse to risk…would buying a highly speculative stock (or one which has been beaten down badly) not be worth the chance. There certainly are a many of the latter currently available. For this type of investor, these TFSA’s have become available at JUST the right time. The poor markets may end up being fantastic gifts for those doing there DD and taking a calculated risk.
  I’m thinking of using my portion in the above manner and the wife’s in a very conservative manner. In the future I see us withdrawing from her gains to do some speculating in my account. Is anyone else in this situation or considering such an idea?
  Our TFSA’s are setu up and ready…now the hard part: How to best use them?
  Good luck
  Oxymoron

• 127 Bruce // Jan 1, 2009 at 6:40 pm

  Thanks for all the posts - they have been very useful. The thing that caught my attention was the fees that were posted for CIBC. I deal with BMO and looked in vain on their website to get some information on the fees associates with the TFSA. I decided to send them a message and I’ve provided my comment and their response below.

  ” Comment:Hi, I was thinking of opening a tax-free savings account and can’t seem to find any information on the fees associated with the account. Can you please direct me to the place on your website that shows what fees would be associated with the tax free savings account. Thanks,

  Response: Thank you for contacting BMO Bank of Montreal, and I appreciate this opportunity to respond.
  I understand your concern regarding fees. I can confirm that there are no fees associated with the Tax Free Savings Account (TFSA). Please note that the investment products you choose to hold in the TFSA may have fees or charges associated with them (for example, management fees on a mutual fund).

  Based on this message, I opened an account with them.

• 128 Tim // Jan 7, 2009 at 9:15 am

  Hi folks, great insight here….I have had my research assistant spend several days contacting all the banks and other institutions by phone and website to find out what fees they will charge, and what incentives are being offered. A lot of them are still figuring this out and have not fully developed a plan (!?)… anyway we will feature this on the website (under “Where…”) once the stats are coded…and it will be updated as new info comes in.

• 129 tax free saving // Jan 7, 2009 at 9:34 am

  Just to follow up on the previous post..the table will be up in a day or two showing what the banks fees and incentives are, and we will update accordingly - Diana

• 130 Scott // Jan 12, 2009 at 6:45 pm

  Okay, here’s a question. I contribute to a company stock plan. Can I transfer the stock directly in to a TFSA, or do I have to sell it, trigger the capital gain/loss, and then invest in the account?

• 131 Robert // Jan 13, 2009 at 1:58 pm

  This is just a pathetic move to look like they are doing something. WOW, 3% of 5,000….wow just such great gains.

  It’s bloody savings account….and you save 100 a year. That is of course assuming you’ll never need to touch it.

  And then, it may work if you don’t touch it for let’s say 10-30 years? And what average family will never have an emergency in that time?

  This is like some old lady getting a face lift, too little too late. And done the great canadian way…CHEAPLY.

• 132 Traciatim // Jan 13, 2009 at 2:18 pm

  Robert, of course if you just open a savings account with it and put 5 grand in there, then never do anything else with it again you would save a few bucks a year.

  Of course you leave out that the growth of the account is yearly, so next year you put another 5 grand in. Year 3 you have an emergency that wipes the account clean so you are at 0, but your contribution room is now the 3 years of 5K (15K) plus the interest you earned, so you can feel free to contribute as much as you like in year 4 again since you haev a shade over 20K of room.

  Think about someone turning 18 now when they are 30 and starting their family and have 60,000 of room available, you think it’s trivial then?

  It completely rounds out the taxable short term accounts, with a non taxable savings and a non taxable retirement account which makes an incredibly powerful combination for future planning.

• 133 Cajon // Jan 14, 2009 at 3:58 pm

  Currently only BC, AB and PE allow successor designations for TFSAs. Since we live in Ontario, we can’t designate a successor. Anyone heard if Ontario and the other provinces will be introducing legislation to allow this?

• 134 DB // Jan 17, 2009 at 5:01 pm

  Cajon - If you mean naming a spouse or common-law partner as a beneficiary upon death then the answer is yes you can and the proceeds are tax free.

