Author Topic: TFSA Questions for canadians  (Read 7660 times)

Dmy0013

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TFSA Questions for canadians
« on: February 25, 2013, 08:06:48 AM »
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« Last Edit: April 13, 2016, 09:04:16 AM by Dmy0013 »

Khao

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Re: TFSA Questions for canadians
« Reply #1 on: February 25, 2013, 08:32:17 AM »
RRSP vs TFSA depends on what your goal is.

If you want to buy a house and haven't used the Home Buyer's Plan yet, I think both are valid places to stash money.
If you want to buy a house and have already used the Home Buyer's Plan and you know you aren't eligible for your next purchase, I'd say max out your TFSA (25,500 is the maximum you can put this year if you haven't contributed in the past years) and put the rest in the RRSP.

Personally, I've just emptied my RRSP to purchase my first condo using the Home Buyer's Plan, and I want to upgrade to a duplex or triplex in 3-5 years. Right now, I've got a TFSA with Ing Direct which get auto-deposit every week and I plan to max it in 2-3 years (so it'll be at 36,500 in 2015). If I have more to stash away, I'll put it in my RRSP but I won't be able to use that money as a downpayment in a couple of years. I'll use the money from the sale of the condo + my TFSA to purchase my next house.

I also like having a maxed out TFSA before putting too much into the RRSP because you have access to that money in case an emergency comes up instead of needing a separate savings account. I plan on leaving 5k in a simple TFSA with small interest rate in my ING Direct account (right now around 1.5%) and the rest will go in a TD E-Series TFSA account using the Canadian Couch Potato allocation : http://www.canadiancouchpotato.com

If your goal is purely retirement stash, I'd say either max one then the other, or put 50-50 into each. Both provide good fiscal benefits.

Matt K

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Re: TFSA Questions for canadians
« Reply #2 on: February 25, 2013, 08:57:38 AM »
I want to start using my TFSA more this year, my question is, is there a way for me to control my TFSA without having to go through a bank or financial advisor?  Can I manage it from my home computer, using a monthly payment plan towards mutual funds or stocks I choose?

Obviously, it needs to be held in a financial institution, but it doesn't have to be one of the big banks. Quest Trade (or any low fee online brokerage) lets you do exactly what you want. Mind you, so do the big banks. For RRSP account the big banks tend to charge $125/year until you have $25k invested with them (then it is free). Quest Trade is free for RRSPs. Both the big banks and Quest Trade have free TFSA investment accounts. In all cases you have access to an online investing portal that lets you do research, view your portfolio, buy, and sell. Setting up reoccuring payments is also really easy.

There are other low fee brokerages, I'm just using Quest Trade by name because it is the one I am most familiar with. I do not however have an account with them.

Since you expect to have the same income in retirement as in working (I'm curious how/why you plan that btw, since pensions are lower than working wages, and most people live on less when retired than working, so why work the extra years to build up the high retirement income?) the RRSP loses its biggest advantage (the tax break) - Kinda. You'll pay the same taxes when pulling the money out, but if you reinvest all that you get back from your tax return, you'll have more capital to grow faster, which is a pretty great thing.

The TFSA definitely wins for flexibility though. Want to pay out your mortgage early? Can do. Want to draw income early without being penalized or transfering the RRSP to an RLIF, Can do. I've got a mix of TFSA and RRSP (close to 50/50) so that I have that flexibility later if I want it, but I also get some of the tax advantages now.

aclarridge

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Re: TFSA Questions for canadians
« Reply #3 on: February 25, 2013, 02:53:54 PM »
Definitely max out the TFSA, and use both tax sheltered accounts for your most badly taxed investments.

The RRSP is interesting - at your tax bracket it's fairly effective, but not as much if you plan on having such a high income in retirement. It's very confusing to me - if you're saving a lot of your income now, then you are living on much less than 75k right? Same thing Matt K said.

The other thing to be concerned about with RRSPs is that they have what I would call "political risk", that is, the risk that the government messes with the rules by which you can access your money, or increases tax rates. The latter is certainly possible due to the demographics in this country.

daverobev

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Re: TFSA Questions for canadians
« Reply #4 on: February 25, 2013, 03:41:22 PM »
"Why not both" - and also, bear in mind that the RRSP is better for some things than the TFSA.

Namely: Due to a retirement-savings treaty, if you hold US$ stuff in your RRSP, dividends are not taxed. If you hold them in your TFSA, they will be taxed (taxes withheld) at 15%/30% if you don't have a W8BEN form.

Well, $75k means you're in a nice high tax bracket. I'd certainly max the TFSA for flexibility with bonds, Canadian ETFs, Canadian REITs. Then put your international stuff in the RRSP, plus any extra Canadian stuff that won't fit in the TFSA.

Self-employed-swami

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Re: TFSA Questions for canadians
« Reply #5 on: February 26, 2013, 08:24:39 AM »
ING direct also has self-directed TFSA accounts, but I think you can only purchase their mutual funds/GICs.

aclarridge

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Re: TFSA Questions for canadians
« Reply #6 on: February 26, 2013, 09:24:10 AM »
Yeah maybe you were right and its wishful thinking I will be in the same tax bracket in retirement... I work for a large company which has a EXCELLENT EXCELLENT Pension, but im only 25 and I imagine they will make huge cuts to the pension by the time I hit 55...

You're 25 and making 75k, and want to work until you're 55? You must like your job :)

Yeah I hear my company has a great pension plan too. I don't plan on sticking around long enough to take advantage of it, and certainly part of the reason is that there's no guarantees it will continue to be good even if I stuck around long enough to get the bulk of it.

strider3700

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Re: TFSA Questions for canadians
« Reply #7 on: February 26, 2013, 01:26:55 PM »
You can also have multiple TFSA's if you really want to.  You still have the same limit just split between them,  over invest and you'll be penalized.

