The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Heckler on April 21, 2015, 09:25:07 PM
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Some interesting facts out of today's federal budget.
Harper plans to increase TFSA contribution limits to $10,000 per year, effective 2015 tax year ( I imagine if he's reelect end in the fall). Just in time for our date with a mortgage burning party in January!
So, where do you fall on the statistics? As a couple, we are only 1/4 through our current contribution limit, but without the mortgage will be stoked to max out our TFSAs in 2-3 years from now.
http://www.cbc.ca/m/news/business/budget-2015-tfsa-limit-hiked-to-10-000-as-election-budget-delivers-few-goodies-1.3040853
If you want all the details...
http://www.budget.gc.ca/2015/docs/plan/budget2015-eng.pdf
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Some highlights.
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Not indexed anymore though... so negative points on that. Overall it's good for my FIRE plan.
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Not indexed anymore though... so negative points on that.
You mean that it used to be 5k, then 5.5k for the last three years? Now a steady 10k? How is that a problem? change governments and it's all up in the air anyway...
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Well, it's not much use to me now, but I can see it becoming handy in a few years.
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So, where do you fall on the statistics? As a couple, we are only 1/4 through our current contribution limit, but without the mortgage will be stoked to max out our TFSAs in 2-3 years from now.
I was maxed out on my TFSA. Now I'll add another $4.5K to it every year.
-- Vik
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I'm almost maxed for TFSA. Will be completely by year end. What this means for me is I should never have to have any taxable accounts. I never get why people, even when getting low interest rates in a savings account aren't using the TFSA. Unless you're going to removing money frequently why have any taxable accounts at all?
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I'm almost maxed for TFSA. Will be completely by year end. What this means for me is I should never have to have any taxable accounts. I never get why people, even when getting low interest rates in a savings account aren't using the TFSA. Unless you're going to removing money frequently why have any taxable accounts at all?
Well, you've just said it yourself: by year's end you'll be maxed for TFSA. Are you planning to just stop saving and investing? I doubt it!
Whether people prioritize TFSAs or RRSPs, if they're saving at a high rate, they'll end up maxing both (unless they have a very low income that makes maxing the TFSA impossible). At that point, of course it's better to open a taxable account than to just sign up for a cable package and start eating out all the time.
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It's great news, but haven't the opposition parties said they stop the move if they were elected?
With elections later this year, I'm not very much counting on it. Although we might get a year of increased TFSA contributions, at least. One of the few fiscal moves that would actually benefit me, it would suck to see it go down the drain.
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I'm happy that we can put more money in the TFSAs now. We've always maxed out the our TFSAs and RRSPs each year.
It does make me wonder longer term about the effect on Canada's tax base. Given a few years time, each Canadian will have thousands of dollars room in TFSAs . . . for most people, there would never be reason to keep money in a taxable account ever again. That's bound to have an effect on long term revenues . . .
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It does make me wonder longer term about the effect on Canada's tax base. Given a few years time, each Canadian will have thousands of dollars room in TFSAs . . . for most people, there would never be reason to keep money in a taxable account ever again. That's bound to have an effect on long term revenues . . .
You are all the 1% then. See graph #2- only 20-25% of people over 50 currently max out.
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So 20-25% of people max out, but only the 1% are able to max out?
Failure to max out is less a function of income and more a function of choosing to spend money that could have been saved. If you have above median income, it shouldn't be difficult to save 5.5k/year. As in, it is so easy that not doing it is probably a moral hazard.
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It's great news, but haven't the opposition parties said they stop the move if they were elected?
With elections later this year, I'm not very much counting on it. Although we might get a year of increased TFSA contributions, at least. One of the few fiscal moves that would actually benefit me, it would suck to see it go down the drain.
http://news.nationalpost.com/news/canada/canadian-politics/trudeau-promises-to-nix-tory-tax-free-savings-boost-and-balance-budget-if-elected-in-the-fall
Yes, Trudeau is not on our side.
I think it's time we let him know it's not just the rich who will benefit. The little man wants to invest tax free as well! I had full intentions voting the Liberals in yet again, but this stance of his might just sway me to vote Conservative for the first time ever.
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So 20-25% of people max out, but only the 1% are able to max out?
Failure to max out is less a function of income and more a function of choosing to spend money that could have been saved. If you have above median income, it shouldn't be difficult to save 5.5k/year. As in, it is so easy that not doing it is probably a moral hazard.
According to the libs, yes.
https://www.liberal.ca/stephen-harpers-budget-helps-those-who-need-it-least/
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I am not a Harper fan (actually there is no party I really support, each have something I can't stand about them), but they do win me points on that one. It makes me chuckle people bashing it by saying "Ah great, Harper is helping out the rich folks again". The TFSA is available for EVERYONE, they seem to forget that, sure I am not able to put 10K$ a year in my TFSA, but at least I don't have to worry about going over the limit and for once the goverment gives us a tool in which the goverment can't get our money (unless they dramatically alter the TFSA rulings which is something that worries me if another party goes in power, especially the NDP). We have too many people in our society who embraces being poor and blame everyone else for their poor mismanagement of their own money. I do not make alot of money, but I am still able to put money aside in the TFSA even though I am in the lower tax bracket. Its all about spending less than what you earned, instead I notice people hoping the goverment becomes their knight and shining armour and save them from their own mess that they created themselves. A perfect example, is this one person complained to me about having no money for the tfsa and whining that Harper is helping out the rich, but yet, that same person pays 80-90$ on a cell phone plan, that 80-90$, could easily go towards the TFSA or at least a portion of it if he want to keep his cell but with a lower plan. I could only imagine what other useless spending this guy makes that could also go towards savings.
