The gift

kisses1

Imagine if the government let you take a portion of your income each year, invest it in almost anything, pay no tax on the profits, remove the money when you feel like it and use it for any purpose, then put it back later.

Now imagine if you could do this for your spouse, too. And your older kids. If you were in the top tax bracket (making $140,000 or more), such a thing would effectively double your investment returns, turning 3% into 6% or 7% into fourteen. It would allow easy income-splitting within the family. And every cent in there would be after-tax income in retirement, no matter how much other money you had. No withholding tax. No clawbacks. No CRA.

Finally, imagine if you and your spouse could instantly open accounts and plop $51,000 in there, add $400 a month for twenty years, then retire. You’d have $414,346. Unlike an RRSP or company pension, you could take out lots or little and pay no tax. You could enjoy a $30,000 annual income top-up (at a return of 7%), send none of it to Ottawa, and still have your four hundred grand.

Well, you have this ability, of course. It’s called the TFSA. As you should know, the annual contribution limit was just raised to $5,500. Now the accumulated contribution room is $25,500, double for a couple, triple if you have a kid over 18.

Let nobody reading this blog think Canadians are moronic simply for the way they treat real estate. Oh, no. This is equally whacked. Our innumeracy is pristine.

Despite being able to shelter all this money from any kind of tax, most don’t. Only four in ten people have a TFSA, even five years after it was created. Of those only half actually contribute to them. And (are you sitting?) eighty per cent of people with a tax-free savings accounts have the money in savings. Yup. High-interest savings accounts paying 1.5% or maybe two. Or a dead-end GIC. (I spoke with a woman this weekend whose TFSA is in a 90-day GIC. “It pays 2.5%,” she said proudly, thinking it will grow that much every 90 days. I wept.)

This is a complete and utter waste of a tax shelter. Millions of people, seduced and ravished by TNL@TB, have been pushed into ‘investments’ which don’t even pace inflation. Their tax-free accounts have been rendered into low-yield, emergency slush funds, routinely raided for vacations and full-body hair removal. It’s also astonishing how many people don’t realize keeping money around for emergencies like job loss or infidelity is a bad idea, when you can get a line of credit costing nothing to maintain.

TFSA money is best invested for growth. No, not those junior uranium stocks the coffee-truck guy is always yakking about, but as part of a diversified and balanced portfolio. Remember, last year the S&P grew by 13% and the TSX by just 5%. International markets returned double-digits and the REIT index added about 7%. Why would you not want a mix of this stuff in an account that F’s paws will never touch?

After all, there’s no way the average house will be gaining in value by this amount over the next few years, while costing you big bucks in property tax, insurance, maintenance and the lost investing power of all that equity. If you own real estate, you’re better off ignoring a 3% mortgage and using any extra money to stuff into a TFSA, where this kind of portfolio can build what we all need most, besides a hug, – liquid wealth.

And what about the debate over putting long-term money into a tax-free account, or an RRSP?

There shouldn’t be one. RRSPs are fine for tax-shifting, like financing a mat leave, income-splitting between spouses or going back to school to become a realtor, but not for retirement. Yes, you get a tax deduction for making a contribution, but that could easily be wiped away by higher personal taxes in the decades to come. Besides, you must have a powerful reason to take after-tax money and make it taxable again by stuffing it in an RRSP. When you can achieve the same taxless growth inside a TFSA, and pay nothing on the way out, why wouldn’t you?

A tiny percentage of people get this. But 70% own a house.

Imagine that.

194 comments ↓

#1 TurnerNation on 01.20.13 at 6:41 pm

Dr. Wayne’s on the wane!

#2 visorman30 on 01.20.13 at 6:46 pm

I’m watching the market to come with eager eyes for sure.

#3 Dr. WAYNE on 01.20.13 at 7:02 pm

#1 TurnerNation on 01.20.13 at 6:41 pm

Dr. Wayne’s on the wane!

====================

Don’t hold your breath …

#4 City that smells like it sounds on 01.20.13 at 7:06 pm

FOURRRRRRRTH!!

(Dr.Wayne, this is your mother. Come upstairs and eat your Kraft dinner before it gets cold!)

#5 Old Man on 01.20.13 at 7:13 pm

I remember many years ago about a kissing booth at a county fair for charity, as such did exist. Many fun things existed years ago, but not anymore. The best kissing booth was in Woodstock, as they had the best babes in Ontario.

#6 Toronto_CA on 01.20.13 at 7:13 pm

I have a few thoughts on this topic.

When the TFSA first came out, the media put out a lot of advice articles about how the TFSA was a perfect place for your emergency fund, since you could take the money out at any time tax free and put it back in.

The name is terrible, by the way. TFSA has “savings account” right there. It should be Tax Free Investment Account.

When the TFSA started in January 2009, the general populace was scared to DEATH of equities. March 2009 was the bottom of the stock markets of the greatest recession we’re likely to see, so in comparison at the time a 3% guaranteed return that ING etc was offering on a high interest cash account sounded great.

On top of that, in year 1, $5000 is not lot of money to put in the stock market, if you bought a diversified portolio you’d pay $120 for 4 trade to set up a couch potato. That’s a lot of money off your 7% return, bringing it down to 4.5% or so. And no one at the time was thinking the stock markets would bring 7% returns.

Of course, now the markets have come back, and you can dump a lot more money into a TFSA, a lot more ETFs are available…the world has changed.

What needs to happen is the media has to get the word out there, with advisors and banks and brokerages, that TFSAs should not be used to hold low interest savings account money, but invested for retirement in securities (and not high MER mutual funds!).

Good post Garth, hopefully you’re contributing to getting the word out there on TFSAs.

#7 prairie gal on 01.20.13 at 7:18 pm

I can’t wait to max out my TFSA and my RRSP!

I am happy to report that, after 7 years of relative frugality, I am debt-free! No more student loans for this prairie gal. Last year I ramped up my payments to $1200 a month; it was totally worth it! *happy dance*

Now to start the wealth-building phase of my life. Opening up self-directed accounts with Questrade, gonna fill ‘em with ETFs and REITs. Any suggestions welcome.

Thank you, Garth. You were very influential in my decision to forego the condo and axe the debt. Rentals here in SK, which used to be few and far between, are going vacant for the first time in a very long time. Rents are also coming down, albeit slowly.

#8 Junius on 01.20.13 at 7:19 pm

#6 Toronto_CA,

You said,”The name is terrible, by the way. TFSA has “savings account” right there. It should be Tax Free Investment Account.”

I 100% agree. I have been thinking about this for a long time. It is all in the branding.

#9 Nukester99 on 01.20.13 at 7:29 pm

We have done exactly as GT suggests, maxed TFSA’s in about the same stuff suggested. I am at a lose why people look this gift horse in the mouth and yet buy lottery tickets and smokes every week? Hey, did the Leafs win last night? Didn’t watch and won’ watch until the “lost” 38 games have been played. My sort of personal protest to the greed displayed but the rest of the sheep can enjoy and continue to live in perpetual numbness. That way when they are working, because they have no choice, until they die at least they had hockey.

#10 Jimbo on 01.20.13 at 7:31 pm

Garth. Wronggggggg!

I max out my RRSP’s and take the refund and top out my TSFA’s. Combo’s the only way to go.

#11 Ronaldo on 01.20.13 at 7:40 pm

You’re early today Garth. Hard to believe how so few people have a TFSA after 4 years and those that have, as you say, put their contributions in low yielding GIC’s and interest bearing vehicles.

The TFSA’s could not have come at a better time in history. Just before the bottom of the GFC. I opened up an account for my wife and I with the brokerage arm of the TD, TD Waterhouse and have never looked back.

I loaded them up with funds heavily invested in financial services since the banks had bottomed out on Feb. 23rd/09 at around -50%. Since then, I have diversified the portfolio across several different areas, much as you have recommended. The growth has been incredible.

I had read in the Financial post a few days before that the CEO of one of the big banks was investing his 2.5 million dollar bonus in his own bank stocks so I figured he must know something we don’t. Well, he’s doubled it and then some. Smart move.

Here’s the amusing part. When I first went to the bank to open up a TFSA, the NL@TB wasn’t even up to speed on what it was herself and she said it would have to be in a savings type of investment which would have been around 2% or so. I suppose the name Tax Free Savings Account had her a bit baffled. I had to tell her that, no, it can be in a self directed trading account since I planned to purchase some bank related investments. Of course after checking, she realized I was right.

At this point in time, with bank stocks down 50% and the TSX down to 7500 or so, these people were absolutely shell-shocked and gun-shy to even think of putting us into these types of funds without us signing a waiver that they would not be responsible for any losses incurred as a result. I didn’t go for it and told them they couldn’t do that. I got my account opened and did it myself and have been doing it the same since.

It’s little wonder then that most people are sitting in GIC’s and HISA’s. They probably were told the same as we were.

#12 Old Man on 01.20.13 at 7:40 pm

I had a road rage incident in a shopping center parking center, whereby, there was no place to park, so parked waiting for a space to open up, and another car did the same, but when a car pulled out had an edge to move in quickly. This young woman went ballistic on me, and went nuts, as that space was hers.

Well she was screaming and kicking my car; as wanted to kill me. Someone hit a cell and called 911, and two guys came to restrain her, and the cops were there in minutes. I do not need this crap, and the cop asked me if I wanted to lay charges, and said no; as will take a pass on youth not to mess up their life.

#13 Richard on 01.20.13 at 7:43 pm

7th…..BARK !! Good boy Zeus….

#14 T.O. Bubble Boy on 01.20.13 at 7:53 pm

Right now I’m mostly holding small cap value ETFs in my TFSA… made some decent gains with high-fliers, followed by some losses (that aren’t tax deductible), and then changed my approach. Now the riskiest investments are always in non-registered accounts.

#15 SMC on 01.20.13 at 8:06 pm

I suspect most people’s TFSAs have done better than ‘average’ simply because the program was initiated when markets were low.

#16 Anxietosity on 01.20.13 at 8:09 pm

Garth, Once the TFSAs have been maxed out for wife and I, is that the time to start filling up the RRSPs (there is room)?

#17 Ken R on 01.20.13 at 8:11 pm

#4City that smells like it sounds on 01.20.13 at 7:06 pm
FOURRRRRRRTH!!

(Dr.Wayne, this is your mother. Come upstairs and eat your Kraft dinner before it gets cold!)

Thanks for the good laugh, good one!

#18 GLK on 01.20.13 at 8:15 pm

#7 prairie gal

“I am happy to report that, after 7 years of relative frugality, I am debt-free! No more student loans for this prairie gal. Last year I ramped up my payments to $1200 a month; it was totally worth it! *happy dance*”

Actually, it is indeed good to be debt free, but that was not the best move, given that student loans are tax deductible. It would have been way better to make the minimum payment on your student loan, at the same time ramp-up investments in your balanced portfolio. Imagine how many ETF shares you could habe bought last year at much lower prices than today.
Regards
GLK

#19 Goldie on 01.20.13 at 8:24 pm

Dr. Wayne is correct, even if a touch vulgar. “Firsting” has become a form of feeble attention whoring; proliferated in part due to his predictable reaction. I suspect that the good doctor speaks for several of the regular readers who prefer not to acknowledge the whoring for fear that they will only encourage more of it.

#20 Randy on 01.20.13 at 8:33 pm

If you live in Ontario ….there’s a 100% chance that you will face much higher taxes and outrageous energy rates. They will never cut spending here…and there will be fewer good jobs…Your future in in Alberta…

#21 Deb on 01.20.13 at 8:36 pm

#6 Toronto_CA

I see your point about changing the name from the TFSA to the TFIA. However, I really don’t think this will change the minds of the 80% of TFSA owners who have all of their contribution money in either a lowly savings account or ghastly GICs. What I would really like to know is whether such dreadful choices in investment vehicles is primarily due to extreme risk aversion or ignorance?

