Stunned

snowman modified

Eight years ago, when F was still talking to me (well, it was more like irritated grunts), I pushed him to create a tax-free retirement investment vehicle. People would get no break from income taxes by investing money, but neither would they ever be taxed on the gains, or when they took money out.

When it comes to retirement, most folks are screwed, I argued. Give them something simple and effective, not based on income or earnings, which all can use to get a leg up. He snorted a bit, and took my report.

Shortly after I was booted by the Conservative Party for having an epic bad attitude (and blogging to my constituents), the TFSA was announced. I was ecstatic. Still am. The politicians came through. But the people did not.

Today (I’ve told you this, but it bears repeating), almost 90% of Canadians have no idea what can go into a TFSA, almost half of people have opened one, and only a fraction of those have money in there. Of those, 80% have opted for GICs or ‘high-yield’ accounts paying 2%. Yup, there’s my financial baby, in the trash. TFSAs have morphed into savings vehicles for winter vacations and yoga pants. What could be an awesome misery-buster for most people in retirement is largely squandered.

Let’s make this simple. If you work, you earn RRSP room. You put money in there, get a tax break, grow the funds, then retire. The money comes out and is added back to your taxable income. You get taxed. You moan and bitch. Your kids hear this and swear off RRSPs.

The TFSA is pure simplicity. Everybody gets one. You contribute annually, grow the money, and retire. Then it’s all yours. Nothing is added to your taxable income, which means your pension benefits aren’t sucked off by Ottawa. Why would you not want this?

Let me give you an example. If you’re 30 years old, stunned, and have never opened a TFSA, what can you expect? Well, if you put in the maximum $5,500 this year, and kept it up for the next three decades, and earned the same average as the TSX has given for the past 30 years (7%), then you’d retire at 65 with $819,000 in the TFSA. This would be equivalent to an RRSP with $1.1 million in it.

If the TFSA threw off 7% returns after that, you’d have $57,300 a year in completely tax-free income. Add in your CPP and OAS, and suddenly you’re enjoying $75,000 in annual income, and paying $0 in tax. Oh yeah, and you’d still have $819,000.

Now, if you stuck with the GIC thing for 30 years, your TFSA would be worth $285,900 at age 65. And your total tax-free income would be $23,700. If you lived for 20 years, the income differential between the two approaches would total $1,000,000.

See what I mean? Little F handed people the keys to a fleet of Lambos, and Canadians turned them into planters.

Worse, most folks have no idea what the basic rules are. They don’t know TFSAs can be used for family income-splitting, for example. Non-resident Canadians don’t understand that if they have just a piece of furniture or a car in the country they still qualify for full contributions. The majority are unaware you can start this at age 18, or catch up on missed contributions at absolutely any time, or take money out then put it back in again later – all things impossible with an RRSP.

Mostly, they’re bricks when it comes to using this tool to build wealth and completely avoid future tax. Because all growth is tax-free and all contributions and profits can be retrieved without declaring the funds on your tax form, why on earth would you settle for some lame-ass high-yield savings account coughing up two or three points at a backwater credit union or some cyber bank with a call centre in Uzbekistan?

That’s easy. Some people are idiots. The rest spent all their money on faucets and low-flow, one-piece toilets at Ginger’s. Their financial plan is a house. The holy grail is mortgage repayment – a 25- or 30-year odyssey that will soak up their disposable income and turn it into equity. They hope. If they succeed in cashing out at the right moment.

Meanwhile, those with the foresight to save a hundred bucks a week for their adult lives, and the confidence to invest it for sustained, long-term growth, can probably also buy a house. It may take a little longer, be a little smaller and have a little less stainless. But it’ll come with one extra feature. A future.

235 comments ↓

#1 NuisanceBear on 01.03.14 at 9:10 pm

FIRST and Ten – do it again – we like it..we like it!

#2 Nobody on 01.03.14 at 9:16 pm

A great read!

#3 Retired Boomer - WI on 01.03.14 at 9:18 pm

You’re the father of the TFSA? I AM Impressed!! That is one hell of an achievement.

By the way this post is absolutely classic!

Why would anyone use anything else?

Oh if your employer matches your RRSP contribution take the FREE dough, but don’t neglect the TFSA.
Greatest Post Garth!

#4 Vancity on 01.03.14 at 9:22 pm

Garth, what are your thoughts on this?

http://www.theglobeandmail.com/report-on-business/vancouver-home-sales-surge/article16191100/

Dec 12 sales sucked. — Garth

#5 Catalyst on 01.03.14 at 9:30 pm

What will 57K be worth in 30 years? Not buying many lambos I suspect.

30 years ago, 8K was income from a middle class job now avg salary is approx 42K. Roughly I would suspect this will make 57K worth approximately 15K a year in todays dollars.

Hand me my bus pass please.

#6 timmy on 01.03.14 at 9:30 pm

I saw a 2 bdrm 750 sqr ft condo in Fairview in Vancouver for $570,000. It was almost 30 years old and combined property tax and condo fees are $450 per month. I can rent a 2 bdrm of the same size for $1400 per month. Why would anyone buy at these prices? Oh, it has a view of the skyline–I mean the ugly glass towers of Yaletown, which are blocking the view of the mountains.

#7 Andrew on 01.03.14 at 9:30 pm

Here is a neat infographic that I pulled together on TFSAs.

http://www.canadiancorner.ca/wp-content/uploads/2013/12/TFSA-Infographic.jpg

#8 Steve on 01.03.14 at 9:30 pm

I went grocery shopping at No Frills today and some guy approached me in the spice aisle to try to convince me to sign a form to get a PC Points Credit Card. I told him I wasn’t interested and he did a damn good job of making me feel like a moron for not signing up for it – “Oh, but you’ll get such good rewards, and free groceries, and $25 dollars off you’re grocery bill just for signing up… you don’t even need to activate it!..”. This is what its like being a Canadian – you are criticized and made to feel like an idiot for not wanting to accept all the ‘benefits’ of taking on more credit. Seriously, why does PC want to give me more credit? They don’t know who I am or anything about me – I could have terrible credit – all they know is that I’m just some guy doing his grocery shopping.

#9 John on 01.03.14 at 9:30 pm

Thank you, thank you, thank you for the TFSA.

As a guy with low income taxes and some money to invest, it is a dream come true.

One benefit that is rarely discussed is that I could learn about investing without worrying too much about tax law and adjusted cost bases.