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https://www.facebook.com/JustinPJTrudeau?fref=nf
Justin's Facebook is open for your feedback. He's got a recent post on this, of course slathered with the poor masses who can't make the payments on their big screen because Netflix costs too much.
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I think it's time we let him know it's not just the rich who will benefit. The little man wants to invest tax free as well! I had full intentions voting the Liberals in yet again, but this stance of his might just sway me to vote Conservative for the first time ever.
There is a lot more to Canadian politics than the TFSA. While I will enjoy the benefits of more room in that account it's not something that would motivate me to vote for Harper given the fact I support very few of his key policies.
This budget was clearly meant to obscure the real economic picture in Canada and throw a few bones to people they want to get votes from.
I'm not telling anyone who to vote for - just make your choice bases on analysis of a wide variety of important issues not just the $4.5K extra TFSA room this year.
-- Vik
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I've always viewed the RRSP as being much more important for retirement . . . but I expect to have a much lower income after retirement than while working. If you expect a higher income in retirement then I guess TFSAs make sense for you.
Nobody's arguing that TFSAs aren't significant for the middle class. The issue with them is that they aren't really a benefit to the poor. It will lead to further income inequality . . . and effectively is a tax break for those with means. The poor are the ones who will depend most heavily on OAS that you're expecting to not have any more. Effectively you're hoping to take their retirement pittance to make yourself richer. :P
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It's great news, but haven't the opposition parties said they stop the move if they were elected?
With elections later this year, I'm not very much counting on it. Although we might get a year of increased TFSA contributions, at least. One of the few fiscal moves that would actually benefit me, it would suck to see it go down the drain.
First post here, but thought this might be worthwhile info:
CRA deems budget plans to be proclaimed from the moment they're entered into record. So while the opposition parties might have something to say about the TFSA limit next year, the limit is, and will remain, 10k for 2015.
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Nobody's arguing that TFSAs aren't significant for the middle class. The issue with them is that they aren't really a benefit to the poor. It will lead to further income inequality . . . and effectively is a tax break for those with means. The poor are the ones who will depend most heavily on OAS that you're expecting to not have any more. Effectively you're hoping to take their retirement pittance to make yourself richer. :P
Yup, this is my concern. Sure, it's a great personal benefit to me, but it would also be a great personal benefit to me if we suddenly had a regressive tax system ... until all of the serious problems associated with that came to fruition, like an uneducated workforce, crumbling infrastructure, under-regulated banks, and everything else we see our neighbour to the south struggling with.
I live in Canada because it's NOT the US, policy-wise. Gutting revenues means gutting services. I definitely don't want a higher TFSA limit at the expense of, say, healthcare, because if we start having to pay twice as much per capita or more for healthcare like they do in the States, that's going to take a big chunk out of the personal benefit. And as an employer--have y'all ever seen what US employers have to pay to provide their employees with basic health benefits? It's staggering. My employees cost about $90/m each for extended health/drug/dental/eye care--in other words, very very little cost to be able to say "and we have dental!" to attract good people. I definitely don't want to have to say "and we don't have dental, because it would add 40% to your salary cost."
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It's great news, but haven't the opposition parties said they stop the move if they were elected?
With elections later this year, I'm not very much counting on it. Although we might get a year of increased TFSA contributions, at least. One of the few fiscal moves that would actually benefit me, it would suck to see it go down the drain.
First post here, but thought this might be worthwhile info:
CRA deems budget plans to be proclaimed from the moment they're entered into record. So while the opposition parties might have something to say about the TFSA limit next year, the limit is, and will remain, 10k for 2015.
Welcome to the forums.
Canada is based on the rule of law, so the statements of politicians can't by themselves amend statutes.
However, in both Canada and the US, non-criminal legislation can generally be retroactive in nature unless it violates some other constitutional provision in doing so. According to the Supreme Court of Canada, "[e]xcept for criminal law, ... there is no requirement of legislative prospectivity embodied in the rule of law or in any provision of our Constitution": British Columbia v. Imperial Tobacco Canada Ltd., 2005 SCC 49, [2005] 2 SCR 473, at para 69. Thus, it is open to the legislature to grant a tax benefit retroactive to the start of a year even though the legislation passed later in the year or even after the end of the year.
If you contribute the new proposed limit before the legislation actually passes, you are basically assuming that the retroactive legislation is eventually going to pass.
However, it's also not accurate to say that a future parliament couldn't do anything about it if this retroactive legislation does pass. Just as the retroactive legislation to grant a benefit was permissible, it would also be permissible to take away the benefit retroactively (barring a constitutional argument based on something other than retroactivity). So really, you can never be sure whether a given transaction is going to be safe in the future. ;-) Indeed, the Parliament of Canada actually has a long history of retroactive changes to tax law.
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Not indexed anymore though... so negative points on that.
You mean that it used to be 5k, then 5.5k for the last three years? Now a steady 10k? How is that a problem? change governments and it's all up in the air anyway...
That's true, I really am just disappointed in the slight of hand. When they introduced TFSAs they promised it would be indexed to inflation, effectively setting the ground for a long term and secure savings plan. Now they changed it to a fixed figure, something much easier to toy with by future governments. The increase in the TFSA should be a good thing, but its become a political toy.