#22 Dr. WAYNE on 01.20.13 at 8:43 pm

#19 Goldie on 01.20.13 at 8:24 pm

=======================

Thank you for a sane voice in the wilderness. VULGAR … Ha !!! The venerable Mr. Turner may have acceptable limits, at least herein, but I certainly do not.

#23 Michael Canada on 01.20.13 at 8:45 pm

Garth,

I totally agree with you. TFSA is a better choice for many people to invest in.

We should pay more attention to TFSA, and we should know there should not be too much money in RRSP after we retire. It would be a tax bomb.

However, TFSA is not the only way to go. Because in reality, things are more complicated. Especially for people have been working and investing for years.

We started having TFSA in 2009. Before that, people already put some money in the RRSP accounts, this was the only choice.

As we know, the growth of these type of accounts is mainly based on the concept of “Compound Interest”.We invest a small portion of our salary for decades, then we can rely on the money those accounts grew to live after retirement. It is the magic of compounding.

The more money we start with, the faster those accounts grow!

25500 each is lots of cash. Not everyone could have that much cash to invest without moving money from somewhere else such as an RRSP account.

Let’s say I have an RRSP account with 70K. If I want to max out my TFSA now, then I will have 44500 left in the RRSP. (I don’t even consider the cost of moving money out of RRSP yet)

Now I have one RRSP account with 44500 and one TFSA with 25500. I will keep contribute 5500 to TFSA every year and the RRSP will be no new money any more.

Both accounts grow at 6%,after 26 years, I will have around 411k in TFSA and the RRSP will grow to 190K,totally I will have 600K.

If I contribute 5500 to RRSP, I will get around 1500 back, then put 1500 to TFSA.

At 6%, after 26 years, I will have around 600K in RRSP, totally 690K in 2 accounts.

There is huge difference between 2 scenarios. almost 90K!

Yes, I will pay tax after retirement, but I am paying tax on the money in TFSA. sooner or later, I don’t see much difference.

The key is to move the money out of RRSP before you turn 71.

So after retiring at 65, start withdrawing 67K every year no matter you need that much money to live or not. Put the money in TSFA. And you will have at least 100K room in TFSA in the 2nd scenario above. The rest of the money will go to a non registered account with some tax friendly investments.

Why 67K? Because based on the current rule, this much money can keep all your OSA money.

Yes, I will pay tax on 67K. But as I said, I will pay tax every year anyway if I don’t get tax refund. There might be some difference. But I don’t think the difference will have a huge impact.

From age 66 to 71, every year 67K out of RRSP, when I have to convert RRSP into RRIF, my rrsp account will only have around 200K left. I won’t worry about that because the RRSP account will be emptied in 3 years at the rate of 67K a year.

To sum up, Garth pointed out something many people didn’t realize. RRSP can be a tax bomb, especially after 71. If you die with half a million in the account, the government will take around 250K from your already sad spouse! WOW!

Here is my point:

1. If you already retired and has lots of money in RRSP, hurry up, move money out. Try your best to control the cost.

2. If you are working but already have tons of money in RRSP, stop contributing to RRSP right now. It will be very difficult to move huge amount of money out without being hammered by the tax after you retire at 65.

3. If you already have some money in RRSP, such as 70K I exampled above, or more, just keep contributing. Keep the vehicle running! Let your money grow faster! Enjoy the compounding! Pay attention to the growth of the account. When the money is too much, stop!

Everyone has different situation in reality. Just keep in mind, RRSP could be a bomb. don’t blindly contribute. Do the math, RRSP still could be a good tool to invest as long as you keep the amount in the account under control.

#24 DT76 on 01.20.13 at 8:52 pm

Garth you should stop talking about TFSAs as an investment tool, the government might be reading and realize they made a mistake allowing this!

#25 An Importation in Quebec on 01.20.13 at 8:55 pm

I am not clear about inheritance. Would children pay tax on it. If yes it kind of looses lustre.

#26 simple reader on 01.20.13 at 9:07 pm

Garth,

I would say a lot of people get your point, and I thank you for giving such honest and free advice. What a tiny percentage of people know is what to do about it. (how to implement it)

Creating a successful balanced and diversified portfolio by yourself requires a lot of knowledge that only a tiny % of people has.

Event tinier is the % of people able to find a good financial advisor, qualified in these strategy you suggest.

I’m not trying to justify people, I just understand why people prefer to play with real estate (more understandable and controlled).

I rent and I have $0 in real estate. But if you (and other great blog dogs here) really want to talk about porfolios, then I’m asking everybody here how to achieve on implementing such a “diversified and balance portfolio”. Let’s all talk about that… that’s where the real advice reside. Let’s talk about known good financial advisors, let’s talk about good strategies, let’s talk about best information sources and recognized authors, let’s talk about testing platforms, and successful portfolios examples, and a long etc… I guess you all get the point.

Let’s move ahead. Those who haven’t realize yet that real estate is in for a correction and that GIC and saving account are ridiculous and tax protection is a very important topic… will never get it. So, Garth, for us who did get it, please, take us to the next level.

Thank you for all the great work you do with this blog.

#27 SmokinJoe on 01.20.13 at 9:18 pm

Start loading up your TFSA with RIM stock tomorrow. You can thank me in a month. :)

#28 CrowdedElevatorfartz on 01.20.13 at 9:22 pm

Garth.
Why did Stephen Harpers wife dump their entire stock portfolio just before Christmas?

#29 AK on 01.20.13 at 9:28 pm

.#4 City that smells like it sounds on 01.20.13 at 7:06 pm

“FOURRRRRRRTH!!

(Dr.Wayne, this is your mother. Come upstairs and eat your Kraft dinner before it gets cold!)”

Lame. Yawn..

#30 Smartalox on 01.20.13 at 9:29 pm

If the US has an equivalent to the TFSA In the Roth IRA, how come the TFSA is not recognized under the tax treaty the way that RRSPs are treated the same as 401ks?

Is there any plan to amend the treaty? What progress is being made?

My wife’s TFSA is well invested, but we can’t harvest the growth because her holdings are subject to US withholding tax on withdrawal, and she’d have to file a tax return to recover the money.

At some point, I’d like to see that situation fixed, and have TFSA withdrawals truly tax free.

#31 Ralph Cramdown on 01.20.13 at 9:41 pm

If you live in Ontario […] …Your future in in Alberta…

I’m holding out for the new life awaiting me in the off-world colonies, thank you very much.

I think Garth is a little hard on RRSPs, though. Tax deferred is tax saved, and a little math shows that for those in the top brackets now, the use of that money compounding for a decade or two would more than make up for a slight rise in bracket rates, and I don’t think we’re going to be in the top brackets in retirement at any rate.

#32 giterdone on 01.20.13 at 9:43 pm

Time 2 get crackin cuz we come hackin, the hosuing market is gonna explode in the spring time, expect a 10% increase in 2013.

…… this tfsa you talk about is nothing but noise, the real money is in real assets baby

giterdone 2013

#33 Vivid Dreams on 01.20.13 at 9:45 pm

Am I correct in thinking that preferred shares decrease in value when interest rates rise? If that assumption is correct, would distribution yields increase accordingly? Certain preferred etf’s are rebalanced on a “time to time” basis.
Psst…TFSA’s rule! Pass it on

#34 Dan on 01.20.13 at 9:46 pm

I fully agree with #26 simple reader

#35 waiting on 01.20.13 at 9:49 pm

I love tonight’s photo!

#36 Intuitive Missus on 01.20.13 at 10:08 pm

Good -and brief – explanation about differences between RRSP’s and TFSA’s.

http://www.getsmarteraboutmoney.ca/en/managing-your-money/investing/tax-free-savings-accounts/Pages/Comparing-TFSAs-and-RRSPs.aspx#.UPykndR5mK0

#37 Classic on 01.20.13 at 10:13 pm

How did the open houses go today?

#38 Dave B on 01.20.13 at 10:13 pm

sheeple

Or a dead-end GIC. (I spoke with a woman this weekend whose TFSA is in a 90-day GIC. “It pays 2.5%,” she said proudly, thinking it will grow that much every 90 days. I wept.)

#39 Freedom First on 01.20.13 at 10:20 pm

RRSP’s and TFSA’s. 2 fantastic gifts to Canadians.

Read all of Garth’s information on RRSP’s and TFSA’s previously written about on Garth’s gift of this generous free blog, and you will know all there is to know about how to use them both for both you and your families maximum advantage. When it comes to sharing any of my money/assets/profits in any way, with TNL@TB, or any financial institution, I will stop at nothing wherever possible. Know all of the rules.

#40 Renting in Regina on 01.20.13 at 10:24 pm

#7 Prairie Girl
Opening up self-directed accounts with Questrade, gonna fill ‘em with ETFs and REITs. Any suggestions welcome.

#11 Ronaldo
“I had to tell her that, no, it can be in a self directed trading account.

This is where I struggle. I have a TFSA. I contribute to it every month. But, it is money that sits there.

1. How do you put a TFSA in a self-directed trading account (or is it vice versa)?

2. Is self-directed the best option when you are still learning the difference between REITs and ETFs?

#41 David on 01.20.13 at 10:36 pm

It is still pretty shocking the level of ignorance surrounding the TFSA.

I’m pretty sure I recall articles suggesting that funding vacations was a potential use of the TFSA. Why how did we ever fund trips before it?

#42 EmpCod on 01.20.13 at 10:37 pm

RRSP is also a tax shelter. Unlike cash accounts, money can compound tax free.

#43 Mark on 01.20.13 at 10:39 pm

Dr. Wayne, you rock. You have another supporter here. I can’t stand the “first” idiots; they are the worst part of this blog. The more you can discourage, the better.

#44 Good authority on 01.20.13 at 10:49 pm

Please stop blasting people for 2% GIC’s in their TSFA.
Many remember 2008.
Nothing has changed.
No one was charged.
The banksters still control the game.
The world is awash in debt.
Many fear loading up their TSFA’s and then watching 50% disappear overnight.
Let the conservative remain that way.
Time will tell who “wins”.

It already has. — Garth

#45 Min in Mission on 01.20.13 at 11:01 pm

Yeah, paying down “cheap” debt may not be the best approach, however, when it is part of your genetic makeup, you have no choice.

Just paid of our house. Started with 5% down (borrowed from family) and a 25 year amort. Took 7-1/2 years.

I just would like to be smart enough to figure out how to do the “investing” thing.

I know what ETF’s, REIT, TFSA’s are. I just can’t figure out how to make the damn things work. Probably a “guy thing”, maybe I should just read the instructions.

#46 will on 01.20.13 at 11:03 pm

“Of those only half actually contribute to them.”

Just a little bit of a language problem here Garth – particularly in the word “contribute”.

My copy of the Oxford English Dictionary reads thus for the transitive verb contribute: “give (money etc.) towards a common purpose.”

I have always thought this usage confuses people and may put them off TFSAs and RRSPs. I don’t contribute to my TFSA for any common purpose. I put it in there for my OWN purpose. Same with my RRSP. There is no common purpose. There is my own purpose – that of aggregating financial assets over time.

Maybe the reason people don’t put money into their RRSPs and TFSAs is because they think they are “contributing” to some supposed common purpose that in fact does not exist. Please respond.

#47 Uki on 01.20.13 at 11:04 pm

RBC started charging “QUARTERLY MAINTENANCE FEE” for TFSA – $25 at least since October 2012.

#48 Inglorious Investor on 01.20.13 at 11:05 pm

There are pros and cons to both RRSPs and TFSAs. But let’s take a simple example…

Let’s say you pay 30% tax on your income until you die (I’m not referring to your top marginal rate, but rather the actual percentage of combined federal and provincial income tax you pay). Now, let’s say you invest $1,000 of income in an RRSP and $1,000 of income in a TFSA. Let’s say you get an average annual compounded ROR of 7.2% over ten years––so basically you double your initial investment.

RRSP
Net amount invested: $1,000
Total value after ten years: $2,000
After tax value: $1,400

TFSA
Net amount invested: $700
Total value after ten years: $1,400
After tax value: $1,400

…?