  See the FAQ section under: http://www.taxfreesavingscanada.ca/

  If you mean naming a spouse or commom-law partner as a successor who can continue to contribute to your TFSA account upon death then I would suggest calling the government to obtain a concrete answer. In that case your spouse or common law partner would have his/her own TFSA potentially and the money inherited from your TFSA could be contributed to his/her own account depending on contribution room at that point in time.

  Although a bit obvious, hope it helps anyways.

• 135 Cajon // Jan 17, 2009 at 11:09 pm

  DB,

  Although the federal legislation for TFSAs provides for designating a spouse as a successor, currently in the province of Ontario, this is not allowed. Only BC, AB and PE allow this. The list of provinces that allow the successor designation is shown on the HSBC website at:
  http://www.hsbc.ca/1/2/en/personal/chequing-savings/savings-accounts/tax-free-savings-account/tfsa-beneficiary-designation

  Here is the response that I received from the office of my MPP concerning this matter:

  Thank you for your email regarding designating a beneficiary and/or
  successor for the new Tax Free Savings Account. Presently, one cannot
  designate beneficiaries for Tax Free Savings Accounts. Accordingly,
  there is no place on a form to do so. Whether to allow such a
  designation is a policy decision that the government is presently
  considering. I trust this information is satisfactory to you.

  Regards,

  Office of Leeanna Pendergast, MPP
  Kitchener-Conestoga

  The current situation is totally unacceptable to me. Why should the residents of BC, AB and PE be allowed to designate a successor beneficiary as provided for in the legislation and the residents of the other provinces be denied this designation?

• 136 walter // Jan 18, 2009 at 11:16 am

  Im finally back from a long vaction into southern europe
  and loved it..anyways..
  Robert, if your looking for interest on an investment look at the corporate bonds as they have been beaten down allot and now have a great yield.. if you dont like corporate bonds look into ppn as these do have a very high percentage return

• 137 DB // Jan 20, 2009 at 2:04 am

  Cajon,

  Interesting and thanks for the followup. I would imagine that legislation to do so would be in the works for the rest of the provinces, not sure why the delay.

  As you mentioned, and I double checked, the federal govmt website allows for designation and succession see:

  http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/dth-eng.html

  A lot of the plans details are still being ironed out by both the govmt and issuing institutions so don’t lose hope.

• 138 JeffyStud // Jan 23, 2009 at 9:14 am

  Hi,

  I’m lacking some understanding regarding the Tax Free Savings Account. And hoping for some clarification.

  From what I’ve been informed and read, Stocks can be held under the Tax Free Savings account.

  Having said that can stocks held outside of the Tax free savings account be transferred into the account ?

  And also when I was talking to a Bank representative, she informed me that if my investment in stocks under the TFSA grow from 5000 to 8000 and I sold the stocks to withdraw 8000, I should be able to recontribute 8000 (which seems rather fishy to me). And so I was wondering if this statement holds true ?

  Thanks

• 139 Canadian Capitalist // Jan 23, 2009 at 11:05 am

  @JeffyStud: Yes, you can hold stocks in a TFSA. You should be able to transfer stocks in-kind to a TFSA but watch out for tax implications (you have to declare any capital gains but cannot claim capital losses). And the bank rep is right. You can withdraw any amount from a TFSA and that amount will be added to your contribution room in the next year.

• 140 MarkI // Jan 25, 2009 at 2:24 am

  This $5k per year contribution room. I assume that it goes up whether or not I have opened such an account - eg I don’t open an account now, but in ten years time I can open an account and deposit $50k??? Is that right? How is this kept track of?
  Also - I assume you have to be 18+ before getting such a benefit (eg my 5 y.o son won’t suddenly have $65k headroom when he turns 18)!

• 141 Traciatim // Jan 25, 2009 at 11:41 am

  MarkI, you are correct. The CRA is tracking contribution room much like they track RRSP contribution room. Financial institutions will report deposits and withdrawals to the CRA.