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That's true, I really am just disappointed in the slight of hand. When they introduced TFSAs they promised it would be indexed to inflation, effectively setting the ground for a long term and secure savings plan. Now they changed it to a fixed figure, something much easier to toy with by future governments. The increase in the TFSA should be a good thing, but its become a political toy.
I agree I'd like to see TFSA indexed to inflation, but to go from $5.5K to $10K at 3% inflation would take over 20yrs and at 5% would take over 12yrs. So the indexed to inflation concerns won't kick in for a while.
-- Vik
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I think it's time we let him know it's not just the rich who will benefit. The little man wants to invest tax free as well! I had full intentions voting the Liberals in yet again, but this stance of his might just sway me to vote Conservative for the first time ever.
There is a lot more to Canadian politics than the TFSA. While I will enjoy the benefits of more room in that account it's not something that would motivate me to vote for Harper given the fact I support very few of his key policies.
This budget was clearly meant to obscure the real economic picture in Canada and throw a few bones to people they want to get votes from.
I'm not telling anyone who to vote for - just make your choice bases on analysis of a wide variety of important issues not just the $4.5K extra TFSA room this year.
-- Vik
I agree with you that this is a political ploy by the conservatives, but without going further about the budget and the political parties, the TFSA is the greatest thing we have in 15-20 years since I started filing my taxes, the rest of the stuff hardly makes any major changes to my life. I mean 20 years ago, the health system sucked and still sucks today (the waiting line to see a doctors hasn't changed for the better or for the worse)...I mean everything aside, the TFSA is the only thing in 20 years I can think of that has been beneficial to me, the rest is the same garbage we hear for the past 20 years under different goverments. So I for one hope the other parties don't scrap it up if they win the election. Its the only tool that benefits the tax payer along with the RRSP (it depends).
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Welcome to the forums.
Canada is based on the rule of law, so the statements of politicians can't by themselves amend statutes.
However, in both Canada and the US, non-criminal legislation can generally be retroactive in nature unless it violates some other constitutional provision in doing so. According to the Supreme Court of Canada, "[e]xcept for criminal law, ... there is no requirement of legislative prospectivity embodied in the rule of law or in any provision of our Constitution": British Columbia v. Imperial Tobacco Canada Ltd., 2005 SCC 49, [2005] 2 SCR 473, at para 69. Thus, it is open to the legislature to grant a tax benefit retroactive to the start of a year even though the legislation passed later in the year or even after the end of the year.
If you contribute the new proposed limit before the legislation actually passes, you are basically assuming that the retroactive legislation is eventually going to pass.
However, it's also not accurate to say that a future parliament couldn't do anything about it if this retroactive legislation does pass. Just as the retroactive legislation to grant a benefit was permissible, it would also be permissible to take away the benefit retroactively (barring a constitutional argument based on something other than retroactivity). So really, you can never be sure whether a given transaction is going to be safe in the future. ;-) Indeed, the Parliament of Canada actually has a long history of retroactive changes to tax law.
Thanks for the welcome, Cathy! Long-time lurker.
With regard to my point, I was specifically referring to the method by which standing governments have the authority to put tax measures into effect immediately, via PC, after having been tabled via a ways and means motion. While not law until subsequent authorizing legislation passes, the government retains the authority to implement these tax measures regardless of whether said legislation ever actually passes -- which traditionally only occurs when a government falls (which I think we can agree won't happen in this case). Regardless of the uncertainty, CRA respects the standing governments authority to enact tax measures and treats ways and means motions as if they were law.
Anyway, the bottom line is that we're free to contribute $4,500 to our TFSA's effective immediately. Assuming another party takes power in October, they may indeed unwind the changes as you suggest, but practically only for subsequent years as the logistical nightmare it would create for CRA effectively makes an intra-year revocation impossible.
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.I mean everything aside, the TFSA is the only thing in 20 years I can think of that has been beneficial to me, the rest is the same garbage we hear for the past 20 years under different goverments.
In 20yrs you've lived through lots of government policies that have benefited you. Unless you think Canada is a crappy country to live in - in that case we'll just agree to disagree.
The TFSA change is very simple to understand so it's easy to grab on to it mentally hence the announcement a few months before the election.
Safe drinking water legislation could be far more important to you, but it's a dry topic and the effects are hard for the average person to measure until people start dropping dead around them.
Ultimately there is no reason to assume you can't have the added TFSA room and Gov't policies you believe in. JT is just reacting to the budget in a way that's as clear as the bones Harper is throwing out there. His base will benefit from the TFSA change as much as the Conservative base. I'd be very surprised if he changed anything with that part of the budget should he be elected. He'll be getting a lot of pressure not to and once he's in power he'll have much bigger fish to fry.
-- Vik
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.I mean everything aside, the TFSA is the only thing in 20 years I can think of that has been beneficial to me, the rest is the same garbage we hear for the past 20 years under different goverments.
In 20yrs you've lived through lots of government policies that have benefited you. Unless you think Canada is a crappy country to live in - in that case we'll just agree to disagree.
The TFSA change is very simple to understand so it's easy to grab on to it mentally hence the announcement a few months before the election.
Safe drinking water legislation could be far more important to you, but it's a dry topic and the effects are hard for the average person to measure until people start dropping dead around them.
Ultimately there is no reason to assume you can't have the added TFSA room and Gov't policies you believe in. JT is just reacting to the budget in a way that's as clear as the bones Harper is throwing out there. His base will benefit from the TFSA change as much as the Conservative base. I'd be very surprised if he changed anything with that part of the budget should he be elected. He'll be getting a lot of pressure not to and once he's in power he'll have much bigger fish to fry.