#49 AK on 01.20.13 at 11:05 pm

#43 Mark on 01.20.13 at 10:39 pm
“Dr. Wayne, you rock. You have another supporter here. I can’t stand the “first” idiots; they are the worst part of this blog. The more you can discourage, the better.”

Amen to that. I have been getting flamed by a number of posters for several weeks for supporting DR. WAYNE. Some have gone as far as stating that we are one of the same. :-)

#50 Uki on 01.20.13 at 11:07 pm

“#43 Mark on 01.20.13 at 10:39 pm
Dr. Wayne, you rock. You have another supporter here. I can’t stand the “first” idiots; they are the worst part of this blog. The more you can discourage, the better.”

OMG – another one, why they so attracted to “firsts” ?
Must be something in common in genetic ?

#51 Bottoms_Up on 01.20.13 at 11:08 pm

#38 Dave B on 01.20.13 at 10:13 pm
——————————————
“Sheeple. Or a dead-end GIC.”

Regarding Sheeple — isn’t it the advisors that work at banks that are to blame? Withholding information, telling white lies etc. should constitute fraud in the industry yet it happens day in day out.

Regarding dead-end GIC — is there any other kind? They all lose to inflation (essentially always), therefore you are losing money by parking it there.

#52 Engineer on 01.20.13 at 11:17 pm

I agree with what many are saying on this blog. The TFSA is a fine investment vehicle, but I don’t understand why Garth won’t advocate both TFSAs and RRSPs.

RESPs technically provide the biggest bang for your buck (20% up front). TFSAs are the second best move and finally RRSPs (for all the reasons that Garth articulated above). However, RRSPs, even in third spot, are still wonderful vehicles to compound tax-deferred investments, especially for those with youth on their side.

On Jan 2 this year, both my wife and I contributed our $5500 into our TFSAs. We also put in $3400 per child into their RESP. When March 3rd comes around, both my wife and I will transfer funds from our cash accounts over to our RSPs and then finalize our contribution in May once our 2013 contribution room is confirmed by the CRA. We use our tax-refunds to prepare for the next year’s cycle. As Garth advocates above, we purchase bond, pref, and passive equity index ETFs for all accounts, based upon our asset allocation strategy.

You can do all three (RESP, TFSA, and RRSP) if you plan for it!

If all of your money is registered, bad move. — Garth

#53 Ralph Cramdown on 01.20.13 at 11:22 pm

#44 Good authority — Please stop blasting people for 2% GIC’s in their TSFA. Many remember 2008. […] The banksters still control the game. Many fear […]

So the banksters control the game, and your idea is to lend them your money at 0% real (after inflation)?

If you think the banks always win, buy bank stocks.

If you think the rich will get richer, buy Rogers, Saputo, Power Corp., Brookfield, Weston et al, and get richer with them.

If you think you can’t outperform the market, buy index funds with low fees.

If you think everything is going to hell and preservation of capital is paramount, you’re screwed because all your friends and neighbours are already crowded into the government bond market, driving yields to near 0%, and worse after inflation. Sooner or later, those people are going to start coming out of their bunkers and moving from fixed income to equities.

#54 W on 01.20.13 at 11:26 pm

Since TFSA’s came into being after our tax treaties, isn’t is better to hold domestic etf’s in it? An s&p etf would still be subject to withholding taxes on dividends, would it not?

#55 Smoking Man on 01.20.13 at 11:30 pm

A tiny percentage of people get this. But 70% own a house.

Imagine that.
……………………………………………………….

What is there to imagine?

Loot in a TSFA, don’t score you barging rights with your rivals,

Now Granet and hardwood goes a long way in making your competition who live in basements or mom and dad feel like shit.

why am I the only one who see’s this………..It the spine in the real estate market…Showing off.

Me I like looking at all the zeros of my wealth…..

#56 Smoking Man on 01.20.13 at 11:32 pm

shit that last line did not sound right…o well, chirp away

#57 Rabbit-One on 01.20.13 at 11:41 pm

TFSA can be a great Estate Planning tool.
Because it is registered account, it is not probatable.
Meaning, upon your death, straight to go to the named beneficiary, or the spouse.
You don’t pay probate fee, let’s say 1% to BC gov’t.

Another feature, upon your death, unlike cash or RRSP, it is deemed sale without taxable gain, tax free.
(somone correct me if wrong).
Many people’s RRSP can get highest inome tax on the year of the death.
TFSA grow tax free when withdrawn.

I’m excited. Shoot me. — Garth

#58 Rabbit-One on 01.20.13 at 11:43 pm

RSP is taxable income upon your death unless carried over to your spouse, but on your spouse’s death, whole amount will be taxable. RRSP is the vehicla, just, tax differred, not tax free. I love TFSA

#59 Inglorious Investor on 01.21.13 at 12:00 am

#40 Renting in Regina on 01.20.13 at 10:24 pm

“1. How do you put a TFSA in a self-directed trading account (or is it vice versa)?”

You open up a brokerage account with say, TD, Royal, National, etc. Within your brokerage account you can set up various sub-accounts (e.g. RRSP, TFSA, RESP, Cash, Margin). If you call any of the brokerages, they will be more than happy to assist you.

–––––––––––––––––

“2. Is self-directed the best option when you are still learning the difference between REITs and ETFs?”

Uhhh… no. Get a good advisor. I believe that even then your investments are still technically self directed (correct me if I’m wrong), though you can’t trade in your accounts. But most people will defer to their advisor’s judgement; otherwise what’s the point?

#60 Nostradamus Le Mad Vlad on 01.21.13 at 12:11 am

-
“This is a complete and utter waste of a tax shelter. But 70% own a house. Imagine that.” — But duzzent a house equal stability, security and always go up in price? That’s what TNL@TB said, and she’s always right!

Exc. post and a great reminder to take full advantage of all the opportunities that avail themselves here, which don’t include buying lottery tickets.
*
#63 Humpty Dumpty on 01.20.13 at 3:46 pm — Great link. Couple of things which stood out was that every couple of centuries, empires bite the dust. This goes with the cycle change, currently under way where the Caucasian Race is letting the Yellow / Red Races move into top spot, every 250 years or so.

Another part was the decline of the US$ since 1913, and other countries are now picking up on and moving several of their asset classes into new ones.

The global chess game going on at present is fascinating to be involved in, but to stand back and observe, or be detached from the everyday stuff of line, none of which we can do anything about. Cheers!
*
The Gift Not Garth’s column, UK energy giants; China – Japan turns Nikkei lower; All Carnage on the Slaughter Front ‘Tho the headline says it better; Gold Future collapse? Obomba’s New Economy “In fact, even some people who have earned PhD’s are either unemployed or pathetically under-employed, which is pretty sad for the world’s number one economic power.” 25 cents an hour This is why mfg. is going to Bangladesh and similar places; Cutting Military Pensions David Cameron, doing what all politicos do so well; Odepression Different POV; California Commits Suicide; Energy Independence? One person thinks otherwise; Warren Buffett “The debt is not a problem”;Middle Class in NYC requires US$80K / yr.

70 year old charity told to stop feeding hungry in Seattle; 4:40 clip “In May 2011, Belarus surprised its citizens by devaluing its currency by 50% overnight in an attempt to kickstart its economy, leading to swift and brutal hyperinflation. And while written narratives of the most recent episode of monetary collapse are one thing, nothing is quite as amusing, and grounding for those attempting to “value” money (such as Nobel prize winning economists writing out of their steel exoskeletal ivory towers), as watching a bag of cash be used to pay for seven boxes of beer. And nothing is quite a cathartic as spending several hours trying to count said cash – cash backed by the “full faith and credit” of the Belarus central bank…”.
*
Rallies against gun control “The corporate media is obsessed with Obama’s inauguration tomorrow, which is kinda weird because Obama is actually taking the oath of office today in a private ceremony at the White House, and the former Presidents Bush are not planning to be in DC tomorrow for the parade. It’s almost as if they expect a “crazed lone gun nut with ties to Iran, Russia, and Al Qaeda” (Reg Trademark CIA) to take a shot at someone important with an assault rifle!”; wrh.com and RFID Chips in Guns means Big Brother could remotely disable them plus Civilian Disarmament leads to enslavement; 15:22 clip Re: Sandy Hook and US coup; China buying Russian fighter jets; 0:28 clip ‘Quake warning for California; Brain Fog Not necessarily a pea souper, but there are causes; ‘Net Censorship and FBook Happening quietly. but The Pirate Box and ‘net freedom; 28:30 doc. Toxic Lights, aka The Dark Side and New Light Bulbs info.; Crocodile Dundee aged three.

#61 Cici on 01.21.13 at 12:26 am

#1 TurnerNation

Don’t you usually contribute really interesting and informative posts?
Quit Dr. Wane-bashing. He’s actually got something quite important to say when he’s not wasting his breath on annoying Furst posts. Keep the faith and help him get over his “furstration.”

#62 Inglorious Investor on 01.21.13 at 12:28 am

#52 Engineer on 01.20.13 at 11:17 pm

RESPs are good, but perhaps not as great as many think.

You get the CESG (Weee! Free money!!) But keep in mind that the CESG money and any gains realized in the RESP are taxable as income by the beneficiary (your scholarly son or daughter). Hopefully, their exemptions will outweigh their tax, as they will likely be basically indigent (like so many American university grads today).

Also, keep in mind that if your child decides not to go to school, you will have to pay back the CESG money, even if it was lost in bad investments. Yikes.

#63 Cici on 01.21.13 at 12:36 am

OH, I meant Dr. Wayne. Sorry for the missing Y.

And thanks for this post Garth.
The best and only way to appeal to the common sense of masses is through pure greed, and I see this as a productive variety of a theme.
Yeah, yeah TFSA!

#64 Dr. WAYNE on 01.21.13 at 12:39 am

43 Mark on 01.20.13 at 10:39 pm

Dr. Wayne, you rock.

========================

Ya … I know … but Buddy Holly is ‘my man’ !!!!

#65 Dr. WAYNE on 01.21.13 at 12:41 am

#63 Cici on 01.21.13 at 12:36 am

OH, I meant Dr. Wayne. Sorry for the missing Y.

====================

Holy Shit … I don’t think I can cope with this politeness …

#66 Tony on 01.21.13 at 12:42 am

Unless you can run five and a half G’s into five and a half million what good is it? People will still take all their money and park it offshore to avoid taxation.

#67 St. Harper (Canuck PM) on 01.21.13 at 12:57 am

Smoking Man=Old man=Dr Wanker(+ fans)..

Trust me !!!(or be audited 4 ever

PS: Garth ..quit ducking and doing the “rope- a-dope”…..or we’ll tax you at minimum on the middleweight class.

#68 Cici on 01.21.13 at 1:03 am

#12 Old Man

That was very nice of you. Especially since the poor girl obviously lost it, and boy can I understand. People drive like absolute assholes, especially Boomers in SUVs. They are seriously worse than teenage boys.
She had probably been cut off several times earlier in the day and nearly killed by impatient bastards, before you took her parking spot, which set off the final straw. It all comes down to ethics: don’t steal and people (hopefully) won’t try to kill you :-)

Personally, I have to stop driving so much. It’s an exercise in aggression, futility and frustration.

OK, peace out. I’ve really got to go and open a TFSA. The time has come to contribute.

#69 Mic D'angelo on 01.21.13 at 1:08 am

I appreciate that the Conservative Harper government increased the annual maximum TFSA contribution by 10% for the last 4 years from $5,000 to $5,500. The $5,500 is still not high enough regarding interest rates and longer term bond yields. In 2009, longer term provincial strip bonds 15 years + were yielding about 4.99% to 5.18% depending on the province. Also, the highest 5 year GIC’s were paying 3.50% to 3.75%. If you take either of the 2 highest yields of today 3.50% to 3.70% for provincial strip bonds 15 years or longer and 2.50% to 2.85% for highest 5 year GIC’s the $5,500 is not correct. The decline in interest rates in either example from 2009 to today is about a total of 28%. Also, you must account for inflation and the TFSA maximum annual contribution for 2013 should be $6,800 and not $5,500. I calculated this by the total C.P.I. inflation over 4 years which is about 8% and the total decline in interest rates which is about 28% so $5,000*1.36=$6,800. This is not compensating for the full loss as compound interest makes this total loss much worse but it is better than what we currently have at the present 2013 $5,500 maximum annual TFSA contribution. The difference of $1,300 for each spouse may not seem like much.A couple started contributing at 30 years old and stopped at 67 the new old age security pension qualification age the TFSA’s would be worth $199,247.87 more for both spouses. This would mean an extra $7,372.17 in annual income using a 3.70% longer term provincial bond yield.