Now that my TFSA is filled with a diverse portfolio, I have time to work out the nitty gritty of making non-registered investments tax-efficient.

#10 TurnerNation on 01.03.14 at 9:32 pm

Weekend economics: How much money has been donated to “Cancer” charities during the last 100 years? Would an even $Trillion be stretching it? Let’s look at your ROI.

When so many are patently scammy:

http://www.tampabay.com/americas-worst-charities/

Recall I said the ‘elites’ will never again let us new, First World infrastructure projects without further taxes and penalties (we’re not allowed to reap the 40-50% of taxable income that’s paid-out). Well how about the healthcare field.

No ROI on donations allowed for us?
– Any advances will be for-profit, billed to the ever-expensive (and expansive) private or public insurance plans in the nice case of privatizing profits and socializing losses:

“New Drugs Could Change Cancer Landscape In 2014

http://news.investors.com/technology/122713-684412-bmy-mrk-bringing-new-class-of-cancer-drugs-
to-market.htm?

For patients, that means new hope. For Bristol [Myers] and its investors, that means money. Current Wall Street consensus expects the drug’s annual sales to hit $4.7 billion by 2020.

These drugs are about the most exciting thing happening in cancer right now, say analysts.

“It’s one of the few areas where we’re going to see a new class of drugs, with potentially new revenue streams,” Les Funtleyder, author of Healthcare Investing, told IBD. “That’s the excitement.”

….

Like the scary movies? Read just the first 50-100 pages of this book instead.

http://www.amazon.com/Secret-History-War-Cancer/dp/0465015689/ref=sr_1_1?

“As epidemiologist Devra Davis shows in this superbly researched expose;, this is no accident. The War on Cancer has followed the commercial interests of industries that generated a host of cancer-causing materials and products. This is the gripping story of a major public health effort diverted and distorted for private gain that is being reclaimed through efforts to green health care and the environment.”

#11 Win on 01.03.14 at 9:33 pm

What a great legacy garth.
See, small, inconsequential, pathetic people can make a world of difference.
Let’s all do our part to make a difference in 2014!

#12 Marty on 01.03.14 at 9:34 pm

Thanks Mr Turner. I learned a lot form your posts on the subject of TFSA.

I will add my 2014 amount of 5500$ soon, but for now my TFSA is doing pretty good. I have 60 000$ in it, pretty good after putting 20 000$ 2 years ago and 5500$ last year. It should compound for 20 more years before retiring.

#13 Sydneysider on 01.03.14 at 9:36 pm

“Non-resident Canadians don’t understand that if they have just a piece of furniture or a car in the country they still qualify for full contributions.”

Non-resident Canadians can’t qualify for a TFSA unless they also qualify for income tax payment on their world-wide incomes.

http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s5/f1/s5-f1-c1-eng.html

Also:

“Generally, secondary residential ties [such as the examples of furniture/car given] must be looked at collectively in order to evaluate the significance of any one such tie.”

It is also worth mentioning that since 2008, non-residents don’t have to pay tax in Canada on interest earned in Canada (but may have to pay in their country of residence, if it taxes worldwide income).

#14 pinstripe on 01.03.14 at 9:37 pm

Hmmm!!! and here I thought F was the founder of the TFSA.

When Harpo gave you the boot, did he offer you a job as ambassador to Uzbekistan for the TFSA tip?

#15 REIT guy on 01.03.14 at 9:42 pm

Stuff your TFSA with Dundee REIT (d.un)
7.76% yield = no brainer

#16 KWkid on 01.03.14 at 9:45 pm

Granite and Moen are “investments” to the masses. They buy an overpriced house with a cash back mortgage and pimp them out with HELOC and then figure they’ve added value to their house and call that investing.

#17 REIT guy on 01.03.14 at 9:46 pm

I have never been so horny over a financial tool like I am for a TFSA………ok Garth give us a stock pick. Lets put a good log audience to use……PUMP and dump!!!!!!!

#18 HDJ on 01.03.14 at 9:48 pm

Nice blog. I’ve a question about RRSPs. In view of the approaching retirement crunch for boomers, why doesn’t the government extend some of that TSFA generosity to RRSPs? – tweak RRSPs so that more of what’s been stashed away in them ends up in the pockets of retirees?

#19 pinstripe on 01.03.14 at 9:52 pm

The TFSA is not fair to the current Senior.

Is there any possibility that F give the current Senior a one time make-up (20 years x 5500 = $110000) to boost their retirement savings?

Suck it up. You got to buy a house for $50K. — Garth

#20 Freedom First on 01.03.14 at 10:03 pm

Stunned. Perfect word for the Canadian TFSA lethargy. Hard to believe, as the TFSA is a *****gift to Canadians. My TFSA is maxed out for 2014, as well as every year since its inception. I have also been a chronic user/abuser of the RRSP for years, using it exactly as you have prescribed how to use it in your blog Garth. I have not paid bank fees for many years, 0 interest for many years(paid very little interest in my entire life) and never bought a house until my net worth was more than the house price. I have always believed in keeping my money for my use. Being self supporting since 17(through unavoidable circumstance) will do that to you. Learned the value of a $ real quick. Being money smart is hard, as it requires much work/discipline, but the payoff is incredibly good. Being money insane is easy, spend and waste money and always be in debt paying interest. The payoff is financial armageddon.

Also, I travel, ski, golf holidays, etc. since my twenties. I remember being a hungry teenager shoveling the $hit out of the racetrack barns for money. I did take business at night school, but I learned just as much at that race track. Being broke and eating $hit sandwiches is something best experienced in ones youth.

Thanks again for the TFSA Garth, and your Blog, both awesome!

#21 Jeremy on 01.03.14 at 10:04 pm

In the year TFSA was introduced, some people didn’t know the rules, and used it like a regular savings account by depositing and withdrawing the same five thousand dollars month in and month out. Some didn’t know about the contribution limit, and did that with far more than the contribution limit. The following year, they were penalized for more money than they had in their TFSA. Those idiots blamed the banks and the government, calling TFSA a scam and they would renounce TFSA for life. I got a laugh out of those morons, because they steadfastly blamed everyone but themselves for their stupidity.

There is one disadvantage with TFSA. If you’re trying to rent a home and you have to submit proof of income in the form of income tax notice of assessment, your TFSA income wouldn’t be on it.

#22 not 1st on 01.03.14 at 10:04 pm

Garth, what happens when some savvy people start growing the TFSA into 10s of millions which could happen over 40 or 50 years especially if F doubles the limit next year. Think the gov’t will stand by and let that sit there untaxed? Its like offshore bank account but here onshore.