-- Vik
I think you misinterpreted what I was trying to say or maybe I didn't explain myself well.
In 20 years, my personal situation hasn't changed as much. Meaning, what I pay for taxes or the services I received are more or less the same as it was 20 years ago. I am not richer or poorer because of the goverment. However the TFSA has helped me alot in the personal finance world. Before 2008, the RRSP was the only tool we had to save money without the goverment touching our money (until the day we withdraw from it). But the RRSP advantages are limited, the TFSA brought a whole new ball game. I mean, we get hit by taxes left and right (especially where I live in Quebec) with nothing on our side and here comes the TFSA and gives us some relief when it comes to taxes. For once, we have something that is on our side, the only safe place where we can put money without anyone from the gorverment touching it. By the way, I am not against paying taxes, but it's nice once in awhile to not pay some of our money hard earned money just on taxes and it is equally frustrating to see our hard money paid towards taxes only to find out that our goverment is mismanaging our money (Just look at the Commission Charbonneau where you had our tax dollars going towards big enterprises for their vacation boats, renovations on their houses, etc...)
By the way, my comments were not to say the new budget from the Conservatives is perfect, I'll let the analysts nit pick whats right and what's wrong with the budget and decide for myself, however I like the TFSA and I am glad it exists. Simple as that, but do not think for once it means I am sold on the Conservatives, I am still undecided, because each federal party haven't convinced me yet on why they should get elected. It is is too early to judge the new budget and I wouldn't be surprised if there is a catch somewhere (there is always one).
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I'm a bit confused, is the 10,000$ limit now for everyone to use? I called TD to transfer some assets from my non-reg to my TFSA and the guy told me they got an internal memo to warn customers the law hasn't passed yet and that we'll incur penalties.
I'm confused now, the CRA cannot be reached (all lines busy). Is the new limit live and I can contribute an extra 4,500$ for 2015 or not?
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Never trust a politician. I'd wait till it's on the CRA site.
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I'm with you Heckler.
Also...I'm VERY happy we can put more money in the TFSAs now. $20,000 per couple every year. Eventually, I won't need my taxable account but I'm at least a decade away from that.
Thanks, at least for this, Harper.
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The 10000$ will start on January 1st 2016...if the conservatives win their elections. If the Liberals win or NDP and they decide to scrap it, the whole tfsa 10000$ thing can be revoked.
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It is effective for 2015. I imagine TD is just covering their butts.
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The 10000$ will start on January 1st 2016...if the conservatives win their elections. If the Liberals win or NDP and they decide to scrap it, the whole tfsa 10000$ thing can be revoked.
For reasons I addressed above, the $10,000 limit is effective immediately. As Otsog mentioned, TD is simply covering their arse.
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I'm a bit confused, is the 10,000$ limit now for everyone to use? I called TD to transfer some assets from my non-reg to my TFSA and the guy told me they got an internal memo to warn customers the law hasn't passed yet and that we'll incur penalties.
I'm confused now, the CRA cannot be reached (all lines busy). Is the new limit live and I can contribute an extra 4,500$ for 2015 or not?
It's going to be retroactive to 1 Jan 2015. The Cons have a majority Gov't so failure to pass seems a remote possibility.
Even if NDP of Libs were to quash this legislation they aren't going to do anything for 2015 just to punish Canadians who saved and invested.
So in my opinion you are safe throwing an extra $4.5K at your TFSA now. You will 100% be safe after the budget passes its vote.
-- Vik
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I'm a bit confused, is the 10,000$ limit now for everyone to use? I called TD to transfer some assets from my non-reg to my TFSA and the guy told me they got an internal memo to warn customers the law hasn't passed yet and that we'll incur penalties.
I'm confused now, the CRA cannot be reached (all lines busy). Is the new limit live and I can contribute an extra 4,500$ for 2015 or not?
It's going to be retroactive to 1 Jan 2015. The Cons have a majority Gov't so failure to pass seems a remote possibility.
Even if NDP of Libs were to quash this legislation they aren't going to do anything for 2015 just to punish Canadians who saved and invested.
So in my opinion you are safe throwing an extra $4.5K at your TFSA now. You will 100% be safe after the budget passes its vote.
-- Vik
Thanks. When would it be passing the vote?
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Thanks. When would it be passing the vote?
The better question is when is the budget vote?
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I would wait until this becomes law. That's just me. Need to have a few rounds of question period before anything passes....
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Seems like the CRA has confirmed that the increase is effective immediately:
http://business.financialpost.com/personal-finance/tfsa/after-some-confusion-banks-now-letting-canadians-top-up-tfsa-for-2015?__lsa=92d7-6d3f
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http://tfsa.gc.ca/
"•NEW: Economic Action Plan 2015 proposes to increase the TFSA annual contribution limit from $5,500 to $10,000, starting in 2015."
I can afford to wait, because I don't have a spare $10K anyway. :(
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WHat happens if Trudeau wins the election, he seems he wants it to go down at 5000$, will he be able to change that?
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WHat happens if Trudeau wins the election, he seems he wants it to go down at 5000$, will he be able to change that?
So imagine you are JT. You just won the election likely by a small margin. You may even be in a minority gov't situation. What will you be doing those first few months to a year in gov't? Do you think one of those priorities will be to roll back the TFSA increase back to 1 Jan 2015 so you can then force a bunch of normal Canadians to withdraw $4500 from their TFSA and possibly face penalties for over contributing?