#70 Hoof-Hearted on 01.21.13 at 1:10 am

OK Doc Wanker….

Nice the family was allowed access to a computer on their day pass…

Think of the future..like the “Iditarod in your mind”…..you can stare at a bunch of a$$holes for a whole week ……as you stand there yelling “Mu$h” while on your laptop and posting on this blog.

PS can the sled hold 15 ukeleles ?

#71 Aaron- Melbourne on 01.21.13 at 1:24 am

From Oz (too funny) compare and contrast:

http://www.theage.com.au/business/property/australian-housing-severely-unaffordable-20130121-2d2gk.html

with

http://theage.domain.com.au/real-estate-news/economist-tears-roof-off-affordability-study-20130121-2d2e4.html

**********
However, the Australian economist Dr Andrew Wilson criticised the Demographia International Housing Affordability Survey, saying that comparing the Australian housing market to others was like making comparisons with Jupiter.

But Dr Wilson, the senior economist at the Fairfax-owned Australian Property Monitors, questioned the validity of the survey by making world comparisons. “You may as well be comparing the Australian housing market to the one on Jupiter, because they are different animals,” he said.

He issued a “please explain” challenge to the authors of the survey.

“If Sydney is so unaffordable, why do we have so much activity in the housing market?

“Why are prices rising?”

Dr Wilson said that unlike the US, Australia had some of the most stringent banking controls in the world.

“If you can’t afford it, the banks won’t lend you the money,” he added.

#72 The gift — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate « The Affluent Boomer™ on 01.21.13 at 1:25 am

[…] via The gift — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

#73 gaspr on 01.21.13 at 1:27 am

Garth
You say in the last paragraph, “Besides, you must have a powerful reason to take after-tax money and make it taxable again by stuffing it in an RRSP.” This makes it sound like you are paying tax on the same money twice?? I would call RRSP contributions pre-tax money.
Please enlighten…

#74 Aaron- Melbourne on 01.21.13 at 1:41 am

wish we had TFSA in Oz :(

however I do top up my superannuation with pre-tax contributions. Minimum employer contributions (by virtue of the Superannuation guarantee levy) is a mere 9%. I make the equivalent pre-tax contribution to top up to an effective 12%. Thats a paltry $50 I chuck in every week – about the cost of a slab (24 carton) of decent beer.

I’d like to have an alternative where the extra I put in can be drawn upon for various life events instead of locked in.

An Aussie TFSA would have been a much smarter reform than our ridiculous “First Home Saver Accounts”.

#75 The Man From Nantucket on 01.21.13 at 1:49 am

#20 Randy on 01.20.13 at 8:33 pm
If you live in Ontario………Your future in in Alberta…

We’ll see if you’re still saying this when a few years go by, the necessary pipelines still aren’t built, and the US is self sufficient and maybe even exporting.

My future might be in Alberta, but it’s not happening until the next trough has flat-bottomed.

Happy Monday!

#76 Jane24 on 01.21.13 at 1:57 am

We have had these tax-free accounts in the UK for many years they are called ISAs – Individual Savings Accounts and they hold cash or shares. Tax free because they are made up of pre-taxed income of course but yes you can take money in or out as long as you invest no more than about £15,000 Cdn per year per adult.

Over the last few years I have cashed in my Canadian RSSPs and paid the 25% withholding tax there and invested the same funds in my ISAs in shares so I have more control over the funds.

The English ISAs make me more comfortable as they are not registered, your bank or broker controls how much goes in each year, and I do think that in the future Western govts will be so desperate for money, that any known to govt asset will in time become either taxable or not so attractive.

Garth you are already right about stocks in 2013, there is a wall of money moving into the market.

#77 Dr. WAYNE on 01.21.13 at 2:07 am

#67 St. Harper (Canuck PM) on 01.21.13 at 12:57 am

Smoking Man=Old man=Dr Wanker(+ fans)..

Trust me !!!

==========================

I take extreme exception to the gross insinuation
that my brilliance (excepting that of the venerable Mr. Turner, of course) could, even in the slightest quantity, be metamorphosed into the writings of those in costume and composing words of wit/support ostensibly attributed to me.

#78 nocte_volens on 01.21.13 at 2:54 am

I don’t recall who said it 5 years ago, but I agree: “If you are not smart enough to open a TFSA, then you don’t deserve to have money.”

#79 Buy? Curious? on 01.21.13 at 3:09 am

Garth, this is just another example as to how Canadians are so stupid. The other is how hockey fans are still paying top dollar to see games. If they really cared about hockey, they’d stop going to NHL games for a year.

Just on a side note, yesterday, to my amazement, I had the opportunity to write “First” in the comment section. Sure, it would have been funny to me but it would have brought down the intellectual bar a few notches. I decided not to do it. Can people stop posting “First”? Now if you’ll excuse me, I have touch up the colours on my rainbow afro wig.

http://www.youtube.com/watch?v=6DuFiCx88sg&feature=player_embedded#!

#80 ApplePi on 01.21.13 at 3:18 am

@#59 inglorious investor:

“RRSP
Net amount invested: $1,000
Total value after ten years: $2,000
After tax value: $1,400

TFSA
Net amount invested: $700
Total value after ten years: $1,400
After tax value: $1,400″

You’re forgetting a couple if important facts.
1- Most will spend the rrsp rebate rather than reinvest it.

2- you can’t guarantee that personal taxes will still be 30% when you retire. Especially when you consider the burden that the baby boomers wil create on the system… Taxes, especially personal taxes will go up. It is too big a carrot for the government. A massive number of retirees with lots of money in RRSPs. The government would love to get their hands on that money and far be it from the next generation ho arw running the show and who have been pooched by the baby boomers excesses to prevent it from happening.

#81 Longterm on 01.21.13 at 4:11 am

I’ve been out of Canada for 10 years but returning permanently in April. Does anyone know whether I’ll be eligible for all of the TFSA contribution room going back to its creation once I’m a resident again, or only the $5500 per year going forward? And will I be eligible for the 2013 contribution? Cheers

#82 Devore on 01.21.13 at 4:48 am

#40 Renting in Regina

1. How do you put a TFSA in a self-directed trading account (or is it vice versa)?

When you open a trading account, it can be flagged as either an RRSP, TFSA or unregistered account. The broker will do all the paperwork.

This is where I struggle. I have a TFSA. I contribute to it every month. But, it is money that sits there.

But you have a problem. If you take money out of here and put into your self-directed TFSA, it will count as a contribution, and if it puts you over the limit you will pay a penalty. You will have to wait until year end (and hopefully you at least get SOME interest during this time), take everything out, then put it into the self-directed account in the new year (the withdrawal is added to your contribution room next calendar year).

#83 jjpetes on 01.21.13 at 5:35 am

Garth what’s your take on investing in master limited partnerships for dividend yield?

As opposed to real companies that earn discernible profits, are closely regulated, have constant liquidity and pay escalating returns? What do you think? — Garth

#84 detalumis on 01.21.13 at 6:10 am

Um can you say lies, damn lies and statistics one more time? Do you know what the median earned income is in this country? It ain’t oh 140K or 120K like everybody on this blog seems to make, it hovers at less than 30K and hasn’t budged in what, 25 years now? That’s why only 4 in 10 have put money into a TFSA. Comparing home ownership is neither here nor there, you include a huge whack of seniors and people who purchased their homes 25 and 30 years ago.

I also never would make any investments based on current tax law. Anybody who thinks that TFSAs will NEVER EVER be considered as income EVER for clawbacks or GIS or other senior goodies is a fool, they already are included as assets for welfare and when the political time is right they certainly will be for seniors.

#85 BillyBob on 01.21.13 at 8:31 am

#82 Longterm

I am in the same position, returning to Canada after 7 years away, would like the answer to the same question. Had a look around, but the info seems to (naturally) cater to residents.

#86 Devore on 01.21.13 at 8:40 am

#82 Longterm

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

#87 Nukester99 on 01.21.13 at 8:46 am

So people in Saskatchewan “feel” wealthy because their house prices are much higher. A 23 year old owning a Audi A4? Wow, I guess there will be many used cars for sale soon.

http://www.thestar.com/news/canada/article/1317618–think-saskatchewan-s-full-of-beat-up-pickup-trucks-think-again

#88 Devore on 01.21.13 at 8:48 am

#85 detalumis

I also never would make any investments based on current tax law. Anybody who thinks that TFSAs will NEVER EVER be considered as income EVER for clawbacks or GIS or other senior goodies is a fool

So what? Withdraw your money and close your account before that happens. Meanwhile, you have a vehicle today for tax-free growth. You’re a fool if you don’t use it.

#89 Victor V on 01.21.13 at 8:53 am

http://ca.news.yahoo.com/the-new-underclass-213043737.html

Melanie Cullins is no pipe dreamer. She chose a vocation that, by unanimous opinion, represented a path to steady employment—teaching English as a second language to the thousands of immigrants pouring into B.C., a good many of whom, the experts predicted, would be making their way to Victoria, where she grew up and wished to make a home. That was back in the early 2000s, when opportunities for the young and industrious appeared unlimited. A rewarding career seemed within reach for all.

Cullins’s degree in applied linguistics was the gold standard of ESL qualifications. But she graduated in the thick of the 2008 financial meltdown, and the entry-level position she imagined would launch her career never materialized. Governments cut back on language transition programs. Resumés piled up in recruitment offices. Her calls to program directors went unanswered. “For me, that was a huge blow,” she says. “I had almost perfect performance reviews from my practicums, but I couldn’t even get an interview. You start to wonder: what’s wrong with me?”

She took temporary work to support herself—waitressing, schlepping lattés, baking cupcakes in a family friend’s café. She volunteered in an ESL classroom in order to beef up her C.V. Yet the weeks slipped by with nary a callback, and when she got pregnant 2½ years ago, her dreams took a back seat to necessity. She took another stab at finding work in her field when her son Liam was old enough for day care. But by then, incredibly, the job market had worsened. Now, with her husband, Benjamin, doing contract work for the B.C. forest ministry, the 28-year-old wonders whether she’ll ever attain a comfortable, middle-class life—a house, college funds for the kids, money left over for retirement. “I have no pension plan. My husband has no pension or benefit plan,” she says. “We’re renters in one of the country’s most expensive cities, and we’d like to someday own a home. Once you have kids, these things really start to worry you. You’re always thinking, ‘Will I ever get ahead?’”

#90 Dr. WAYNE on 01.21.13 at 8:56 am

#84 jjpetes on 01.21.13 at 5:35 am

Garth what’s your take on investing in master limited partnerships for dividend yield?

As opposed to real companies that earn discernible profits, are closely regulated, have constant liquidity and pay escalating returns? What do you think? — Garth

==========================

Now how could stuffy parliamentarians cope with such razor wit, couching truth and objectivity … they couldn’t … ergo … we, here, enjoy this man.

#91 };-) aka Devil's Advocate on 01.21.13 at 8:56 am

BANNED

#92 EIT on 01.21.13 at 9:18 am

#93 };-) aka Devil’s Advocate on 01.21.13 at 8:56 am
BANNED

I was gonna write something but BAHAHAHAHA

#93 confessions of a real estate bear on 01.21.13 at 9:24 am

In responce to 44 I absolutely agree with you. We are only witnessing the denial from people who do not realize that the world has changed. The last time the world was forced to delever the single greatest investment was cash because over time assets dropped in price faster. You had to be patient nad you will this time as well. Central banks are powerfull, but not more so than math. Remember compounding intetrest requires compounding growth on the other side of the equation. Do you relly think growth can forever compound.