• 142 DJRH // Jan 26, 2009 at 2:07 pm

  Hi guys, I have questionsregarding opening multiple TFSA accounts. Suppose I open a TFSA with a bank A today and put $5k in it.

  1. It looks like if at some point bank A drops drastically the rate, am I stuck with it? It seems that I cannot move my money to another TFSA in a bank B without penalty since I have used my contribution room for 2009? Am I correct? If so, that’s sooooo lame.

  2. If, on Dec 31st 2009, I forget to move my $5k to bank B, does it mean that I am stuck with bank A for 2010? Technically, if on Jan 1st 2009 I have $5k in my TFSA account in bank A and move them to bank B (along with putting another $5k for 2010), I would be $5k over my contribution limit (I had $5k in bank A, then $10k in bank B, so I am $5k over the limit). Is that correct?

  Thanks.

• 143 Canadian Capitalist // Jan 26, 2009 at 2:20 pm

  DJRH:

  1. Yes, you’ll have to transfer the account. You can’t make another contribution with Bank B for $5,000.
  2. If you transfer a TFSA out of Bank A into Bank B that won’t count as a contribution. You are simply moving your account. So, your contribution for 2010 is the $5,000 money you put into the account in Bank B. The money transferred in from Bank A doesn’t count as a contribution.

• 144 DJRH // Jan 26, 2009 at 2:50 pm

  Thanks Canadian Capitalist,

  The portion I was missing that one is able to transfer a TFSA account. I guess you have to place a request with bank B that will take care of the transer?

  Thanks.

• 145 Jay // Mar 20, 2009 at 9:39 pm

  can i declare my tax free savings account?
  and save from my income tax?

• 146 ERTW // Mar 21, 2009 at 3:59 pm

  I’ve been reading a lot of articles and blogs about the the TFSA. Almost every article I’ve read implies using the TFSA for holding cash investments and GIC’s getting marginal at best returns. I would think the only real advantage in this account doesn’t come into affect until a large balance is attained, so wouldn’t it be advantageous to use it primarily as a vehicle to hold your moderate to high risk investments, maximizing your returns and tax savings?

  I have yet to hear of anyone suggest this and I want to know if I’m off my rocker.

  Thanks

• 147 Traciatim // Mar 21, 2009 at 7:14 pm

  ERTW, the reason most places recommend the TFSA for investments that earn interest is that capital gains and eligible dividends are already taxed less than income/interest outside the registered accounts.

  Though you are correct that they can be used to store all sorts of investments and the advice given in advertising is kind of a ‘rule of thumb’ that will fit most people’s situations rather than showing how powerful the accounts can be and how flexible they really are.

• 148 walter // Mar 22, 2009 at 6:06 pm

  ERTW,

  Its your money you can do what you will with it. I for one have bought stock with my TSFA’s cash. I’m also looking at the cororate bond side of things as well, however just like you have said higher risk investments do warrent more caution in the market at this time. no risk equals no reward. now watch as inflation picks up and everything (other then metals) will lose value.

• 149 Canadian Capitalist // Mar 23, 2009 at 3:24 pm

  ERTW: To the extent that most people hold some cash as emergency savings, a TFSA is a good place to hold this because of flexible withdrawal rules. Since the initial contribution room is just $5,000, it makes sense to keep highly-taxed cash instruments within the TFSA and hold higher risk instruments in a taxable account. In future years, when the contribution room grows due to annual $5K (or thereabout) increments, it makes sense to hold riskier assets in it.

• 150 blai // Mar 25, 2009 at 3:32 pm

  Walter, I also hold stocks in my TFSA. Due to the volatility of the market I have managed to increase my initial $5k contribution by 30% just within a month and a half. From reading numerous articles, some suggest not investing stocks within the TFSA due to the inability to claim capital loss but with the markets so low, isn’t it more likely there would be a higher chance of capital gain instead of capital loss? With the market the way it is, I’d rather invest in stocks than some low-paying GIC’s… does this not make sense?