That seems so exceedingly unlikely as to not be worth thinking about.
It's possible he would roll back the TFSA for 2016 or 2017, but my own opinion is that is also unlikely as it would cause more problems for him than it would solve. He can just leave it alone and let inflation eat away at it until it's at a level he feels is acceptable.
Bottom line I'll be adding another $4.5K to my TFSA for 2015 and I'll keep maxing it out regardless of what happens in the election.
-- Vik
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To anyone worrying about how this will affect the tax base... just to point out the UK has an ISA limit, which is roughly equivalent to the TFSA, of about £15k = $27k a year (though the ISA is 'use it or lose it').
There's lots I don't like about the Conservatives, but worrying that this will wreck the budget isn't one of them.
It's really nice that the TFSA room is reusable (next financial year).
I have no doubt that means testing of OAS/GIS vs TFSA will be introduced some time between now and when I'd be eligible to get it.
One big thing is the simplicity - inside TFSA? No ACB, no cap gains, no dividend gross up or foreign tax credit or....
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http://news.gc.ca/web/article-en.do?nid=966849&tp=1
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I have no issue with the TFSA increase.
But the whole budget and timing has been most effective at dominating the airwaves right in the middle of the Mike Duffy trial. I'm sure Harper is much happier with us talking about the nuances of indexing and whether it's a fair change than talking about his three stooges (Duffy, Wallin, Brazeau) who are all facing charges for corruption/incompetence/violence respectively.
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I think Trudeau's got it wrong on this one. The TFSA benefits people who save and invest, period. Even when I was young, I was able save $10K/year, and salaries were a lot lower then. I'd be surprised if we have enough savers to have a huge impact on the tax base in the future. I've read on the internet ( :-) ) that many people use TFSAs for short terms savings for vacations, new cars and down payments on houses. This type of use isn't going to change the tax base very much.
I keep hoping the liberals will come up with some kind of meaningful policy statement, because it's really really time for a change.
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The income splitting, on the other hand, definitely needs some adjustment. It makes no sense that a higher income family (like mine) should be able to grab the entire $2000, while a lower income family gets a much smaller tax cut.
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I agree, they will probably put in some "rule" about the clawbacks at some point.
Let's assume I keep working til 65, $10k/yr investment in only TSFA ~ 5.75% growth, and assumption I've maxed TSFA every year. That comes close to 900k.
And because withdrawals don't hit income (tax free), I get full OAS/CPP/GIS with ZERO clawbacks!
So very interesting...
To anyone worrying about how this will affect the tax base... just to point out the UK has an ISA limit, which is roughly equivalent to the TFSA, of about £15k = $27k a year (though the ISA is 'use it or lose it').
There's lots I don't like about the Conservatives, but worrying that this will wreck the budget isn't one of them.
It's really nice that the TFSA room is reusable (next financial year).
I have no doubt that means testing of OAS/GIS vs TFSA will be introduced some time between now and when I'd be eligible to get it.
One big thing is the simplicity - inside TFSA? No ACB, no cap gains, no dividend gross up or foreign tax credit or....
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I agree, they will probably put in some "rule" about the clawbacks at some point.
Let's assume I keep working til 65, $10k/yr investment in only TSFA ~ 5.75% growth, and assumption I've maxed TSFA every year. That comes close to 900k.
And because withdrawals don't hit income (tax free), I get full OAS/CPP/GIS with ZERO clawbacks!
So very interesting...
Not many Canadians will be maxing out their TFSA.
http://www.cbc.ca/news/politics/tfsas-won-t-be-a-problem-for-harper-s-granddaughter-pbo-report-says-1.3051045
As high savers the CDN MMM crowd will get a big benefit relative to the rest of the population.
Talking to my friends who are middle to upper middle class and well educated the understanding of the benefits of the RRSP vs. TFSA is poorly understood and at least for now the RRSP is what people prefer as a retirement vehicle because of the immediate tax reduction.
As time passes understanding of the TFSA will increase and maybe more people will use it vs. the RRSP.
For the time being I think all the focus on the TFSA this election cycle is piss poor prioritization of issues in Canada. We have much bigger fish to fry than this.
-- Vik
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I know that feeling, I put my saved money in the tfsa and almost nothing to RRSP since I am in the lower tax bracket, yet i get comments from people that I shouldn't be doing that because that means I would lose out on money at tax season. They don't realize I would be paying it all back when I will be withdrawing since my tax bracket will likely stay that way.
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Wife and I added our additional $4,500 each on April 23rd. Now just over $100k combined in our TFSA's and we'll keep maxing it along with our RRSP's, RESP for the kid and another $50-80k a year into non-registered. So far in 2015 we have contributed $98,225 to all these accounts.
Now if we could do something about the wasteful spending by the clowns running our country (and province), get the entitled teachers off the picket lines and do something about our crappy cold winters I would be less grumpy. :)
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I don't know of any entitled teachers on picket lines.
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Regardless of the politics, it's a fantastic wealth building tool!
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I'm pretty excited about this and hope to be able to max out my TFSA something at the start of next year. It really bothers me that people are trying to bash the TFSA as a tax-break for the wealthy.
Trudeau just released his budget proposal that included cutting the marginal tax rate for the $44,700 to $89,401 tax bracket. Given my current salary that would help me a bit but not nearly as much as being able to contribute 10K every year to my TFSA. It seems like while simultaneously talking about how the increase to the TFSA limit only helps the rich they are proposing a policy that would cost me more money and instead benefit people who make significantly more than I do. The cutting of the tax rate would also provide zero benefit to my parents who have a very low income but max out their TFSA's due to strong saving habits.