#94 TurnerNation on 01.21.13 at 9:29 am

Worth mentioning, Hairspray from Kelowna replied to the froth against him a few blogs back. The final post,

Doesn’t add up. 30-day suspension for what he suggests is the realty equivalant of a parking violation?
#nothingtohide?

#notimpressed

#95 };-) aka Devil's Advocate on 01.21.13 at 9:29 am

BANNED

#96 Dr. WAYNE on 01.21.13 at 9:40 am

By the way … the dog photo … looks like my dog, who died 48 years ago … still miss him …

#97 The Prophet Elijah on 01.21.13 at 9:49 am

I’ve been able to triple my TFSA playing the gold sector. The time to do transfer in kinds of beat up stocks was in 2009, then watch the exponential growth in the TFSA. After that you buy dividened paying stocks and that’s all tax free. Gotta love it!

#98 Rand an on 01.21.13 at 10:17 am

Long term and Billybob

Why in god’s name would you go back?
I just left for South America and am loving it
Couldn’t wait to get get out of the rainy sh@t hole

#99 Toronto_CA on 01.21.13 at 10:49 am

#82 Longterm on 01.21.13 at 4:11 am
and
#87 BillyBob on 01.21.13 at 8:31 am

“no TFSA contribution room will accrue for any year throughout which you are a non-resident of Canada.”

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

Hope that helps. The tax advice bill is in the mail ;-)

#100 BPOE's BrainFart on 01.21.13 at 10:50 am

alas Devils Advocate hath gone the way of BPOE ………

#101 Gunboat denier on 01.21.13 at 11:08 am

89 Nukester – an 06 A4 can be had for about $20k. She has a decent job but does a lot of driving. Proportionately probably cheaper than my car in 1980, and no f350.

#102 Daisy Mae on 01.21.13 at 11:14 am

#72The gift — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate « The Affluent Boomer™ on 01.21.13 at 1:25 am
[…] via The gift — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

**********************

What is this supposed to mean? Often wondered….

#103 };-) aka Devil's Advocate on 01.21.13 at 11:17 am

BANNED

#104 gladiator on 01.21.13 at 11:32 am

Garth, please enlighten:

1. Can I day trade in the TFSA?
2. Can I trade options in the TFSA?
3. Is there a minimum holding period for securities held in a TFSA?

Thank you in advance.

#105 Doug in London on 01.21.13 at 11:50 am

Only four in ten people have a TFSA. Wow, that low? With the bitching and bellyaching I often hear about high taxes, I thought all Canadians would have the maximum allowable amount in this great gift from the benevolent government. Toronto_CA is right, it should be renamed a Tax Free Investment Account.

#106 claudius emperor on 01.21.13 at 12:06 pm

#59 Inglorious Investor
———————–

Of course you can trade from an TFSA/RRSP account.
Just open a trading account with a bank or a brokerage.
Be careful when buyng US stocks from your TFSA as there are US tax implications. TFSA is tax free for canadian stocks, but not an US recognized plan.

#107 };-) aka Devil's Advocate on 01.21.13 at 12:27 pm

BANNED

#108 Holy Crap Where the Tylenol on 01.21.13 at 12:37 pm

RIM time..What to to do? I am a lone Warrior on the Edge of Time with a fist full of RIM stock in my hand and a lance in the other.

We are standing on the edge
On the edge of time
We are standing on the edge
On the edge of time
We are the warriors at the edge of time
We walk hand in hand with horror
We ride side by side with death
We are the warriors at the end of time
Over poisoned crystal deserts
Where the ruined towers shout
We march towards our dying scarlet sun
Death!
Death to life!
Death!
Death to time!
Wow this is way too heavy, I am going back to bed, with my RIM stock.

http://www.google.ca/finance?client=ob&q=TSE:RIM

#109 Inglorious Investor on 01.21.13 at 12:40 pm

#108 claudius emperor on 01.21.13 at 12:06 pm

“Of course you can trade from an TFSA/RRSP account.”

I was talking about brokerage accounts managed for you by an advisor.

#110 Randis on 01.21.13 at 12:46 pm

Hello all its been a long while since my last comment … Anyhow I always wanted to ask but never asked: What’s TNL@TB stands for again? I know who Garth is referring to but I never get the long form of this acroynm … Thanks in advnace if someone can share.

#111 Adam on 01.21.13 at 12:54 pm

#108

TFSA is tax free for canadian stocks, but not an US recognized plan.

===============

Just to clarify, you have to pay withholding tax on dividends from shares listed on a US exchange held within a TFSA (not in an RRSP, though). If you were just purchasing growth stocks with no dividends and you sold them for a profit there would be no tax on capital gains.

#112 OkanaganInvestor on 01.21.13 at 12:55 pm

#60 Nostradamus Le Mad Vlad on 01.21.13 at 12:11 am

4:40 clip “In May 2011, Belarus surprised its citizens by devaluing its currency by 50% overnight…
_____________________________________________

Great clip Nostra!

Feel sorry for the cashier and wonder what the other customers were paying with.

#113 EIT on 01.21.13 at 12:59 pm

#97 };-) aka Devil’s Advocate on 01.21.13 at 9:29 am
BANNED

#105 };-) aka Devil’s Advocate on 01.21.13 at 11:17 am
BANNED

BAHAHAHAHAHAHAHAHAHAHAHAHA

#114 AK on 01.21.13 at 1:06 pm

#108 claudius emperor on 01.21.13 at 12:06 pm

“Be careful when buyng US stocks from your TFSA as there are US tax implications. TFSA is tax free for canadian stocks, but not an US recognized plan.”

Besides the standard 15% US withholding tax on Dividend payments, what other implications are you referring to??

#115 Inglorious Investor on 01.21.13 at 1:07 pm

#81 ApplePi on 01.21.13 at 3:18 am

“You’re forgetting a couple if important facts.
1- Most will spend the rrsp rebate rather than reinvest it.”

Perhaps, but that has nothing to due with RORs. Also, one could argue that the tax-free accessibility of TFSAs makes them more liquid and susceptible to withdrawals. But again, that’s not the point.

————————–

“2- you can’t guarantee that personal taxes will still be 30% when you retire.”

I agree, and in fact I also anticipate that income tax rates will be higher in the future. But one just can’t know what those numbers will be. So rather than guess, I just assumed a constant tax burden of 30%.

That said, I could argue that, based on a constant 30% tax burden, and assuming that most workers will fall into lower tax brackets upon retirement, that in fact a constant 30% income tax burden has a future tax rate increase already built in. But as I said, it was a simple example meant to compare RORs under the same conditions.

#116 Adam on 01.21.13 at 1:09 pm

#69

I calculated this by the total C.P.I. inflation over 4 years which is about 8%….

The government states very clearly that CPI is exactly (and solely) how they calculate contribution room for TFSA. It starts at $5,000 a year (4 years ago) and it goes up in $500 increments with CPI. If CPI was 2% the first year, then that means contribution room would be $5,100 – this rounds down to keep the rate the same at $500.

If CPI was 2% the second year, then $5,100 (from 2% CPI the first year) + 2%*$5,100 = $5,202 – this still rounds down to $5,000.

Now in the 3rd year is CPI is 2% then $5,202+2%*$5,202 = $5,306 – this rounds up to the nearest $500 which means the contribution room then changes to $5,500 a year.

This was explained very clearly when the TFSA was introduced. You obviously weren’t paying attention.

#117 Mister Obvious on 01.21.13 at 1:18 pm

#112 Randis

See comment #2 in the link below for your answer, as well as other obscure terms found on this blog:

http://www.greaterfool.ca/2012/04/16/spring-4/

#118 BPOE's BrainFart on 01.21.13 at 1:41 pm

Devil’s Advocate,

You just dont seem to “get it” do you?

“banned” means “go away…..forever!”

#119 Dr. WAYNE on 01.21.13 at 1:42 pm

#115 EIT on 01.21.13 at 12:59 pm

#97 };-) aka Devil’s Advocate on 01.21.13 at 9:29 am
BANNED

#105 };-) aka Devil’s Advocate on 01.21.13 at 11:17 am
BANNED

BAHAHAHAHAHAHAHAHAHAHAHAHA

===============================

Devil’s Advocate is pissed. He figured the venerable one was joking … NOT !!!

Love the laugh …

#120 claudius emperor on 01.21.13 at 1:44 pm

I had in mind exactly that: Dividend US withholding tax
It is 15 % currently, this would change/increase.
It is still a significant percentage to consider.

You could get additional tax on some US index funds.

Also for some comodity ETFs there are some additonal year end taxes.

None of these apply to an RRSP account.

#121 Inglorious Investor on 01.21.13 at 1:50 pm

#81 ApplePi on 01.21.13 at 3:18 am

Upon reflection, I think I may have misunderstood your comment, to which I responded in comment 117.

When you put money into an RRSP, there is no “rebate” to re-invest. All you are doing is investing pre-tax dollars. So if you invest $1000 of your income into an RRSP, the entire $1000 gets invested. If you invest $1000 of income into a TFSA, it’s actually a net amount of $700 (assuming 30% for taxes). If you want to invest an actual $1000 in a TFSA, that actually requires about $1,429 in income.

#122 Gregor Samsa on 01.21.13 at 1:52 pm

#44 Good authority has the best post here.

This quote from a business associate haunts me: “If I had just put all my money into the bank and left it there, I would be a millionaire and retired by now.” (referring to losses he sustained during the various crashes of the past 12 years).

The casino always wins.

#123 EIT on 01.21.13 at 2:15 pm

#121 Dr. WAYNE on 01.21.13 at 1:42 pm

I’m here to help….. kick someone while they’re down.

#124 coastal on 01.21.13 at 2:51 pm

Thanks for banning that DA idiot. Same goes for the other one too. When they slag Garth as being wrong for 5 years, 10 years, post vids with wrong numbers, etc then turn around and talk it up about a house being down 10% in two years in a nice neighborhood, it goes to show you how pathetically hypocritical these agents are getting. As I said before, professionalism and/or class is a dying trait these days in the real estate bizz.

#125 Bobby on 01.21.13 at 3:02 pm

For # 62 Inglorious Investor,

My Family plan RESP has worked extremely well for me. Only invested the amount that would give me the full grant. Why turn down a 20% return. Put that into High Yield Bonds and dividend paying stocks, it has all done very well.

Sorry missed your point. You’re not one of those so called fund salesmen cum financial advisers are you?

#126 Adam on 01.21.13 at 3:05 pm

#123

Yes, you’re right. But you didn’t go far enough. The whole $1000 gets invested into the RRSP, but in addition to paying taxes on that $1000 later, you’ll also pay taxes on whatever that $1000 earned as well.

What would you rather do, pay a little in tax now (TFSA) or pay a lot in tax later (RRSP)?

#127 kreditanstalt on 01.21.13 at 3:15 pm

Re: TFSAs, three qualms (none of which are meant to imply that real estate or bank accounts are better – they aren’t):

One, you need an INCOME to make any use of one – many people have no income and most of the others live paycheck to paycheck anyway.

Secondly, it is always dangerous to let a government know how much money you have and where it is.

Thirdly, with the amount of money normal people have to save, even TFSA-boosted returns won’t keep you ahead of price inflation in food, energy, tax and education.

#128 DM in C on 01.21.13 at 3:22 pm

};-) aka Devil’s Advocate on 01.21.13 at 8:56 am

BANNED

^^^^^ Great thing to see on a Monday morning.

Garth, is that a forever ban? Or a six month probation like last time?

#129 DM in C on 01.21.13 at 3:26 pm

NVM my question Mr. Turner, I found the original…. [dances a jig]

I warned you several times. I suspended you once. Now you are gone. — Garth

#130 claudius emperor on 01.21.13 at 3:27 pm

I think Comex just shut down.

This could be the story of a lifetime….