#23 raisemyrent on 01.03.14 at 10:05 pm

doesn’t F speak in grunts all the time?

#24 Banjopete on 01.03.14 at 10:06 pm

That’s an impressive opportunity that sadly will be wasted by the masses. I’ve been enjoying your posts for the last few months and I’m hooked. Thanks for speaking so plainly and offering up ideas to cut through all the sales jobs at the financial institutions. Knowledge is power.

#25 raisemyrent on 01.03.14 at 10:08 pm

@ #13 Sydneysider

He means non-citizens or non-permanent residents. For the CRA, non-resident means not living in Canada (not the same thing). They’re otherwise happy to take anyone’s money, even if that means offering RRSPs and TFSAs too.

#26 nin.com.poop on 01.03.14 at 10:09 pm

First, THANK YOU for the TFSA!

Looking at making this years investment. I was thinking of using US dollars this year but have read I would lose the tax credit. I seem to recall you may have mentioned in a post not to have just CDN investments (presently of which I am guilty). If anyone would care to comment on this.

#27 not 1st on 01.03.14 at 10:11 pm

If I was 18 again I would take my education money and sink it into the TFSA and then work at Home Dept for the next 30 yrs while stuffing in the max every year and dripping it hard. Poof, millionaire at age 50. How many college grads are going to get there?

#28 mike in kelowna on 01.03.14 at 10:15 pm

Happy New Year to you Garth and your loyal followers. Not checked in for a couple months and notice some ‘new faces’ and hope they’re all making money from your astute wisdom and suggestions. Unless I missed it while going over the posts the past couple days, didn’t see the word gold even mentioned. Guess all the hard core gold nuts who used to frequent this site are now kaput?? You understand the charts and the fundamentals; so how do you feel about a few bucks in a precious metals ETF in the TFSA?.. Better prospects now for the future than GIC’s right?

#29 Flamed out in Kitchener on 01.03.14 at 10:18 pm

Like I said yesterday … TFSA (Totally Fun Savings Adventure) is a gift. Why would anyone ignore this.

Hey REIT guy … careful with Dundee … too much concentration on office properties with a lot of new product coming onto that market … I use FCR (First Capital Realty) … fantastic management with execs owning a large portion, well diversified and very disciplined with capital. It’s a corp not a REIT, so also great for the non-reg portfolio.

Thanks for your influence and determination with the TFSA Garth … at least little F got the point.

#30 gladiator on 01.03.14 at 10:25 pm

Best. Post. Ever.
I think I now know what a man crush feels like.

#31 coastal on 01.03.14 at 10:30 pm

Victoria prices are going nowhere says the so-called pros. In other words the downward momo will continue with rising mortgage rates.

If there is no money to be made then there is no reason to risk half a million dollars on granite and stainless. The party is now emptying out, drunks are on the front lawn screaming for the cab.

“Prices are not going up, he said. “Simple as that.”

http://www.timescolonist.com/flat-forecast-for-greater-victoria-s-home-prices-1.777568

#32 Nicolas on 01.03.14 at 10:33 pm

Thank you, Garth.

I was out of the country for the last 7 years, but definitely had dubious quality furniture in storage a.k.a in mom’s root cellar. Will that be enough to convince [email protected] at RBC Direct investing to give me and my wife full contribution room retroactively?

#33 Leedog on 01.03.14 at 10:35 pm

#14

+1

#34 Porsche on 01.03.14 at 10:39 pm

After I have made back all my capital losses in the markets I’ll think about a TFSA.

#35 Undercompensating on 01.03.14 at 10:44 pm

A house is a TFSA that you can live in.

#36 aprilNewwest on 01.03.14 at 10:53 pm

Go to WHISPERS FROM THE EDGE. Hilarious! Click on “My reading list”. Scroll down to ” Vancouver Flippers in Trouble”.

#37 Ruff on 01.03.14 at 11:04 pm

Wife and I have TFSA(s) since its inception. No GICs, no Bonds, no Money Market stuff. Only pure Equity and DRIPs were we can. It is amazing how fast these TFSA are growing for us.

Thanks Garth

#38 Happy in Kelowna on 01.03.14 at 11:04 pm

Fabulous column Garth! I know so many people who need to read and know this but they won’t sadly. Thank you anyway, some of us are listening.
p.s. FYI and the non believers in your theories- our balanced portfolio return for 2013: 15.3%.
This is no BS. NO high risk investments. 60% Canada, 20% USA, 20% International(probably too much Canada, time to rebalance). 64% equities, 34% Fixed Income, 2% cash.
Believe it.

#39 James on 01.03.14 at 11:05 pm

It’s outlandish that you are trying to take credit for the framework of TFSA.

Did you also invent the internet?

Ask the little pecker. — Garth

#40 T.O. Bubble Boy on 01.03.14 at 11:06 pm

@ #22 not 1st on 01.03.14 at 10:04 pm
Garth, what happens when some savvy people start growing the TFSA into 10s of millions which could happen over 40 or 50 years especially if F doubles the limit next year. Think the gov’t will stand by and let that sit there untaxed? Its like offshore bank account but here onshore.
———————————

Yes – just look at Mitt Romney in the U.S… he put near-worthless investments into his Roth IRA (the U.S. equivalent of a TSFA) right before Bain Capital turned those investments into millions of dollars.

The rich take advantage of these vehicles to minimize tax and create/preserve wealth.

#41 T.O. Bubble Boy on 01.03.14 at 11:07 pm

@ #34 Porsche on 01.03.14 at 10:39 pm
After I have made back all my capital losses in the markets I’ll think about a TFSA.
——————————–

You know, if you made back those losses in a TSFA, the gains would be tax-free!

#42 T.O. Bubble Boy on 01.03.14 at 11:07 pm

(TSFA = TFSA)

#43 Calgary Conditional Owner on 01.03.14 at 11:15 pm

Garth, can you invest in options in the US Stock markets through a TFSA? If so, do you know which platform or online broker can offer such TFSA? Great post today BTW.

#44 sheane wallace on 01.03.14 at 11:16 pm

#28 mike in kelowna
————————————–
“Gold is money. Everything else is credit.” -J.P. Morgan, testifying to Congress in 1912.
———————————-

definitely gold miners ETFs are worth it/double leverage

#45 sheane wallace on 01.03.14 at 11:17 pm

#35 Undercompensating on 01.03.14 at 10:44 pm
A house is a TFSA that you can live in.