Why are we so intent on attacking people who are trying to save money?
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And if Justin Trudeau is elected, he would like to reduce the TFSA limit ...
http://www.benefitscanada.com/news/politics-could-shrink-tfsa-contribution-room-66097
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I'm pretty excited about this and hope to be able to max out my TFSA something at the start of next year. It really bothers me that people are trying to bash the TFSA as a tax-break for the wealthy.
Trudeau just released his budget proposal that included cutting the marginal tax rate for the $44,700 to $89,401 tax bracket. Given my current salary that would help me a bit but not nearly as much as being able to contribute 10K every year to my TFSA. It seems like while simultaneously talking about how the increase to the TFSA limit only helps the rich they are proposing a policy that would cost me more money and instead benefit people who make significantly more than I do. The cutting of the tax rate would also provide zero benefit to my parents who have a very low income but max out their TFSA's due to strong saving habits.
Why are we so intent on attacking people who are trying to save money?
I agree that this does not help the wealthy- they have much more than 10k/year to invest! The amount of tax they're saving is a drop in the bucket for them. It's actually kinda sad if people think you need to be wealthy to invest 10k/year…
In my view, it helps people who are middle/upper middle class *and* saving a decent, but not extreme amount of money (say 25% savings rate). These people would usually max out their RRSPs and then use non-registered accounts for savings. I can see those people being encouraged to save more due to the TFSA- wouldn't the government want people to save more for retirement? I don't care much about an OAS clawback based on TFSA amounts, since who knows what form OAS will exist in 30+ years from now anyway.
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Why are we so intent on attacking people who are trying to save money?
Nobody is attacking us. Not really.
It's politics and if JT wants to get elected he has to dig in on issues that get some traction in the minds of Canadians.
If you want a lot of votes do you court the MMM crowd or the spendypants folks in the middle [and studies show that most people from $20K to $150K/yr incomes think they are middle class] who are confused and think the TFSA is for the rich only?
Reality and politics are not the same thing. But you can't get elected if you only deal with reality.
I'd prefer the larger TFSA room and I'd max it out every year, but I'm not voting based on that single issue.
-- Vik
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I think Trudeau wants to capitalize on the ignorants when it comes to the TFSA. I don't understand why he is making it an issue other than taking advantage of people who are clueless about finance. There are other major issues he should go after, the TFSA shouldn't be one.
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If most people actually use the TFSA then there's a big revenue shortfall coming . . . Each Canadian will have contribution room of a hundred thousand plus dollars of untaxable money in five years, that will continue to grow each year. That's a lot of missing tax money from the coffers. If this tax shelter is used primarily by those with lots of money, then it furthers income inequality. Those who don't need a subsidy from the government get one, and those who do are ignored.
For me personally, it's great. For Canada as a whole it's effect several years down the road could be a bit troubling, which is why my support of this is somewhat torn.
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If most people actually use the TFSA then there's a big revenue shortfall coming . . .
I would hazard a guess that at least 50% of Canadians do not use the TFSA, and of the 50% that do, at least 80% of them have one of those awful TFSA savings accounts at the big banks making a laughably bad 0.75% in interest (and therefor, the government is not missing out on much tax since not much money is being made). I am also the only person I know (IRL) that has maxed out their TFSA.
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If most people actually use the TFSA then there's a big revenue shortfall coming . . .
I would hazard a guess that at least 50% of Canadians do not use the TFSA, and of the 50% that do, at least 80% of them have one of those awful TFSA savings accounts at the big banks making a laughably bad 0.75% in interest (and therefor, the government is not missing out on much tax since not much money is being made). I am also the only person I know (IRL) that has maxed out their TFSA.
I agree with you, alot of coworkers of mine not only don't invest in the TFSA, many of them don't even know what it is. So I am not worried about taxes hurting us in the long haul. We get taxed like crazy, much more than our neighbours in the US, it's nice to have something on our side for once in which we don't get taxed on.
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I agree with you, alot of coworkers of mine not only don't invest in the TFSA, many of them don't even know what it is. So I am not worried about taxes hurting us in the long haul. We get taxed like crazy, much more than our neighbours in the US, it's nice to have something on our side for once in which we don't get taxed on.
I don't think that's true when you consider that you get free [or nearly free] health care in Canada.
http://www.investopedia.com/financial-edge/0411/do-canadians-really-pay-more-taxes-than-americans.aspx
http://www.step.org/canadian-and-us-tax-systems-comparison
http://www.ctvnews.ca/canada/think-canadians-pay-some-of-highest-income-taxes-in-the-world-think-again-1.1771575
-- Vik
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If most people actually use the TFSA then there's a big revenue shortfall coming . . .
I would hazard a guess that at least 50% of Canadians do not use the TFSA, and of the 50% that do, at least 80% of them have one of those awful TFSA savings accounts at the big banks making a laughably bad 0.75% in interest (and therefor, the government is not missing out on much tax since not much money is being made). I am also the only person I know (IRL) that has maxed out their TFSA.
. . . which leads to my other argument. Most people who are rich have someone handle their investments for them. Which means as a group, they'll benefit the most from the TFSAs. That's why I wrote about income inequality in the part of my post that you discarded.
If everyone uses them, they're not great for our tax revenue. If few people use them, they increase income inequality. Which one are you pulling for?
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If everyone uses them, they're not great for our tax revenue. If few people use them, they increase income inequality. Which one are you pulling for?