• 151 walter // Mar 25, 2009 at 3:55 pm

  blai,

  If it makes sense to you then yes. Keeping in mind that everyone should know were there comfort level is and for some its in GIC’s. The reason why everyone talks about placing “interest earning” items into a TFSA is because of the way its taxed. On the flip side don’t believe that bonds don’t/can’t fall in price, looking at what has happened in the bond market over the past year people who had corporate bonds last year are in the red by allot more then the stock avg. (depending on the bond issue)

• 152 FRANK // Mar 26, 2009 at 10:14 am

  I hear you can hold U.S. investments in the TFSA, but upon withdrawl you will recieve Cdn. dollars, which exposes you to dollar fluctuations and bank exchange fees. True?

• 153 walter // Mar 26, 2009 at 11:21 am

  Frank,
  yes on both accounts. The TFSA is really no different then an RRSP in regards to the currency.

• 154 Devon // Apr 6, 2009 at 12:24 pm

  Hey everyone, thank you for your input, I’m finding it very helpful. I am gathering as much information as possible on the TFSA.
  I do have one question (I didn’t see it in the previous thread, however I may have missed it) and that is, does anyone know or have a list of the institutions which allow you to purchase stocks directly from your TFSA account? Or is there only the option to hold them?
  I would like to open one but for obvious reasons would like to ensure that the location I open at offers the most versatility.

  Thank you for your time.

• 155 Canadian Capitalist // Apr 6, 2009 at 12:26 pm

  Devon: You can do that by opening a TFSA account at a discount broker. Watch out for fees — admin fees and withdrawal fees. You can then buy stocks directly from a TFSA account.

• 156 walter // Apr 6, 2009 at 7:41 pm

  Yes, you can open them to take stocks directly.

• 157 Withholding Tax on US Stocks Held in a Tax-Free Savings Account | Canadian Capitalist // Jun 16, 2009 at 8:41 am

  [...] 16th, 2009 · In today’s post, I’ll try and answer a question on the new Tax-Free Savings Account that were sent to the Personal Finance Clinic. You may also want to check out Money Gardener and [...]

• 158 The Gibbons Family // Jul 17, 2009 at 1:08 am

  As a 5 year old child, I had a savings account opened for me and learned the value of saving.
  You would think our “leaders” would like today’s children to learn a value or two (not meaning to offend anyone).
  Our 8 year old and 6 year old have started earning their money by getting a paper route. We wanted to open a savings account for them. What a hassle this has been!!!

  First we were told they needed official birth certificates. Returning to the bank, now we’re told we need Social Insurance Numbers for these two little children.
  Who are these people we keep electing? They don’t seem to be very smart or family-minded,

  We can’t have a TFSA. Those are only for persons over 17.
  Hmm, I see. Children over 17 don’t pay tax. Children under 18 can’t have a TFSA and could pay tax. Say again?

  Our children can have a non-interest bearing chequing account (totally useless if you’re trying to teach your children something - sorry again if we’re offending some of you), but they cannot have a non-taxable interest bearing savings account like everyone else over 17.
  Children under 18 can only have a ‘taxable’ savings account IF they produce a Social Insurance Number and an official Birth Certificate proving they are who they say they are.
  We shouldn’t have to apply for a SIN to open a child’s savings account to put money in from their paper route.

  Mr. Prime Minister, are you listening? Does this all make sense to you?

• 159 DAvid // Jul 17, 2009 at 2:27 am

  @ The Gibbons Family:

  Firstly, you may wish to check around at various financial institutions; not all require a SIN. Most Credit Unions have young savers accounts, as do other banks. Some will require a co-applicant, others may not.

  Secondly, there are many things your underage children are prohibited from: contributing to RRSPs, voting, joining the military, purchasing tobacco & alcohol, working beyond a certain number of hours in a week, and many more similar prohibitions. That’s life in the western world. Your children will pay no income taxes on less than $8,500 per year. If they can earn $170 per week from a paper route, or after school job, then I’m impressed! So, in all likelihood your children can indeed have a tax-free savings account simply because they will earn insufficient reported income to pay taxes. In addition, since the taxes on the income earned from the bank account would be so small, even if your kids did earn enough to be taxed, really aren’t worth worrying about. $5000 at 1% interest is $50 taxed at 2 to 5% is a buck to $2.50 in taxes paid. If your kids are earning that sort of coin, then one of the lessons they should be taught is the benefits they receive for the taxes they pay.