#131 Westcdn on 01.21.13 at 3:40 pm

Do you remember this news article? Ontario is not California. (Article: canadafreepress ). True in that Ontario’s economic fundamentals are worse. Keep in mind the Feds are running a deficit too. Ontario and Quebec are running large deficits and Alberta is about to join them. Higher taxes are the usual answer to keep spending going but eventually that drives out productive resources rather than attracting them. The pie gets smaller. This cannot be good for a retirement based solely on real estate prices and government payments.
There is no question that a TFSA is a better savings vehicle than an RRSP for a young person. My strategic purpose of a RRSP was to defer income from high marginal tax rates and withdraw it later at a lower marginal rate. It does not make sense to contribute to a RRSP at low marginal tax rates and withdraw it later at higher marginal tax rates. A TFSA can be used to accumulate capital to make RRSP contributions when you have high income years, preferably when it appears your income is going to be much less in retirement.
I saw a picture of Harper meeting Obama last weekend. I wonder if Harper mentioned Canada has been a faithful ally in police actions and could use a pipeline. I googled “corrupt real estate agents” and found this Australian article. It is a laundry list of petty criminal tricks played by unethical agents. Question: Are our elected government representatives acting like unethical agents?

#132 Bloodcross on 01.21.13 at 3:59 pm

@gaspr: RRSP contribution are effectively pre-tax (gross) money because whatever tax you paid on it will be refunded in your tax return because of the associated deduction.

There’s a weak case to be made about interests on that money that you lent the government over the year, but that’s easily resolved by contributing directly each pay, getting the deduction on the spot.

And a agree with you that Garth’s comment makes it sound like you are getting taxed twice on rrsp investment, which is false and misleading.

#133 Renter's Revenge on 01.21.13 at 4:05 pm

#127 Adam:

It depends on your marginal tax rates now and “later” (whenever you take the money out). If they are the same, then it makes no difference whether you use a TFSA or RRSP. For example:

$1000 gross income is contributed to an RRSP, doubles in value after 10 years (invested in a Garth-approved portfolio, of course) and is withdrawn at a 30% marginal tax rate. End result: $1400.

vs

$1000 gross income is taxed at 30%, $700 is contributed to a TFSA, doubles in value and is withdrawn tax-free. End result: $1400.

Garth’s premise on his blog is that your marginal tax rates will likely be higher when you retire because of tax bracket creep, inflation, income-tested government benefit clawbacks, etc. In which case, the TFSA will be the winner. Which is why Garth invented the TFSA.

All hail the mighty and benevolent Garth!

#134 Rand man on 01.21.13 at 4:11 pm

Claudius …..

Comex? En serio?

Where do you get this from?

#135 };-) aka Devil's Advocate on 01.21.13 at 4:12 pm

#130DM in C on 01.21.13 at 3:22 pm
};-) aka Devil’s Advocate on 01.21.13 at 8:56 am

BANNED

#136 espressobob on 01.21.13 at 4:15 pm

#110 Holy Crap Where the tylenol

Hawkwind? That was a great album. RIM stock? You must have a cast iron stomach? Good luck with that.

#137 all_we_need_is_mortgage on 01.21.13 at 4:15 pm

That’s what I’ve got from my real estate agent in the email today:
“The number of houses that changed hands in the first two weeks of January was up 2.4 per cent and the average selling price was up 4 per cent compared to the same period a year ago, according to figures released Wednesday by the Toronto Real Estate Board.

The average price of homes sold in those first two weeks of 2013 was $459,728, according to TREB.

The condo sector was another story: Sales were down about 4.4 per cent — 5 per cent in the 905 regions compared to 4.2 per cent in Toronto — and prices sank by 3.3 per cent.

Semi-detached homes remained in highest demand, showing a 12.2 per cent increase in sales in the first two weeks of January over a year earlier and price increases across the GTA averaged 11.5 per cent, according to TREB.

Sales of detached homes in the GTA were up by almost 5 per cent overall, despite a 2 per cent decline in the City of Toronto. Prices jumped by an average 4.3 per cent.

Can these numbers be real?

#138 Bottoms_Up on 01.21.13 at 4:20 pm

#112 Randis on 01.21.13 at 12:46 pm
—————————————–
It’s that person that gives you the glossy-eyed stare at the bank and recites ‘mutual funds and GICs are your only investment choices’.

#139 Calgary Rip Off on 01.21.13 at 4:20 pm

My wife and I did this type of thing as soon as we could afford it, about 6 years ago.

And I own a mortgage, not a house. And I will probably continue to, until Im dead. Even when Im dead the house may not be paid for thanks to the oil rich AHOLES in Calgary that shot house prices thru the roof in 2005.

Your comments Garth are likely like beating a dead horse, given that 99% of the general populace is composed of people who cant put underwear on correctly.

Best to tune it all out and listent to heavy metal music.

#140 Bottoms_Up on 01.21.13 at 4:23 pm

#106 gladiator on 01.21.13 at 11:32 am
—————————————–
You can make your TFSA like any other trading account but it does have the restrictions on contribution room.

#141 claudius emperor on 01.21.13 at 4:26 pm

Or maybe just an early closure… Is today a holiday in US?

#142 Bottoms_Up on 01.21.13 at 4:30 pm

#80 Buy? Curious? on 01.21.13 at 3:09 am
——————————————–
Hockey and Canadian culture are synonymous and in the major cities there could be a 10-yr lockout and fans would still pack the arenas paying top dollar. The problem lies with the fringe teams where fan devotion is recent and tenuous.

#143 Deb on 01.21.13 at 4:44 pm

There are a couple of things concerning the TFSA that might be worth keeping in mind. First, the contribution limit of $5,500 is for a limited time only, as it applies just to the year 2013. The extra $500 was added on this year to account for inflation indexation covering the last five years. In 2014, the limit goes back to $5,000. God only knows how much money will be spent later this year to remind us of this.

Secondly, during the 2011 federal election campaign, the Big H, standing beside his loyal minstrel F, promised that TFSA contribution room would be doubled to $10,000 a year when the deficit is finally eliminated and a fresh Conservative majority government is elected. Sigh. When is this supposed to happen, if not 2015, then 2019, or 2023? Why bother promising what they know is a calculated mirage? I really wish the pair of them would hitch a ride on a slow boat to China.

#144 Inglorious Investor on 01.21.13 at 4:47 pm

#127 Bobby on 01.21.13 at 3:02 pm

I also have a family RESP for my own kids. Max out the CESG benefit every year. As I said in my comment: “Weee! Free Money!!” So, yeah, I agree with you.

I’m just pointing out that it’s not quite as generous as it seems. They call the CESG a ‘grant’, and yet they try to claw back some of it in taxes. And the beneficiary is taxed on the returns as well. The numbers depend on each individual’s circumstance. But I can tell you that my nephew had to pay so much in taxes that my brother regretted even investing in the RESP. So you have to know what you’re doing and plan accordingly.

And no, I’m not a fund salesperson or an advisor, though I’ve known a few who are really nice people.

#145 Foreign Withholding Tax on 01.21.13 at 5:05 pm

Hi Garth and fellow blog dawgs!

I am rebalancing my RRSP and needed some advice on owning ETF’s from US and International Emerging Markets

I am looking into buying iShare’s IVV ETF for US market and Vanguards VWO for emerging markets. These will be inside my RRSP.

Can anyone who knows about foreign withholding tax while inside the RRSP have any input on a better ETF or solution to owning US and International markets?

Thanks

#146 };-) aka Devil's Advocate on 01.21.13 at 5:09 pm

BANNED

#147 -=jwk=- on 01.21.13 at 5:13 pm

@30 “If the US has an equivalent to the TFSA In the Roth IRA, how come the TFSA is not recognized under the tax treaty the way that RRSPs are treated the same as 401ks? ”

Not equivalent. Roth has penalties for early wthdrawals (10% off the top, plust counts as income) of amounts that have bee nin there less than 5 years. also has floating cap based on shared pool (ira +roth) not like the flat amount TFSA has. It is much more flexbile, but also less tuned to guaranteed retirment fund than ROTH is. Get out now, you can buy CDN equivalent to many large USD EFTs (such as vangraud) now.

———-
#7, #18
#7 prairie gal

“I am happy to report that, after 7 years of relative frugality, I am debt-free! No more student loans for this prairie gal. Last year I ramped up my payments to $1200 a month; it was totally worth it! *happy dance*”

Actually, it is indeed good to be debt free, but that was not the best move, given that student loans are tax deductible. It would have been way better to make the minimum payment on your student loan, at the same time ramp-up investments in your balanced portfolio. Imagine how many ETF shares you could habe bought last year at much lower prices than today.
Regards
GLK
————-

Cant make those claims withouth knowing more. Some student loans interest is tax deduction. Mine was not, wife’s was but she has no income with a baby at home so a waste. The other thing to consider is cash flow – we were paying over $600 a month in student loans. 4.5% for me prime +2 for here. Paying it off was welcome relief. Was not the worth the 15% of 5% of 22,000 (that’s a measly $165 in taxes saved each year. big whoop.) we could have saved on taxes to keep paying $600 month…we got them all done by Dec 12 and are loving our debt free lifestyle now…congrats to Prairie girl it is a great feeling not having student loans!

#148 Holy Crap Wheres the Tylenol on 01.21.13 at 5:14 pm

#138 espressobob on 01.21.13 at 4:15 pm

#110 Holy Crap Where the tylenol

Hawkwind? That was a great album. RIM stock? You must have a cast iron stomach? Good luck with that.

I am doing the superman contrarian-investing thing! Our believes are that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. There is so much widespread pessimism about a stock can drive a price so low that it overstates the company’s risks. With all of that explained, the reality is I just happened to have some left over acid from my Hawkwind days and I must of taken it when I got on the RIM train. Please, please, please for Gods sakes someone throw the safety switch and stop this dam thing, the ride is hell!

#149 Inglorious Investor on 01.21.13 at 5:19 pm

#128 Adam on 01.21.13 at 3:05 pm

“Yes, you’re right. But you didn’t go far enough.”

The tax on the principle and the gains is implicitly taken into account. The numbers are the numbers. Is that the whole story re: RRSPs vs TFSAs? No. In investing, it never is, as there are always many factors the individual must consider when deciding what’s best for them.

————————————

“What would you rather do, pay a little in tax now (TFSA) or pay a lot in tax later (RRSP)?”

Yeah… the problem is, it’s not “a little tax now.” In my example, it’s a realistic 30%. If you start off 30% lower, you have to realize a gain of almost 43% to get back to even. That’s the weakness of the TFSA. Again, the numbers are the numbers. And it works out that way no matter what the investment horizon is.

If there’s something I’ve missed, please point it out, because I would like to know too.

#150 prairie gal on 01.21.13 at 5:32 pm

Deducting the interest on my student loan: BFD. Its not much of a tax incentive, considering its deducted using the lowest tax rate. I’d rather free up my capital.

Any actual helpful investment suggestions are welcome.

#151 Bargains everywhere on 01.21.13 at 5:44 pm

Re: Transferring a TFSA

I saw some misinformation earlier in the comments but can’t find where it was.

You can directly transfer your TFSA from one institution to another without having to withdraw anything if you use the proper transfer form.

See attached link from the CRA

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

Call the broker of your choice (I use Scotia iTrade) and tell them you want to set up a TFSA with them but you need to transfer your existing TFSA from another institution. They’ll know what to do and will be able to explain it to you. (That’s why they’re there). The issuer has to fill out the transfer paperwork on your behalf (you can’t do it yourself) but once complete, you’ll be in control of your own money.

Don’t delay, do it today! Give them a call!

You have to start somewhere and I have found the folks at the direct investing brokerage arm at the various banks to be just as friendly and helpful as TNL@TB. I’ve called them many times over the years with questions because I didn’t know much at the beginning and everyone was always very pleasant to deal with. It’s scary to make the first call, but not as scary as if you don’t start managing your own money prudently.

#152 dosouth on 01.21.13 at 5:49 pm

Maybe indirectly about real estate but we are looking to buy a small travel trailer as when people are in debt toys are usually the first to go. Hence we think we can work some better deals.