I honestly think the TFSA is a much bigger benefit to middle income investors than the rich ones. Sure, someone with a million dollars of investments is definitely going to take full advantage of the TFSA.... but then its such a tiny amount of their total portfolio its not like its giving them that big of an advantage. It shouldn't be difficult for most Canadians to max out the TFSA each year, but its their choice not to.
Listen, I am not advocating for income inequality. By all means, there is a small segment of the population that gets paid WAYYYY too much money. But the TFSA is not the problem here. The fact that every Canadian citizen gets the same amount of contribution room makes it a level playing field. If people chose to not take advantage of it, then that is their own problem. If you offer someone $10 bucks and they don't take it, are you going to snatch the $10 away from the guy who did take it, just to be "fair"? If anything, the RRSP is a bigger problem than the TFSA, because it increases based on your income, which means bigger incomes can stash more money and get bigger benefits.
Also, I am tired of everyone assuming that the TFSA will increase by $10000 a year for eternity, therefore becoming some massive tax haven for the rich. No, clearly that is not going to happen, some time in the future the government will stop or greatly reduce the increases, likely before it gets out of hand.
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I agree with everything you said but RRSP does have a cap limit.
Maximum Annual RRSP Contribution Limits
Year Contribution limit
2011 $22,450
2012 $22,970
2013 $23,820
2014 $24,270
2015 $24,930
So really the very wealthy honestly don't care much about RRSP or TSFA.
If everyone uses them, they're not great for our tax revenue. If few people use them, they increase income inequality. Which one are you pulling for?
I honestly think the TFSA is a much bigger benefit to middle income investors than the rich ones. Sure, someone with a million dollars of investments is definitely going to take full advantage of the TFSA.... but then its such a tiny amount of their total portfolio its not like its giving them that big of an advantage. It shouldn't be difficult for most Canadians to max out the TFSA each year, but its their choice not to.
Listen, I am not advocating for income inequality. By all means, there is a small segment of the population that gets paid WAYYYY too much money. But the TFSA is not the problem here. The fact that every Canadian citizen gets the same amount of contribution room makes it a level playing field. If people chose to not take advantage of it, then that is their own problem. If you offer someone $10 bucks and they don't take it, are you going to snatch the $10 away from the guy who did take it, just to be "fair"? If anything, the RRSP is a bigger problem than the TFSA, because it increases based on your income, which means bigger incomes can stash more money and get bigger benefits.
Also, I am tired of everyone assuming that the TFSA will increase by $10000 a year for eternity, therefore becoming some massive tax haven for the rich. No, clearly that is not going to happen, some time in the future the government will stop or greatly reduce the increases, likely before it gets out of hand.
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I agree with everything you said but RRSP does have a cap limit.
You are correct, it is more of a problem between the various middle class income levels I suppose.
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I don't think that's true when you consider that you get free [or nearly free] health care in Canada.
If you want to see how expensive something can be, start offering it for 'free' to the masses.
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If you want to see how expensive something can be, start offering it for 'free' to the masses.
And yet we pay much less per person for hugely better health outcomes (longevity, infant mortality, etc) than our privatized neighbour to the south.
How about, if you want to see how expensive something can be, make sure there's an enormous privatized bureaucracy attached to it, soaking up every possible penny until you're left with the highest healthcare costs and nearly the worst healthcare outcomes in the industrialized world ... (slightly better these days, of course, though still pretty damned inefficient).
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And yet we pay much less per person for hugely better health outcomes (longevity, infant mortality, etc) than our privatized neighbour to the south.
How about, if you want to see how expensive something can be, make sure there's an enormous privatized bureaucracy attached to it, soaking up every possible penny until you're left with the highest healthcare costs and nearly the worst healthcare outcomes in the industrialized world ... (slightly better these days, of course, though still pretty damned inefficient).
The bargaining power of a single buyer in a country is an immense savings opportunity.
Estimates are we could save billions off our health care costs if we instituted a national pharma care plan. I'd be all for that.
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On the topic of the expanded TFSA contribution room. I've been plugging away at it and I'm just $1.5K away from using it all up. One more month and I'll be topped up.
I hope Harper loses, but I figure no matter who gets in anyone who got their money before another change happens will not see any roll backs.
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On the topic of the expanded TFSA contribution room. I've been plugging away at it and I'm just $1.5K away from using it all up. One more month and I'll be topped up.
I hope Harper loses, but I figure no matter who gets in anyone who got their money before another change happens will not see any roll backs.
Awesome!
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If a party other than the conservatives win in October (and it's a party that has made it known they will reduce the TFSA amount), when will we actually find out that the TFSA amount is rolled back? Would they make it official in Nov or Dec, or could there be uncertainty Jan 1 as to how much you can actually contribute that year?
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If a party other than the conservatives win in October (and it's a party that has made it known they will reduce the TFSA amount), when will we actually find out that the TFSA amount is rolled back? Would they make it official in Nov or Dec, or could there be uncertainty Jan 1 as to how much you can actually contribute that year?
My best guess is they won't roll back for 2015. If anything they will set a new rate once next years budget comes out in the spring. If it's a majority government, they will likely indicate where the 2016 TFSA limit will be by January.
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I hope Harper loses, but I figure no matter who gets in anyone who got their money before another change happens will not see any roll backs.