No it not. A house is NOT an investment.

#46 Rexx Rock on 01.03.14 at 11:18 pm

The stock market will keep going higher because of qe.No need to worry about a crash.Garth is right,qe will be here for many years to come.Yellen knows that the 10 year treasurey needs to be below 3%.She may increase qe even more to drive down the yield and push up the market.Thank god for qe and low interest rates forever with no cocequences.Who cares about the pensioners and savers anyway?

#47 Stoopid Idiot on 01.03.14 at 11:19 pm

Great article tonight Garth… gave it a little Copy & Paste and sent it out with a link to the site…. Hell they won’t listen to me!

What a delightful read… This is one giant, furry, warm, womb-like group hug in the middle of a frozen mediocrity.

Hahahahaha good one Garth. Here some more warmth for the soul that will make you want to buy the world a coke

http://www.imf.org/external/pubs/ft/wp/2013/wp13266.pdf

#48 Smoking Man on 01.03.14 at 11:23 pm

Garth it’s a beautiful thing that most don’t do TSFA.

If everyone did, and maxed it out.

It would end real quick. You know govt.

Stop talking about it.

#49 Bill Gable on 01.03.14 at 11:28 pm

The lying swine at CREA are trying to shine up the Dec 2012 numbers for Dampcouver, and it ain’t flying.

The Island is worse. Try Parkesville or Victoria.

It’s a slaughter – and so many people in these homes have HELOC’s and soon the phone is going to ring.
[email protected] wants a check by, say, noon, Monday>?
Demand loans and profligacy and leverage are about to bite a lot of people right where they live.

The blog is a path to financial sanity. Pay attention – because our bearded host knows his stuff and he gives it to you straight.

Pay attention, or get used to KD for the rest of your days.

2014, is going to be really interesting.

#50 OlderbutWiser on 01.03.14 at 11:33 pm

TFSA’s rock. I put my UK stock into mine. These are ADR’s listed on the US exchanges since there are no withholding taxes. Stocks such as BP, BBL, GSK, RDSplc etc. Don’t put your US stock into the TFSA since you get no ability to claim the 15% withholding tax back. Also, no point in putting your Canadian stock into the TFSA since you can’t benefit from the dividend tax credit. Put anything that would otherwise be subject to 100% tax in Canada (ie non-Canadian dividends), that are not subject to foreign withholding taxes, in your TFSA. Canadian REIT’s don’t usually qualify since they are generally taxed as returns of capital rather than taxable income. You need to be very selective in what you put into your TFSA to maximize your returns. Note that you need to have a seven figure retirement portfolio (according to Garth) if you are investing in individual stocks. Guilty as charged but I think that you can get adequate diversification with a smaller portfolio if you know what you are doing. My humble opinion only of course.

#51 Smoking Man on 01.03.14 at 11:40 pm

F looks worn, tired, spent.

But he’s a suck up, Harpo the alpha goes with what works so far, his handlers. So for they have been right on.

But attack ads against a celebrity young aponent won’t work. They don’t have much in terms of creativity.

Harpo is in trouble. He don’t know it yet. Senses it.

Time for a better back room guy. The joke is, I could probably help them the most.

Not a chance in China CSIS would never let that happen.

Promise me this, the night Harpe announces his defet speech we have a beer

#52 totalinvestor.com on 01.03.14 at 11:41 pm

7% annual returns? Ha!
Investing in the 10 “Dogs of the Dow” would have resulted in a 20.9% average annual return since 1973.
Much better and easier to follow.

#53 Stoopid Idiot on 01.03.14 at 11:44 pm

Missed out on yesterdays fun talk

January 2, 2014

The Global Warming Tipping Point is Near

Andrew Thomas

Malcolm Gladwell’s great book The Tipping Point presents the case that sudden seismic shifts in society can result from small events, if the right factors are present. Tipping points happen when momentum toward an idea builds and finally crosses a threshold where it is evident that a major cultural change has occurred. The global warming tipping point is coming, but not the one anticipated by climate change “experts.”

Anthropogenic Global Warming (AGW) theory has been dominant for the past three decades as absolute fact in the public mind. In the last several years, however, cracks in the fortress of “settled science” have appeared, and public opinion has begun to shift. Increasingly, alarmist predictions have failed to come to fruition.

In 2004, NASA’s chief scientist James Hansen authoritatively announced that there is only a ten-year window to act on AGW (presumably by transferring mass quantities of taxpayer funds to global warmist causes) before climate Armageddon destroys humanity. Well, that window has now shut tight, and AGW is AWOL.

Al Gore, the high priest of AGW theory, has closed all of his Alliance for Climate Protection field offices, and laid off 90% of his staff. Contributions have all but dried up since 2008.
Australia’s conservative government has severely curtailed the country’s climate change initiatives and is in the process of repealing its business-killing carbon tax. A group of German scientists predicts dramatic global cooling over the next 90 years toward a new “little ice age.”

Of course, even many “low information” folks have an awareness of the record increase in Arctic sea ice, as well as the current highly-publicized predicament of the cadre of wealthy global warmists stuck in record-high sea ice while on a cruise to the Antarctic to prove the absence of sea ice.

Now the UN’s Intergovernmental Panel on Climate Change (IPCC) has quietly downgraded their prediction for global warming for the next 30 years in the final draft of their landmark “Fifth Assessment Report.” The effect of this is that they are tacitly admitting that the computer models they have religiously relied-upon for decades as “proof” of AGW theory are dead wrong.

The tipping point is near. I can smell it.

Andrew Thomas blogs at http://Darkangelpolitics.com

#54 Tony on 01.03.14 at 11:49 pm

A noble thought but a TFSA accomplishes absolutely nothing for Canada. Since the rich controls all the wealth that’s who you target. Bringing in a ten percent across the board tax would have gotten rid of the underground economy and all the outflows of money to tax havens as well as doctors and the rich all leaving Canada for good.

Just like in poker with a chip and a chair you try to turn a couple of coppers ($5,500 a year) into a king’s ransom. It sort of levels the playing field and gives everyone the same chance.

#55 Sebee on 01.03.14 at 11:49 pm

Can you stick a stock grant in a TFSA?

#56 Darklan on 01.03.14 at 11:53 pm

“They don’t know TFSAs can be used for family income-splitting, for example” – could you elaborate please.

As far as I know it is your personal after tax dollars that go into TFSA.