Enter Kijiji a province away. Trailer for $27k only used for 3 weeks last year great deal. In BC here we can buy it new for $22500.

Fellow replies, “Maybe you want to get that one, it’s a better deal.” – Sent from my iPhone.

iPhone will be next thing for sale – just keep our email in case you change your mind.

#153 Ron on 01.21.13 at 6:03 pm

I always like Tax Free Speculation Account myself.

Also nothing wrong with holding your US dividend payers in an RRSP. RRSP is a tax bomb when older but nothing wrong with holding some in there as a first time house down payment account not to mention a proper source of unemployment insurance.

As mentioned by other once you get close to retirement age pull the money out as fast as you can.

And of course if your biggest problem in life is having too much income you may not be optimized but I would hardly call that being screwed.

#154 Idle Forever! on 01.21.13 at 6:20 pm

#106 gladiator on 01.21.13 at 11:32 am
Garth, please enlighten:

1. Can I day trade in the TFSA?
2. Can I trade options in the TFSA?
3. Is there a minimum holding period for securities held in a TFSA?

Thank you in advance.

Dude, if you don’t know where to look for these answers other than asking a busy blog host, do yourself a favour and don’t day trade……especially with options!

#155 jess on 01.21.13 at 6:22 pm

Omni Potens

http://www.dailymail.co.uk/news/article-2265253/Andrew-Tinney-The-regime-fear-inside-Barclays–boss-lied-shredded-evidence.html

========

In 2010, 28 percent of participants reported having an outstanding loan against their retirement accounts, an all-time high, according to a survey of 110 large employers by Aon Hewitt, a human resources consultancy. And nearly 7 percent of employees took hardship withdrawals that year — roughly a 40 percent increase since the recession, while 42 percent of workers cashed out their plans rather than rolling them over when they changed jobs…

http://www.thedailycrux.com/Post/42106/New-study-reveals-a-disturbing-retirement-trend-in-America

A recent study by Boston College’s Center for
Retirement Research

found that the typical household approaching retirement age has an average of $120,000 in retirement savings, enough for roughly a $7,000-a-year annuity.

#156 Dr. WAYNE on 01.21.13 at 6:26 pm

#93 };-) aka Devil’s Advocate on 01.21.13 at 8:56 am

#97 };-) aka Devil’s Advocate on 01.21.13 at 9:29 am

105 };-) aka Devil’s Advocate on 01.21.13 at 11:17 am

#109 };-) aka Devil’s Advocate on 01.21.13 at 12:27 pm

#137 };-) aka Devil’s Advocate on 01.21.13 at 4:12 pm

#147 };-) aka Devil’s Advocate on 01.21.13 at 5:09 pm

*** ALL BANNED ***

===================================

Obviously in hopes of wearing the venerable one down.

This guy is almost as irritating as your truly.

#157 bill on 01.21.13 at 6:28 pm

Good morning all.
what a pleasant surprise .
I drag myself from my sickbed to glean the daily financial advice offered by our Very Generous Host Garth and lo the ‘evil one’s little helper’ has been banned once again.
Thank you Garth.
nemesis : saw the Guzzi v7 at the tradex bike show in abbotsford.
pictures do not do it Justice. cb 1100 was also a vision.
”Honda Frankie” opined it might make 110 hp.and rare [for a honda] . one to a dealership.
Garth are going to the Bike show when rolls into TO ?
lots of harley davidson to view for you and ‘big rider’….

#158 Smoking Man on 01.21.13 at 6:29 pm

As we wait for the Jan stats,they will show no soft landing but a slow accent.. As far as rim we enjoy the ride up, but Samsung owns the market be ready to reverse your bets… At moments notice

#159 hangfire on 01.21.13 at 6:30 pm

#28..Crowded…Perhaps this was the reason the Harpers have bailed out of stocks…

http://www.moneynews.com/Outbrain/interview-exposes-stocks-collapse/2012/09/20/id/456981?PROMO_CODE=109C0-1#v1&utm_source=taboola

a bit of bad publicity is really good for this type of hyper bad news.

Personally…I agree with the writer….but not to the extent that the world is going to end….it won’t….but he’s right when he points out that the rescue of the ’00 economy started a bad precedent that our regulators have fallen victim to.

The bottom line is that we simply have to stop the government from intervening….they aren’t any good at it…….the western economies need an enema….starting at square one……without any of the political baggage that has built up…including wiping clean the slate when it comes to legacy pensions and contracts of public workers…..the only way we will survive this is to set the clock back to hour one and begin again.

#160 Smoking Man on 01.21.13 at 6:32 pm

I wish I paid more attention to DA, why did he get banned?

#161 jess on 01.21.13 at 6:32 pm

dead fish assets

taking out of 401k to pay for underwater asset is one better to walk way/and or bankruptcy
http://globaleconomicanalysis.blogspot.ca/2013/01/over-25-of-401ks-tapped-to-pay-current.html

#162 DM in C on 01.21.13 at 6:33 pm

#137 };-) aka Devil’s Advocate on 01.21.13 at 4:12 pm

#130DM in C on 01.21.13 at 3:22 pm
};-) aka Devil’s Advocate on 01.21.13 at 8:56 am

BANNED

ha HA {tm/nelson} — any over/under bets on when DA finally gives up and just stops posting? Or tries to slink back in under a new moniker with a masked IP?

OH RE on topic news — the 2bdrm 3 year and counting empty former grow op in my community in (Calgary) Tuscany has finally been reduced in price. Now you can have it for the grand low price of only $367,900! And for that price you get AS IS WHERE IS and a letter from Alberta Health. MLS®: C3546655

#163 Andrewski on 01.21.13 at 6:38 pm

#144 Deb, I am just off the phone with TNL@CRA and “now that the TFSA limit has been set to $5,500 it will NOT go down.”

From CRA TFSA web site:

TFSA contribution room

Starting in 2009, TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older, have a valid Canadian social insurance number and are a resident of Canada.

The annual TFSA dollar limit for 2012 is $5,000.

The annual TFSA dollar limit for 2013 is $5,500.

You will accumulate TFSA contribution room for each year even if you do not file an income tax and benefit return or open a TFSA.

Investment income earned by, and/or changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years. For an example, see Example 1 – TFSA contribution room.

How your TFSA contribution room is determined

The $5,000 TFSA dollar limit is indexed based on the inflation rate. The indexed amount will be rounded to the nearest $500.

The TFSA contribution room is made up of:
•your TFSA dollar limit ($5,000 per year plus indexation, if applicable);
•any unused TFSA contribution room from the previous year; and
•any withdrawals made from the TFSA in the previous year, excluding qualifying transfers or specified distributions.

For an example, see Example 2 – TFSA contribution room.

An individual will not accumulate TFSA contribution room for any year during which the individual is a non-resident of Canada throughout the entire year.

The TFSA dollar limit is not prorated in the year an individual:
•turns 18 years old;
•dies; or
• becomes a resident or a non-resident of Canada.

Note
You can have more than one TFSA at any given time, but the total amount you contribute to all your TFSAs cannot be more than your available TFSA contribution room for that year. As the account holder, you are the only person who can contribute to your TFSA.

Cheers.

#164 OZY - What a SHAME is TSFA on 01.21.13 at 6:38 pm

What a SHAME is TSFA, why the gov. did not care to nationalize bank of canada and pay 5% on 5 y GICs or on GOV bonds instead? If they care so much about their people.

But no, they throw the regular financial-illerate kanatians to the SHARKS, what a shame. Well, once they get burned – maybe they learn to form new political parties and challenge the status-quo.

TSFA is just a kid toy for the millionares, either.

There is no one else in the middle to really enjoy, 10000 people on a 40 milion country?

A shame or a JOKE?

#165 OlderbutWiser on 01.21.13 at 6:39 pm

Blog dogs…it’s easy to open a self directed TFSA trading account. Allows you to trade just like an unregistered account. My TFSA also allows me to “swap” stock out of my unregistered account into my TFSA account. If you do this note that you will realize any accrued capital gains to date and any capital losses will not be allowed. I do it because it allows me to move USD (via USD stocks) without selling and repurchasing the currency.

A couple of tax points for you all:

1. Own US stocks in your RRSP. There is no withholding tax (15%) and therefore your income compounds faster.

2. Own non US/non Can stock in your TFSA as well as any Canadian REIT’s (put any overflow into your RRSP). I hold shares in UK companies in my TFSA (USD ADR’s) as there is no withholding tax on dividends paid by UK companies and they are taxed 100% if held in an unregistered plan.

3. Own Canadian stocks in your unregistered plan as these are subject to the lowest tax cost.

#166 OlderbutWiser on 01.21.13 at 6:52 pm

I wanted to give you guys a simple example of why Garth says that RRSP’s are not the “great benefit” that many think they are.

Assume you have $1,000 to invest and your tax rate when you finally take the money out is 40%. Also assume that your investment only realizes capital gains (no dividends are paid) and it has grown to $10,000.

If the money is in a TFSA – you receive $10,000

If the money is in a RRSP – you receive $6,000 ($10,000 less 40% for tax)

If the money is in a non-registered account – you receive $8,200 ($9,000 cap gain x 50% taxable less 40% for tax).

If all you earn are capital gains, then a RRSP is the WORST place to put your money. I have not accounted for the tax refund when you make your RRSP contribution, but if you are like most, your $400 or so refund never gets invested in the first place.

Everyone’s situation is different, all I am saying is NEVER underestimate the tax implications of your investing choices. RRSP’s turn tax advantaged earnings into 100% taxable income.

#167 Ogopogo on 01.21.13 at 7:07 pm

TFSA maxed out for 2013 for both myself and the wife. Debating whether to max out Spousal RRSP and invest the remainder in non-reg account or avoid RRSPs altogether, given the dividend tax credit applicable to investments in non-reg accounts.

A year ago the above paragraph would have meant essentially nothing to me. Which is why I sacrifice a goat to honour this blog every Shabbat.

Best news of the week: DA banned.

#168 Dan from Richmond Hill on 01.21.13 at 7:24 pm

One question: if, for example, I have iShares S&P U.S. Preferred Stock Index (PFF) ETF in my TFSA, do I have to pay any tax for dividends or capital gains? Thank you.

#169 Bobby on 01.21.13 at 7:26 pm

For #145 Inglorious Investor,

Yes, you are right. It is about getting all of the facts, and acting accordingly. I have done that.
Isn’t that been the thrust of what Garth has suggested in this pathetic blog.
Enough said.

#170 TurnerNation on 01.21.13 at 7:40 pm

Fraser Institute criticizes corporate welfare handouts

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3a*CURRENT-2033410&symbol=*CURRENT&region=C

2013-01-21 16:23 ET – Street Wire

by Mark Milke of the Fraser Institute
You might think the federal Conservatives, who added $125-billion to the federal debt since 2008 and will add another $21-billion by the end of March, might be shy about unnecessary expenditures. Alas, that is not the case, as it appears Prime Minister Stephen Harper and his colleagues would rather hand out cash to corporate Canada instead.
In just the first two weeks of January, the Prime Minister announced another $250-million for the Automotive Innovation Fund -— a federal subsidy program that provides the auto sector with taxpayer cash for research and development.
Then the Prime Minister announced $400-million for venture capital, mystifying those of us who thought it was fine to let private-sector angel investors risk their own cash, not that of taxpayers, on high-risk start-ups.
The recent taxpayer gifts are but the tip of the corporate welfare iceberg. Between 1994 and 2007, $202-billion was disbursed by all governments across Canada through subsidies to business.
Whenever politicians wish to shower taxpayer money around, predictable excuses are offered up in defence of crony capitalism.

#171 Adam on 01.21.13 at 7:53 pm

#150 Inglorious Investor

Yeah… the problem is, it’s not “a little tax now.”

__________________________

Comparatively, yes it is. The government is banking on you feeling less pain when you pull it out because each year, the percentage might not be as high….