Me too! (Hope he loses.) But this is a difficult election because the economic platforms of the others don't make much sense and involve such pandering. "We need to reduce the TFSA because there is no way the average Canadian can save $10,000 a year! It only benefits the rich!" Me: "Ummm.. Really rich people don't care much about $10K. It's not even a drop in their bucket." The best tax shelter the average Canadian has ever had and people want to reduce it? Is that like one of those schoolyard things where the kid goes, "If I can't use it, nobody's allowed to"?
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I hope Harper loses, but I figure no matter who gets in anyone who got their money before another change happens will not see any roll backs.
Me too! (Hope he loses.) But this is a difficult election because the economic platforms of the others don't make much sense and involve such pandering. "We need to reduce the TFSA because there is no way the average Canadian can save $10,000 a year! It only benefits the rich!" Me: "Ummm.. Really rich people don't care much about $10K. It's not even a drop in their bucket." The best tax shelter the average Canadian has ever had and people want to reduce it? Is that like one of those schoolyard things where the kid goes, "If I can't use it, nobody's allowed to"?
Actually that was Trudeau who said it, I found it so stupid. The only one I won't vote for sure is Bloc Québécois, I just find that they will screw the NDP and that would help out the conservatives in Quebec. I know NDP were not happy about the TFSA changes, but I don't recall them saying anything as stupid as Trudeau on that one. The only thing I recall Mulcair saying about it is that it would hurt in the long run when it comes to funding for programs since the tfsa takes away some tax money which is at least a more reasonable answer than Justin Trudeau.
On one hand you have the conservative who really have knack on hiring people (I am being sarcastic of course, just see Brazeau, Duffy, Pamela Wallin, etc...)...on the other hand you have Justin Trudeau who will say anything to win votes for the low income families and then you have the NDP who have alot of inexperienced people, a party that has never governed the country.
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I'm almost maxed for TFSA. Will be completely by year end. What this means for me is I should never have to have any taxable accounts. I never get why people, even when getting low interest rates in a savings account aren't using the TFSA. Unless you're going to removing money frequently why have any taxable accounts at all?
How do you guys fund unexpected disasters up north without using taxable accounts? I put as much as I can in my IRA (which is well under 10% of my income.), so the rest has to go somewhere.
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How do you guys fund unexpected disasters up north without using taxable accounts? I put as much as I can in my IRA (which is well under 10% of my income.), so the rest has to go somewhere.
You can take $$ out of a TFSA any time with no penalties. You can return then $$ back to it the next calendar year.
Having said that if I had an unexpected emergency I would not touch any of my investments unless there was no other way to deal with it. My high savings rate and line of credit are my first line of defence.
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I'm almost maxed for TFSA. Will be completely by year end. What this means for me is I should never have to have any taxable accounts. I never get why people, even when getting low interest rates in a savings account aren't using the TFSA. Unless you're going to removing money frequently why have any taxable accounts at all?
How do you guys fund unexpected disasters up north without using taxable accounts? I put as much as I can in my IRA (which is well under 10% of my income.), so the rest has to go somewhere.
I'm one of the dummies that keeps an emergency fund despite what MMM says about it. :) $5K in there. I wouldn't touch my tax shelters if I needed a larger sum, I'd take out of my non-registered account and (I guess) pay the piper for capital gains at tax time. Paying capital gains isn't too bad--you only pay income tax on half the profit.
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I'm one of the dummies that keeps an emergency fund despite what MMM says about it. :) $5K in there. I wouldn't touch my tax shelters if I needed a larger sum, I'd take out of my non-registered account and (I guess) pay the piper for capital gains at tax time. Paying capital gains isn't too bad--you only pay income tax on half the profit.
I'd run the math on taking say $25K out of your TFSA for an emergency and paying it back vs. doing that on a non-reg account where you'll pay CG taxes.
The TFSA $$ can be re-contributed the next calendar year so you are only losing the potential returns while you pay back the money. With the non-reg accounts you lose the potential returns and you pay CG taxes.
One scenario where taking money out of non-reg would make sense if you wanted to do some loss harvesting from investments that tanked and offset CGs on investments that appreciated.
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I'm one of the dummies that keeps an emergency fund despite what MMM says about it. :) $5K in there. I wouldn't touch my tax shelters if I needed a larger sum, I'd take out of my non-registered account and (I guess) pay the piper for capital gains at tax time. Paying capital gains isn't too bad--you only pay income tax on half the profit.
I'd run the math on taking say $25K out of your TFSA for an emergency and paying it back vs. doing that on a non-reg account where you'll pay CG taxes.
The TFSA $$ can be re-contributed the next calendar year so you are only losing the potential returns while you pay back the money. With the non-reg accounts you lose the potential returns and you pay CG taxes.
One scenario where taking money out of non-reg would make sense if you wanted to do some loss harvesting from investments that tanked and offset CGs on investments that appreciated.
Luckily, it hasn't happened yet and on second thought, I think you're right. Even if worse came to worse and it was say, $30K. If I couldn't pay that back, I could even (in the next year) pay a bit of capital gains while flipping $30K of high dividend investments from my non-registered into the TFSA. I don't have much shelter room because I have a pension at work. So, I only get about $3200 a year RRSP space and the TFSA. As a Mustachian, it's pretty easy to fill up $13K in no time. That's why I have the non-registered.
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It's great news, but haven't the opposition parties said they stop the move if they were elected?
With elections later this year, I'm not very much counting on it. Although we might get a year of increased TFSA contributions, at least. One of the few fiscal moves that would actually benefit me, it would suck to see it go down the drain.
It looks like we will find out very soon. Fingers crossed it stays at $10,000.