Gift money to spouse, adult basement kids for additional TFSAs. — Garth

#57 Calgary Conditional Owner on 01.04.14 at 12:09 am

#50 OlderbutWiser

How about options? Can you use the TFSA as an investment account with an online broker that trades them in the Nasdaq and NYSE?

Thanks.

#58 Shan2from Edmonton on 01.04.14 at 12:12 am

Thanks for that Garth, I had no idea of your involvement in in the creation of the TSFA deal.

I have used mine to buy banks and pipelines and ZRE.

My one fear is that when the government runs out of other peoples money, they will renege on their deal for these TSFA accounts.

#59 Porsche on 01.04.14 at 12:21 am

#41 T.O. Bubble Boy
@ #34 Porsche on 01.03.14 at 10:39 pm
After I have made back all my capital losses in the markets I’ll think about a TFSA.
——————————–

You know, if you made back those losses in a TSFA, the gains would be tax-free!
……………………………………………………………………..

Your joking right?

But in case your not… you don’t have to pay any capital gains until your capital losses are gone.

#60 Craven Moorehead on 01.04.14 at 12:21 am

I have made substantial contributions to both my wife’s and my tfsa’s. My biggest worry, and I think it is a legitimate concern, is that somewhere down the road, some NDP type government who thinks anyone making more than 25k per year, is filthy rich, will change the rules and go after tfsa investments, we may see a CPP /OAS clawback, or a wealth tax of some sort, and we the sheeple will meekly bend over and take it like we always do, just like they did with income trusts

#61 not 1st on 01.04.14 at 12:27 am

We need to get the segment of society that b*tches and whines the most all into TFSAs so the gov’t can’t make changes to them. Seniors and boomers go get one today.

If those groups are in them, the govt will be less likely to upset the apple cart.

I should have a “instant transfer to Caymans” button on my trading account.

#62 OlderbutWiser on 01.04.14 at 12:29 am

#57 Calgary Conditional Owner – I don’t know as I don’t trade options. I keep it pretty simple. However, I can’t see any limitations on how you trade in your TFSA (unlike RRSP’s) so I would imagine that options would be allowed.

#63 Longterm on 01.04.14 at 12:46 am

#5 Catalyst on 01.03.14 at 9:30 pm

You are dead wrong. Thirty years ago in 1984 the minimum wage in Canada was $3.65-4.25. In 2014 it’s $9.95-10.54 / hr.

http://srv116.services.gc.ca/dimt-wid/sm-mw/rpt2.aspx?lang=eng&dec=2

So on a 2000 hour work year a minimum wage worker 30 years ago made about $8000. This was not the income of a ‘middle class job’ as you state.

The point is that no doubt inflation will erode the purchasing power of $57,000 pa 30 years in the future. Exactly how much is a point of debate and speculation. However a decent portfolio should provide a good return on top of the annual inflation rate regardless of the rate of inflation.

In any event, the essential point remains: would you rather have a $57,000 pa income in 30 years with a purchasing power equivalent of $15k, $25k or $40K – or whatever it might be, or in a bout of cynicism or laziness fail to use your TFSA and end up with NOTHING?

Hand me some cat food please.

#64 Longterm on 01.04.14 at 12:51 am

#60 Craven Moorehead on 01.04.14 at 12:21 am

Don’t you mean when some Neo-Con government claws back your pension or OAS or taxes your TFSA income as the current bunch did with income trusts?

#65 Julia on 01.04.14 at 1:05 am

#7 Andrew on 01.03.14 at 9:30 pm
Here is a neat infographic that I pulled together on TFSAs. http://www.canadiancorner.ca/wp-content/uploads/2013/12/TFSA-Infographic.jpg

Love the infographic! I’m a big fan of good ones. I have one question about one of the points on it though. It claims that NRAs do not provide tax free withdrawals, but since NRAs are after tax money and investment growth (interest, dividends, capital gains) is taxed as you rightly say, I don’t think it’s accurate to say the withdrawal is also taxed, not like an RRSP. Or am I missing something?

#66 Spectacle on 01.04.14 at 1:07 am

Thanks as usual, and Garth you rock in 2014 !
As Predicted……

#48 smoking Man
” If everyone Maxed out …it would end real quick. Stop talking about it. ”

I get the humour SM but …..! The last few posts combine in seemingly distant financial concepts. In truth though, they can be re-read and taken on deeper levels. Try it, read the titles.

For example, a week ago I abandoned earlier financial strategies thanks to Garth’s descriptive analogies. I made 50% to (100%) doubling my money in smaller and infrequent investment vehicles, 2 to 3 times a year (some would also say it was legally tax free) . Big time investment of my time, and distracted me from other daily work to achieve this, plus a huge financial gamble! In short, time to change my game and think in lengthier investment terms;

RACeCAR ( anyone get this )

Rest is Self Deleted…….

Trust this made sense, Regards

#67 Andrew Woburn on 01.04.14 at 1:27 am

If inflation is 2% and you are only earning 2% on your GIC, you are going nowhere. If you are paying tax on the GIC interest, you are going backwards and steadily losing your real spending power. So even if you are afraid to take any more risk than a GIC, at least put it in a TFSA.

Question for Garth: Is there any way to pledge your TFSA assets to secure a loan?

#68 Ronaldo on 01.04.14 at 1:37 am

#5 Catalyst – ”30 years ago, 8K was income from a middle class job now avg salary is approx 42K.”

43 years ago (1970) my salary was $8000 and 1983 it was $24,000 and that was average. Today that same wage would be around $60,000. There was huge inflation in the period between 1970 and 1983 which we will never likely see again in my lifetime. In 1970 an average home represented 2.5 times my annual salary and in 1983 about the same. After that, prices of houses went totally out of whack in relation to wages. Whether salaries will triple from this point over the next 30 years is anyones guess but for some reason I can’t imagine an old ”tear down” in Vancouver currently priced at 1.2 million will be worth 3.6 million in that time. But then , I would never have imagined that my first home that I bought in North Vancouver in 1970 (new) for $20,800 would be selling for $469,000 today.

#69 AACI Home Dog on 01.04.14 at 1:45 am

That, Mr. Turner, was an awesome post !