But ultimately, if you contributed $250k over to get to a million dollars in an RRSP, you owe tax on a million dollars. In a TFSA, you owe(d and already paid) tax on $250k.

Let’s say you were in a 40% tax bracket when you were contributing to your TFSA and thusly paid $100k in taxes in your lifetime to contribute that $250k. Now let’s assume you’re in a 25% tax bracket in retirement when you’re pulling out of your RRSP you’ll pay $250k if you end up withdrawing the whole thing throughout your retirement.

Super simplified example – assumes you spent your tax refunds from your RRSP as well but, in the long term, you will actually spend more money in taxes withdrawing from your RRSP than you will have paid to contribute to your TFSA and that is because your capital gains are taxed. Like I said, the government is just banking on you feeling less pain because your rate will likely be lower and the larger tax hit will be felt over a longer period.

#172 Devore on 01.21.13 at 8:05 pm

#118 Adam

This was explained very clearly when the TFSA was introduced. You obviously weren’t paying attention.

But then it couldn’t be a conspiracy.

#173 TurnerNation on 01.21.13 at 8:18 pm

#89Nukester99

Just this weekend, in downtown Toronto, I was noticing maybe 1-in-10 cars were BMW or Audi marques.
People are richer than they think.

Ps. scientific research has proved that the A4 and BMW 3 series are ‘girls cars’.

#174 Nostradamus Le Mad Vlad on 01.21.13 at 8:21 pm

-
1:37 clip Tighten up your nuts, because 2:33 clip bollocks is a lovely word! (English slang for testicles).

Dear World,

If a bra is called an ‘over the shoulder boulder holder’, then what is men’s underwear called?

Sincerely, ‘Under the Butt Nut Hut’.
*
#114 OkanaganInvestor — Thanks. Clearly, from H and F’s lie about I.T.’s a few years ago, when the word is spoken to them, these bare-faced liars could also pull the same stunt here.

Just as Soros tells Obomba what to do and when to do it, TPTB could also use Canada (via the politicos) as an example of bad monetary policy.

As long as it furthers their Agenda (21) and increases their wealth, we will continue to be prawn sandwiches!

#110 Holy Crap Where the Tylenol — Hawkwind? Great band, still going ‘tho most of them are like Jerry Garcia (mostly decrepit or dead). Two faves are Brainstorm and Master of the Universe, which may explain the current mental state I’m in!
*
GS Nobody does it better than GS; Pay Day Timebomb Great reason to avoid loan sharks; Hurry Up and Die Already! You boomers are too expensive to keep anyway; Gold, gold and more gold “Or that one more nation demanding their gold back from the New York Fed and getting the stall treatment will trigger a gold run on the bank and send gold prices right through the roof.” wrh.com, More Reasons for more Gold; Azerbaijan Gold, JPM embraces offshore Yuan Isn’t the Yuan / Renmibi going to be a gold-backed currency soon? Plus Why Isn’t Gold Higher? The 64 quadrillion dollar question; France Stealing someone else’s gold to pay Germany back. Is hyperinflation roaring silently? One %ers criminal fraud; Switzerland Turning on the super rich.
*
Who were the white Jihadis? The answer is here; MLK’s family Share the civil trial case, and Escorted “Grammy-nominated rapper Lupe Fiasco was escorted off the stage of StartUp’s Rock On inauguration event while performing the antiwar song, “Words I Never Said.” and Utah’s Sheriffs warn Obummer over guns; Triggering Political Chaos If China – Japan go to war at the same time, life will be way more interesting, but here is the real reason why; Sea Drones Bombing deep sea divers? 5:57 clip Tacoma Narrows Bridge. GW? Avoid bridges! The Toilet’s (threat to be flushed) used as a tool to re-colonize Africa; Austerity Inauguration leans to a dash for (corporate) cash (I’m alright Jack, get your hands off my stack), and OMG Obomba Even Jesus would be pissed at this; Climate Change causes fruitcakes to sprout up in summer; Mexico Self defence squads fight drug gangs.

#175 TurnerNation on 01.21.13 at 8:25 pm

Attn. new blog dogs. The following usernames are still available; reserve yours today.

Devil’s Advocate (newly free).

(That is all. )

#176 TurnerNation on 01.21.13 at 8:27 pm

#106gladiator

– Yes.
– Only Covered Calls, long puts.
– No.

#177 TurnerNation on 01.21.13 at 8:33 pm

And of course long calls in a TFSA. Forgot.

#178 The Bear on 01.21.13 at 8:47 pm

Hey Garth,

I can’t believe I never knew that you could use a TFSA for investment vehicles.

If my parents do not have a TFSA, and I convince them to open one, does that mean they will have $51,000?

If I am currently 19 (turned this year) does this mean I can contribute 10,500 this year ( I dont have an account either)

#179 CrowdedElevatorfartz on 01.21.13 at 8:52 pm

@#147 Devils Advocate

Dude…. “banned” means “banned”

Perhaps you dont quite grasp the word so lets sign it to you ala
‘Wayne and Schuster”

‘ Adios, au Revoir, say Goodbye, say So Long, Its been nice, Now you’re gone!

bwahahahahahahahaahahahahahahaha

#180 DM in C on 01.21.13 at 8:59 pm

Must be a realtroll thing — that marko J guys keeps trying to post too. That 6 week course doesn’t include an aptitude for comprehension — only obfuscation.

#181 Bargains everywhere on 01.21.13 at 9:08 pm

#159 Smoking Man on 01.21.13 at 6:29 pm

‘A slow accent’.

You mean like a Southern drawl? : )

#182 AK on 01.21.13 at 9:27 pm

#169 Dan from Richmond Hill on 01.21.13 at 7:24 pm
“One question: if, for example, I have iShares S&P U.S. Preferred Stock Index (PFF) ETF in my TFSA, do I have to pay any tax for dividends or capital gains? Thank you.”

You will not be taxed on the dividends or any capital gains.

Howerver, there will be a 15% withholding tax by Uncle Sam each time the ETF pays you a dividend.

#183 Freebird on 01.21.13 at 9:30 pm

First funny (but not really) story…my partner was at a CIBC vestibule to use the ATM and the branch had a rep in the same area asking people if they were interested in mortgage advice/ information. To say my husband was annoyed is mild. As annoying as now being forced to talk with a CIBC (sales) rep when using the phone to activate a new VISA. I usually let them know from the start I’m not interested in any new products or services.

Anyway, my partner took Garth’s advice and is collecting his CPP early even though he is many years away from retirement…actually likes what he does. Now could someone explain the difference between a TFSA and a non-registered?

Thx

#184 An Cat Dubh on 01.21.13 at 9:43 pm

TFSA are cool. I still have to top up mine. I have a question I hope someone here can answer. My sister married an American and now lives in the USSA. Will any inheritance from my father given to her class as income there? Can she leave it in Canada to avoid US taxes? I know for US citizens it is, even though it shouldn’t be as the $$$ goes to the Rothschild controlled private Federal Reserve. Thank you.

#185 Inglorious Investor on 01.21.13 at 9:43 pm

#172 Adam on 01.21.13 at 7:53 pm

“But ultimately, if you contributed $250k over to get to a million dollars in an RRSP, you owe tax on a million dollars. In a TFSA, you owe(d and already paid) tax on $250k.”

What you are ignoring is the fact that in order to contribute $250K to your TFSA you had to earn about $418K (assuming you paid 40% in taxes). That’s 418K that you could have put into an RRSP, which would generate higher returns than $250K in a TFSA. So is the income you are basing your calculation on $250K or $418K? You can’t have it both ways.

I don’t know why you keep bringing up tax refunds. It’s simple: RRSP=pre-tax income; TFSA=taxed income. It’s really not more complicated than that; there is no “refund” to either factor in or ignore.

Again, just do the math. It shows that, all things being equal, the comparison is a wash. But if you go on the assumption that your taxes will be lower in retirement, that only strengthens the case for the RRSP.

#186 Dan from Richmond Hill on 01.21.13 at 9:48 pm

#183 AK on 01.21.13 at 9:27 pm

Thank you!

#187 Smoking Man on 01.21.13 at 9:51 pm

#182 Bargains everywhere on 01.21.13 at 9:08 pm

The art of never having to admit your wrong…..Language as a weapon.

#188 hangfire on 01.21.13 at 9:58 pm

27 billion dollars……..thats what the politically correct protesotrs and defenders of the status quo cost Canada EVERY YEAR.

http://www.bloomberg.com/news/2013-01-21/world-s-cheapest-oil-crimps-alberta-budget-with-price-gap.html

So…if you’re one of those wankers who continually wants more out of the government coffers…….why not decide to be part of the solution……and not be sucked in and misled by Middle Eastern and American lobby groups who subsidize the protests against Canadian industry…..why do you think the Saudi’s want to keep Canadian oil bottled up………????…OK did you have enough time? Screwing Canada with protest to support the poor people of Saudi, Bahrain and Doha…..is not exactly making you a good Canadian…..just a dupe of foroiegn interests.

Think of how many schools and hospitals could be built and staffed with 27 billion a year…….think about it next time you join the protest club.

#189 Bottoms_Up on 01.21.13 at 10:11 pm

#184 Freebird on 01.21.13 at 9:30 pm
——————————————–
non-registered is just that — it’s just a regular trading account, no strings attached. No tax breaks, no matching contributions, no limits on deposits etc. And it’s not registered with the government.

#190 JuliaS on 01.21.13 at 10:20 pm

#24 DT76

The government made no mistake. They invented the effing thing! It allows you to lend them money, interest free (as oppose to getting something in return). What you do get is the privilege of being able to follow another set of conditions and having a degree of access to your money. Just be current on your taxes and obey the daily increasing collection of laws, designed to fill federal funding gaps.

It’s like a music chairs game where the tune has just started playing and every financial adviser went: “Woo hoo! Music and plenty of places to rest! Come on, everyone, into the circle! Drag your family too. Got kids over 18? Bring’em! They’re legal.”

#191 *Naked Ape* on 01.21.13 at 10:39 pm

@ kreditanstalt on 01.21.13 at 3:15 pm

“Secondly, it is always dangerous to let a government know how much money you have and where it is.”

Thank you for a voice of reason in the wind! Who knows where this debacle will take us, but I’m convinced that at some point, our Masters will be looking for a little more green stuff to keep them appeased. I don’t relish the thought of stuffing it under the mattress, but it’s sure nagging at me…….

#192 InLimbo on 01.22.13 at 3:34 am

In my late 30s I have ~$110k in RRSP and no TFSA (opened the acct last week). I have never liked RRSP and it never bugged me to miss out on it until I was forced to contribute that entire amount last year due to tax circumstances (was pushed into highest tax bracket).

I will very likely (and voluntarily) be in the lowest tax bracket for 2013, maybe the same or next level over next couple of years, so hopefully I can move some $ out of RRSP and back within grasp over the next couple of years.

#193 Freebird on 01.22.13 at 10:27 am

@Bottoms_Up

Suspected as much. Thx for clarifying.

#194 Vamanos Pest on 01.22.13 at 4:52 pm

Garth, if a may, a respectful retort in 3 succinct points:

1. The question is not TFSA OR RRSP, it’s both. These tax strategies are not mutually exclusive and therefore they should not be discussed as though they are.

2. In a TFSA vs RRSP perspective (which I must take to respond to the post) the answer is NOT the same for every person. If someone makes $350 000 while working, they may be planning to take a lot less from investments during retirement, thus lowering the tax bracket and achieving true tax REDUCTION, not just tax DEFERRAL.

3. Related to my first point of using both strategies, one must only have a personal income of $100 000 to utilize the strategy of maxing-out RRSP contribution and using the resulting tax savings to completely utilize the TFSA. (Admittedly, just did a very rough calculation to get that $100 000 number, it is a rough approximation, but you get the point) All this takes is a little discipline. This approximates my situation and my wife and I budget as though we make about 18% less than we do. We have maxed-out both our RRSPs and TFSAs, but the TFSA contribution feels like free money because it comes in the form of a tax refund every year.

Ok, not so succinct. sorry.