  My $0.02

  DAvid

• 160 Traciatim // Jul 17, 2009 at 5:33 am

  Gibbons, You may want to check out ING Direct. They’ve recently launched savings accounts for children that are linked to your own account, but have their own login and can be managed by the child but controlled by the original account holder.

  You also need to verify a piece of ID for you child here, I think just by typing in the ID’s identifying number.

• 161 walter // Jul 17, 2009 at 9:57 am

  Re: Gibbsons,

  Give me a break you have had 8 and 6 years to get the paperwork for your children and now your labeling the banks and the government as anti children. What your teaching your kids is that beening lazy and not knowing the rules (laws) and there for its someone else’s fault.

• 162 Canadian Capitalist // Jul 17, 2009 at 11:07 am

  @The Gibbons Family: I don’t see making a few extra trips to the local bank as a huge hassle. You need to get birth certificates and SIN number for your kids anyway eventually, so you might as well get it now. Or you could have simply called your local branch, inquired about the documents you need and avoid the extra trips in the first place.

  Also, getting a birth certificate and SIN card is a piece of cake. You can apply for a birth certificate online and have it delivered in a few days. You can apply for a SIN by mail. I mean, really how onerous is this process?

  DAvid has already pointed out that it would be a rare young child who pays taxes. It is a moot point whether savings accounts for kids should be taxable or not.

  As an aside, if your younger child doesn’t have a birth certificate or SIN card, how are you getting the Universal Child Care Benefit?

• 163 The Gibbons Family // Jul 17, 2009 at 3:27 pm

  Wow, it’s amazing that I’m still amazed everytime I see how much Canada has changed since the freaks took over in the 1960’s. I’d think I wouldn’t be surprised anymore.
  It appears a “capitalist” in Canada sounds completely unlike how a “capitalist” in America sounds. In Canada, a “capitalist” sounds just like another left-wing loon, who would rush out and worship a Liberal statue if there was one nearby.
  Valter, for people without a car, we aren’t lazy to travel miles to and from our bank to try and get this once-simple task accomplished. It’s more lazy to make comments without knowing people’s situation.
  Not everyone stands at Safeway telling their wife what kinds of breads they have and asking her what kind she wants - while ignoring their child tugging for attention.
  We haven’t had 8 and 6 years to get the paperwork Valter, because we haven’t needed to Valter.
  Canadian Capitalist - it’s a huge hassle to travel to and from the bank without a car (oh I just assumed everyone has a car), and get different information from the worker who’s too busy with her blackberry and knows more about MuchMusic than she does about her job.
  Calling the branch is a bit different when it’s a grocery store with a pavilion, not actually a bank branch (ie. Real Canadian Superstore)- (oh, I assumed it was a regular branch like everyone goes to).
  CC, “simply” calling them to find out what documents were needed wouldn’t have been better than physically going there. It was by talking face-to-face with a worker that we were misinformed that all we needed for each child was a birth certificate. (But she does know alot about Facebook, I’m sure.)

  While David is probably correct, that it would be a rare child who would pay taxes, that wasn’t the point. The point is that at one time it would have been thought absurd by everyone but a handful of nuts, to expect a child to get a SIN to open a savings account. And it would have been thought absurd to guarantee persons over 17 tax free accounts, but not children under 18.
  The point is David, Valter and CC, that (it appears from this site) a “capitalist” in any country other than Canada would shake his head at the nonsense of requiring a child to have SIN to open a savings account. (Yeah the baby-boomer freaks did a great job in their worship to Trudeau and company - two generations brainwashed).
  In a few short decades, thanks to the freaks, we’ve become so different from America, that even our so-called “capitalists’ smell like liberals.