#70 Andrew Woburn on 01.04.14 at 1:57 am

#31 coastal on 01.03.14 at 10:30 pm
Victoria prices are going nowhere says the so-called pros. In other words the downward momo will continue with rising mortgage rates.
===============================

Looks to me like the real story in Victoria is the inventory overhang. The year end inventory of 3,500 listings is low as you expect in December. During the summer it peaked at around 5,000 and the real estate board is projecting 6,000 sales for all of 2014. If I can be forgiven for suspecting them of optimism, Victoria might have up to 12 months sales in underlying inventory. The question is how many of these people really need to sell any time soon.

#71 Cici on 01.04.14 at 2:04 am

Thanks for the TFSAs Garth, I promise I’ll max them out this year, just for you :-)

Great post…if [email protected] explained things such, you wouldn’t have so many Canadians stocking them up with GICs for future yoga pant purchases.

I hope lots of people (especially the young ins) read this particular post, and catch on to the blog…

#72 john on 01.04.14 at 2:06 am

Smokingman #48

Garth I have to agree with smokingman for the first time. Please stop talking about tfsa. If every one does that the government will stop it. Also someone was asking about tfsa and doing options in US can goto quest trade

#73 Fed-up on 01.04.14 at 2:09 am

@#10 TurnerNation

——————————————————————-

The cancer and disease research industry:

By far the most despicable charlatans in human history.

Happy New Year everyone.

#74 Debtfree on 01.04.14 at 2:11 am

If you want to feed your vulture senses and have a really good laugh go to bc assessments online . All you need is the properties address and the assessment is there to see . Don’t forget Garth can also so see yours and mine . In the OK fsbos are asking on average four times the assessed value . MLS is three times . The top end of the market is the hardest hit . Slow motion train wreck . We are lusting but we’ll wait till the smoke clears . Thanks again Garth ,you old mentor you. A bright light in an ocean of stupidity . Thanks also goes out to HFC (captains of the ships of fools ) you’ve made things possible for us . You’ve headed the ship of state on to the rocks and left us Garthians to pick up the pieces . Our time is coming faster than we thought .

#75 Andrew Woburn on 01.04.14 at 2:30 am

One hardly dares utter the word “gold” on this site as it is a bit like stepping in between Sunni and Shiite. However I am curious as to why China is buying so much gold. I found a pretty lucid account on the web site of the World Gold Council, the association of the world’s 21 leading gold miners. They seem quite restrained for 24-carat gold bugs.

Quote:

With the evolution towards a constellation of multiple reserve currencies, gold – as an asset that is no one’s liability – will play a special role. Gold will neither replace fiat currencies, nor be the dominant ‘currency’ in the system. But it will become increasingly sought after and will attract a higher level of attention from policy-makers and financial market practitioners.

“Gold, the renminbi and the multi-currency reserve system”
https://www.evernote.com/shard/s34/res/d7d1f8df-a9bc-4b46-b030-25e4aecaed48/Gold-the-renminbi-and-the-multi-currency-reserve-system.pdf

#76 Ronaldo on 01.04.14 at 2:31 am

Going back as far as 2003 there were those who were lobbying the government, Richard Shillington as an example, to put in place what would eventually turn out to be the TFSA’s we have today. Even better than the TPSP’s that were originally being proposed. See the following links for some background on that and the disadvantages of RRSP’s for lower income earners.

Richard Shillington, April 2003 C.D. Howe Institute (New Poverty Trap)
http://www.cdhowe.org/pdf/backgrounder_65.pdf

John Stapleton and Richard Shillington, C.D. Howe Institute Sept. 08

http://www.cdhowe.org/pdf/ebrief_64.pdf

Alternatives to RRSP’s, the TPSPs for lower income Canadians discussed back in 2003 (Richard Shillington, C.D. Howe Institute)

http://www.advisor.ca/images/other/ae/ae_0104_rrspalternative.pdf

#77 Hoople Head on 01.04.14 at 2:47 am

Garth, I thought I had found the “magic spousal loophole” years ago. It does not work. The tax saved when contributing to a spousal account is exactly the same amount as the deduction you loose (dependant amount) when she takes it out 3 years later as (tax free) income.

That’s called income-splitting, assuming the spouse is in a lower bracket. — Garth

#78 Ronaldo on 01.04.14 at 2:55 am

Further background information regarding the C.D. Howe Institute who were the leading advocates for the introduction of a Tax Prepaid Savings Plan (TPSPs) going back as far as February 2001.

http://books.google.ca/books?id=jvgPpWc-22YC&pg=PT18&lpg=PT18&dq=richard+shillington+and+tpsps&source=bl&ots=xGBRTi6NfS&sig=9Fe-qFnW1x32F_0pAd3CES7v26Q&hl=en&sa=X&ei=XK3HUvHmF87voAT-3oGoDQ&ved=0CDYQ6AEwAg#v=onepage&q=richard%20shillington%20and%20tpsps&f=false

#79 seriouslynorthern on 01.04.14 at 3:02 am

#57-You can trade options in your TFSA but are limited to long calls or puts or covered calls. No spreads or naked shorts. Technically cash secured puts are allowed but i havent found a broker that will allow them yet. Questrade is the broker that i use, just be aware that option commissions are relatively high with most canadian brokers and make it tough to trade them in smaller accounts effectively

#80 quickquestion on 01.04.14 at 3:28 am

Does it make sense to put money into a TFSA if I’m earning over 150k and won’t be able to max out my RRSP contribution? Wouldn’t it make more sense to get as much tax relief as possible now, given the high tax bracket?

Secondly, I’m 35, and working to clear my mortgage in the next 4 years. Does it make sense to delay paying off my mortgage to take advantage of a TFSA now?

Thanks for the awesome blog.

#81 john on 01.04.14 at 3:53 am

Is this statement really correct?
“Non-resident Canadians don’t understand that if they have just a piece of furniture or a car in the country they still qualify for full contributions.”

There are major and minor criteria for determining Non-resident taxpayer status. This is not written in black and white in the tax act. The CRA actually has a form which can be filled out and sent to them and they will give an ‘opinion’ on the taxpayer’s status. The major criteria is length of time away from Canada, hence the 183 day rule. Maintenance of a brokerage account or real property in Canada would be considered a minor criteria.
Canadian non-residents for tax purposes can continue to maintain a TFSA, and income from the TFSA continues to be non-taxable, but further contributions can not be made.
Furthermore while Canada has reciprocal tax agreements with other countries other countries do not have legislation recognizing Canadian tax advantaged income. This was made clear in 2013 in Spain http://www.thisismoney.co.uk/money/mortgageshome/article-2317127/Expats-head-home-Spain-forced-declare-overseas-assets.html?ITO=1490&ns_mchannel=rss&ns_campaign=1490.