I opened a regular savings TFSA with scotiabank back when they first came out.  It sits there making effectively nothing in interest  so I instead opened another TFSA with scotia itrade this one I keep ETF's in.   long term I'll ditch the original TFSA and just keep the new one.  Right now I don't have enough to worry about hitting the max contribution.    itrade is 100% self directed done over the web and they have a list of commission free ETF's.   Other banks have similar I just have all of my banking there already so this was easy to setup.

Like was pointed out above What the investment is determines where it goes.  Some things are best  in TFSA some in RRSP and some in regular taxable.   

Personally my goal is to max out the TFSA for myself and my wife.   I'm of the belief that long term when I reach "normal" retirement age (30ish years) tax rates will be far higher then currently so I prefer TFSA to RRSP.   the 25500 limit however means I will have a mix of both.

My RRSP's are also held at scotia.  They've never charged me a thing for holding them.  Just the initial fees when I set them up.   Perhaps it depends on what you have in them?



Dee

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Re: TFSA Questions for canadians
« Reply #8 on: February 27, 2013, 07:00:33 PM »
Questrade starts at $4.95 a trade.

KMMK

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Re: TFSA Questions for canadians
« Reply #9 on: February 27, 2013, 07:18:34 PM »
The TD e-series has no transaction fees. There is a $20-25 annual fee, but I believe this is waived when your account is above a certain amount - around $25,000.
I've been doing the TD waterhouse self-directed RSP thing for a few months now, just with e-series. It was easy even though I wasn't a TD client. I went to the branch to do the initial paperwork and now I do everything over the internet.

mobilisinmobili

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Re: TFSA Questions for canadians
« Reply #10 on: March 01, 2013, 01:15:12 PM »
Does anyone know what the average "buy" and "Sell" fee is?  Td Waterhouse is 9.99 per transaction? anyone know of a better price? Has or does anyone go through TD for this stuff?

If you do a PPP (pre-authorized purchase plan) then there's usually no transactional cost for a purchase.. on mutual funds. Not sure what you're looking to buy/sell here.

The other advantage of using a PPP is that you're automatically dollar-cost-averaging, and making the best bang for your buck in terms of units of mutual funds purchased per dollar. Same goes for stocks, but depending on the amount, sometimes the transaction fees doesn't make sense using a PPP with stocks. Variety of factors there, too much detail to go into.

daverobev

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Re: TFSA Questions for canadians
« Reply #11 on: March 02, 2013, 07:55:07 AM »
Questrade now has commission free ETF purchases.

Its not AS flexible as mutual funds (as you can only buy integer units, not fractions), but the MERs are better than even TD eseries, which are the only MFs worth going for (IMHO). Saying that I have some RBC (Can. index) simply because it can be done automatically... I'll move chunks out at the end of years and into Questrade, for a .2% MER from 0.7% :)

tomatoprincess

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Re: TFSA Questions for canadians
« Reply #12 on: March 13, 2013, 08:00:05 PM »
daverobev,
I'm also interested in the questrade commission free ETFs, what do you mean when you say they are not as flexible.

Questrade seems to make more sense if buying ETFs are free (you pay when you sale), since I will be investing to hold. Would you agree?

Matt K

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Re: TFSA Questions for canadians
« Reply #13 on: March 14, 2013, 10:07:24 AM »
Does anyone have any first hand experience with QuestTrade? I was going to move my account over there, but I've read a lot of negative reviews on forums (redflagdeals being the big one). There are a lot of people who are upset with the customer service, mostly for getting their money back out of their accounts. Of course, bad news spreads faster than good news, so I'm curious if anyone here has had first hand experience.

Cecil

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Re: TFSA Questions for canadians
« Reply #14 on: March 17, 2013, 06:42:49 PM »
I've used Questrade for my RRSP/TSFA for the last 4 years or so. I've got about $130k on deposit with them, and have never had a problem. I transfer money in using my online banking bill payment, and it usually shows up in about 2-3 days. I've never tried to take money back out so I don't know how problematic that is, though I doubt it's difficult.

I've had to contact their customer service a couple times for various things (changing my wife's name when we got married, resetting a forgotten password etc) and they've always been prompt and helpful.

Kazimieras

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Re: TFSA Questions for canadians
« Reply #15 on: March 18, 2013, 11:30:06 AM »
"Why not both" - and also, bear in mind that the RRSP is better for some things than the TFSA.

I'll echo this thought since you can actually save more money. RRSPs shift when you pay the tax on the income and with TFSAs you can do some really neat things. So remember you're taxed on your income and money taken from the RRSP counts as income; money from the TFSA does not count as income, as it is already taxed. So let's say 25% of your retirement money goes into a TFSA and the rest into an RRSP. When you retire you'll be withdrawing from both pools to make 100% of your retirement income, however you'll only be taxed on 75% of it. The extra added benefit of this approach is that most clawbacks on CPP and OAS are based on income levels, not net worth. So by keeping some money outside of the RRSP, the lowering of your income can help you qualify better for some of the governmental programs.

Note - Many people do think that RRSPs are better for income growth compared to a TFSA and that is partial truth. The money is untaxed in the RRSP and any gains it experiences happen on all the money that was earned whereas gains in the TFSA only happen on the after-tax dollars (which are less), meaning you may gain the same %, but you will gain less $$$ overall. What you are in essence doing with the money in the RRSP is investing on leverage, which is why the gains seem so much better. When you combine this risk with the fact that capital losses cannot be claimed from an RRSP and that income taxes are (typically) higher than capital gains or dividend taxation, the TFSAs become very attractive.