  And as an aside CC, we have three children 8, 6 and 2. Only the 8 year old presently has a birth certificate (because he was born in 2000 which was the first year of the new millennium - ha ha ha - and millions of dollars of our taxes were spent at the end of 1999 for you to celebrate it - ha ha ha - even though some of us lazy people thought the century ended in 2000).
  All the children receive the Universal Child Care Benefit, although we only possess one birth certificate. Wow, wonder how that happened.

  Canada has changed so much since the freaks came to power, that while once we were very similar to America, now most Canadians are quite different. Inculcated.
  Although a Canadian, I think it’s ridiculous for children to have to possess a SIN to open a savings account. And it’s ridiculous to disallow children from having a TFSA but grant them to adults.
  More importantly, it’s shocking that there are grownups today in Canada (and more appalling calling themselves “capitalists”), who think it’s okay that this is the law in Canada (and you should know the law in Canada).
  It would be difficult to find a single “capitalist” in America, who would agree. Everyone of them would shake their heads, but give a knowing grin when learning it was happening in Canada. (but you wouldn’t know that if all you watch is CBC and MSNBC).

  We were misled by the title of this site. But we did learn something. We learned that in Canada, if a site sounds conservative, free-enterprise, or traditionalist (keep the money in the pockets of those who earned it), it doesn’t mean it is.
  Although we already knew, we know even better the extent of the liberal brainwashing in Canada from 1968 to today, by the tone and the comments you made.
  If this had really been a conservative, capitalist site in America, you have told us the name of the offices to complain to and you would have been flabbergasted if not outraged. You see in America, they had Reagan and a lid on their radical feminists. Today we’re so well-taught, we wouldn’t think to fight the culture war that is being fought in awakened America. (you can thank your teachers and your Mommy).

  When we found this site we immediately bookmarked it in our Conservative Capitalist folder, thinking it would probably prove quite useful. Funny now isn’t it.
  Wake up Canada. Get that CBC liberal television network beam out of your head and get deprogrammed from everything you ever learned at your socialist schools.
  Freedom is not an ugly American word.

• 164 Traciatim // Jul 17, 2009 at 4:38 pm

  Holy crap Gibbons, I think you need to check in to anger management, you’re going to blow a gasket.

  P.S. I don’t watch TV, and I don’t have a car… both my kids had SINs a few weeks after they were born. Why are you so lazy and blame everyone else? American perhaps, or just follow their lead?

• 165 Canadian Capitalist // Jul 17, 2009 at 5:26 pm

  That was a very good rant Gibbons but you are barking up the wrong tree here. DAvid has mentioned in his comment that not every bank requires a SIN number. In other words, it is not the law here; merely a requirement by a particular bank. You don’t like it and want the Government to fix it for you and then you call everyone else a Liberal nutcase. That’s pretty thick.

• 166 DAvid // Jul 17, 2009 at 5:49 pm

  Gibbon,
  Canada has been different from the United States since well before Trudeaumania, and well before there was any Liberal presence in the country. In the late 1700’s there was a significant event in Canada’s history known as the United Empire Loyalist emmigration, and it has been pretty clear since that time that the two are very different.

  As for politics, a Liberal in the US is more conservative than Stephen Harper in his happiest dreams. Since you seem to favour the American ideals so much, why not move there?

  DAvid

• 167 DAvid // Jul 17, 2009 at 6:01 pm

  Just another thought, if you feel that it is unfair for children to be unable to have a TFSA, possibly you’d like to send me your Universal Child Care Benefit? I’ve never had the ability to claim that deduction.

  DAvid

• 168 walter // Jul 17, 2009 at 11:00 pm

  Gibbons, holy poop I can’t believe how jaded and narrow minded you are. You whine about the far distance it is to a bank because you don’t have a car. Bo who. Phoning the bank was also not good enough for you. And the whine continues, well it seams that you have internet why didn’t you look it up and see what is required and stop placing this on politics, the rules are there for a reason… This site is for the discussion of investment and the types of investment vehicles that are used in Canada NOT for you whining about a political party. I would suggest that the next time you praise the NDP just remember that if they were is the top seat you wouldn’t have any money at all.

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