If I am wrong on these statements please let me know.

Read the CRA rules. — Garth

#82 AB Boxster on 01.04.14 at 4:19 am

Garth,

There is no doubt that TFSA’s will be useful at some point for
youngers once they begin to earn some income.
Most of the folks with any real wealth (boomers and older) find little use for them because they are already retired or soon to be.
These are the folks that have seen the messes created by the financial geniuses and now have little patience for the junk that is passed off as investment grade.

I suspect that most investors, if they save a percentage of their income, would be satisfied with a 5% return. I would be.
One upon a time it was pretty easy to earn 5% (GIC’s , CSB’s) and most people were satisfied with the returns. With some prudent saving, a moderate return, and power of compounding, they could accumulate ‘enough’.
QE has now seen to it that savers are punished and spenders are rewarded.
The continued use of GIC’s is frankly a factor of the sad state of financial advice provided to those that need it, the fraudulent activity that continues to be SOP (Libor manipulation, identity theft, daily phishing).

So why not just do your own investing and create a balanced portfolio that
is so often mentioned in the blog?
Why not sell your own house without the advice of a realtor?
Why not write your own will without the advice of a lawyer?
Why not write your own prescription without the advice of a doctor?

The Financial advisor industry (guys once known as stock brokers and mutual fund salesmen) have not provided the results that they promise, except for their own benefit.

You sound old and bitter. What a waste of emotion. If you’re 65 the TFSA is still a money machine, even if you started today. Your generalizations say a lot about you and your poor past choices. They are of no benefit to anyone else. — Garth

#83 GangnamStyle on 01.04.14 at 5:30 am

Garth,

If someone put all $50,000 in a RESP at one time to take advantage of tax-free compounding, could they get the full $7,200 matching grant eventually, or must you put make the yearly contributions to get the 20% matching grant?

Yearly. — Garth

#84 Buy? Curious? on 01.04.14 at 5:31 am

Sure, old people vote, but the opportunity comes every 5 years. They won’t riot. They’ll just take it with a side order of cat food.

Baby Boomers, time to reap what you’ve sowed.

http://money.msn.com/baby-boomers/news.aspx?feed=AP&date=20131230&id=17222455

Rob Ford 2014!

#85 groovin_123 on 01.04.14 at 7:06 am

I received my BC property tax assessment today….

Port Moody, BC. Down almost 10% year over year. The year before it was flat.

Fortunately I don’t give a rat’s ass. 35 years old, mortgage free and yes I made every penny myself.

Ready to vulch on my future mansion in Anmore. Should make a nice birthday present for the wife.

Of course I’d leave the rusty old Mazda in the driveway sandwiched in between the neighbours leased BMW’s and Mercedes just to make a statement.

#86 Obvious Truth on 01.04.14 at 8:49 am

If the intent of being an elected representative of the people of Canada was to do the most good, it is being achieved on this site.

This type of post is informative, reassuring and inspiring for people looking for a bright financial future.

Excellent exchange of information. The finance industry wants everyone to think this is complicated stuff. And some of it is. But it’s not rocket science and can be kept pretty simple.

With reading, effort and good advice we can be good stewards of our own fortunes.

Way more fun than housing.

#87 T.O. Bubble Boy on 01.04.14 at 9:16 am

@ #59 Porsche on 01.04.14 at 12:21 am
#41 T.O. Bubble Boy
@ #34 Porsche on 01.03.14 at 10:39 pm
After I have made back all my capital losses in the markets I’ll think about a TFSA.
——————————–

You know, if you made back those losses in a TSFA, the gains would be tax-free!
……………………………………………………………………..

Your joking right?

But in case your not… you don’t have to pay any capital gains until your capital losses are gone.
——-

Wasn’t kidding (just misinterpreted your post).

You should put income-producing investments in there then… Unless you’re saying that you’re 100% in growth investments.

#88 RVP on 01.04.14 at 10:09 am

@Ronaldo #68:

“Whether salaries will triple from this point over the next 30 years is anyones guess but for some reason I can’t imagine an old ”tear down” in Vancouver currently priced at 1.2 million will be worth 3.6 million in that time.”

My first thought when I read this was what could possibly be left in Vancouver to tear down 30 years from now?–the pace at which this city is destroying its heritage is astonishing! Oh yeah, the crap being built today will be the tear-downs of 30 years from now–if it lasts that long!

#89 Toronto_CA on 01.04.14 at 10:14 am

Did you invent the Roth IRA too? Does William Roth know you stole his idea?!

Just teasing Garth. I’m glad the TFSA came to be, even if the name is God awful which in my opinion responsible for its misuse in Canada (the “Saving” should be replaced with “Investment”).

Why every piece of journalism and bank advertisement harped on about it being a great place to put “emergency funds” in 2007 is a mystery, but they did. People really think the 2.5% teaser interest rate that ING is offering new TFSAs for 4 months is a great deal. I try to scoff at them and set them straight.

#90 RVP on 01.04.14 at 10:16 am

@Ronaldo #68:

“Whether salaries will triple from this point over the next 30 years is anyones guess but for some reason I can’t imagine an old ”tear down” in Vancouver currently priced at 1.2 million will be worth 3.6 million in that time.”

I doubt that salaries in Vancouver will triple over the next 30 years, but I have a much easier time imagining real estate tripling in price in the same time period. Real estate prices have been disconnected from incomes in Vancouver for a very long time. If there is anything I have learned from living in Vancouver it’s that you can have stagnant wage growth combined with strong gains in real estate prices. We already have tear-downs in the $2-million range on the West Side so $3-million for a tear down 30 years into the future almost sounds cheap.

#91 Daisy Mae on 01.04.14 at 10:40 am

#39 James: “It’s outlandish that you are trying to take credit for the framework of TFSA.”

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

Well, Garth did. And we all know it. Except you, of course. F, on the other hand, isn’t capable of doing anything right…

#92 Daisy Mae on 01.04.14 at 10:47 am

#39 James: “It’s outlandish that you are trying to take credit for the framework of TFSA.”

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

Well, Garth did. And we all know it. Except you, of course.

The little pecker, on the other hand, isn’t capable of doing anything right…

#93 Stoopid Idiot on 01.04.14 at 10:56 am

http://www.telegraph.co.uk/finance/financialcrisis/10548104/IMF-paper-warns-of-savings-tax-and-mass-write-offs-as-Wests-debt-hits-200-year-high.html

IMF paper warns of ‘savings tax’ and mass write-offs as West’s debt hits 200-year high
Debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, warns IMF paper
By Ambrose Evans-Pritchard
8:06PM GMT 02 Jan 2014
Much of the Western world will require defaults, a savings tax and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund.
The IMF working paper said debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, either negotiated 1930s-style write-offs or the standard mix of measures used by the IMF in its “toolkit” for emerging market blow-ups.
“The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point,” said the paper, by Harvard professors Carmen Reinhart and Kenneth Rogoff.
The paper said policy elites in the West are still clinging to the illusion that rich countries are different from poorer regions and can therefore chip away at their debts with a blend of austerity cuts, growth, and tinkering (“forbearance”).
The presumption is that advanced economies “do not resort to such gimmicks” such as debt restructuring and repression, which would “give up hard-earned credibility” and throw the economy into a “vicious circle”.

http://www.imf.org/external/pubs/ft/wp/2013/wp13266.pdf

#94 Thanking thy Father on 01.04.14 at 10:57 am

TFSA = Turner’s Ferocious Super Account

#95 Mr Happy on 01.04.14 at 11:11 am

“#5 Catalyst on 01.03.14 at 9:30 pm
What will 57K be worth in 30 years? Not buying many lambos I suspect.

30 years ago, 8K was income from a middle class job now avg salary is approx 42K. Roughly I would suspect this will make 57K worth approximately 15K a year in todays dollars.

Hand me my bus pass please.”

———————————————

It’s that kind of thinking that WILL keep you on the bus. It is that opposite thinking that let me retire at 50.

Oh, and with a super car in the garage. ;))

I would a years salary (considerably more than 57k) that you will be no where near 57k a year when you retire. Enjoy working at Walmart….

#96 crowdedelevatorfartz on 01.04.14 at 11:12 am

@#84 groovin
Hey! My 11 year old Mazda is a protege ! IT aint rusty but it was paid for years ago. You’re right, the neighbors all lease……..and boy do they “look” rich. Anmore. Nice spot. Good one.

#97 Renter's Revenge! on 01.04.14 at 11:15 am

In a moment of cynicism, I came up with this little gem (turd):

The government will keep promising entitlements until it gets elected, and then claw them back until they’re affordable.

#98 AB Boxster on 01.04.14 at 11:53 am

Garth – You sound old and bitter. What a waste of emotion. Your generalizations say a lot about you and your poor past choices.
They are of no benefit to anyone else. — Garth
—————————————————————–

Actually none of the above.

Old, perhaps, starting to get. (Younger than GT)
And generalizations…, well more insight and opinion, I would argue.

The comments refer to generalizations made in the recent blog regarding why people either invest low risk in a TFSA or not at all, (“some people are idiots, the rest plow it all into overpriced homes”)

The points regarding lack of confidence in investing in the ‘surprise a day’ world of financial investments,
or lack of usefulness of 95% of the financial advisor industry can be easily brushed off.

Its far easier to blame the individual for his/her plight, than to consider that there might be something wrong with the industry or the system.

Contrarian? Definitely.
Bitter? No.

My millions are already made, and I could certainly retire now with ‘enough’, and am pretty happy with my past choices.

It easy to spout unintelligent drivel or whine incessantly about how ‘dem boomers
done broke the world’ or how easy it is to get 15% + returns.

But, if you don’t want any reasoned comment or thoughtful opinions, then just say so.

#99 Detalumis on 01.04.14 at 11:54 am

And you are also old enough to not believe promises that something will never EVER be taxed. Do you really believe that in 40 years people will get GIS and have a million in their TFSA. TFSAs are already considered assets when you apply for any sort of social assistance. I would never base my investing decisions solely on current tax rules.

I can easily see taxes, clawbacks or “fees” e.g. for LTC being based on assets in the not too distant future. They already do it in many other countries.

No reason not to take advantage of a gift now. — Garth

#100 Ralph Cramdown on 01.04.14 at 11:58 am

#75 Andrew Woburn — (Quoting the WGC) “With the evolution towards a constellation of multiple reserve currencies, gold […] will become increasingly sought after and will attract a higher level of attention from policy-makers and financial market practitioners.”

The World Gold Council is certainly less bug-eyed-loony than many other gold sites, but who are they? A bunch of gold miners. Do the miners keep their retained earnings in gold because gold is going up? Nope, they sell the stuff as fast as they can mine it, pay their shareholders a pittance in dividends, and use their profits to dig more holes. They want you to buy what they’re selling.

In other words, their job isn’t to present a balanced and lucid account of why gold may go up or down in the future, their job is to get you to buy gold. Every day they wake up and try to think of another reason. Currently, the reasoning goes something like this:

1) Chinese and Russian central banks are buying gold!
2) ???
3) Profit!!!!

It’s your job to mentally fill in #2 with whatever your brain can dream up.

And their stats are sooo sketchy. Correct me if I’m wrong, but I don’t think they know how much China’s central bank is buying versus its mainland citizens, Hong Kongers, or rich foreigners buying gold in Hong Kong. Given RMB inflation, higher real wages and the limited investment alternatives available to mainland citizens, I’m not surprised they’re buying lots of gold.

So what? The price is still going down. Central banks have always held gold. Gold is one of the few things traded on commodity and future exchanges that isn’t consumed in great amounts by industrial economies, so it already has a special place in the financial community.

#101 Stickler on 01.04.14 at 12:01 pm

@ #47 Stoopid Idiot on 01.03.14 at 11:19 pm

Re your link:
http://www.imf.org/external/pubs/ft/wp/2013/wp13266.pdf

—————————————–

Interesting read…for those interested, it basically says:

If policymakers are fortunate, economic growth will provide a soft exit, reducing or eliminating the need for painful restructuring, repression, or inflation […but not likely as demonstrated throughout history] .

The evidence on debt overhangs is not heartening [it blows].

Looking just at the public debt overhang, and not taking into account old-age support programs, the picture is not encouraging [it really blows].

Their studies find that current advanced country governments may [and likely will] have to look increasingly at engaging in:

– austerity [less for you],

– forbearance [postponement of loan payments],

– debt restructurings [less for you]

– conversions [involuntary trade of your thing for this newer crappier thing],

– higher inflation [less for you],

– capital controls [harder for you to maneuver]

and other forms of financial repression.

Sounds like fun…

#102 Paul on 01.04.14 at 12:03 pm

Thanks for your influence and determination with the TFSA. You helped me a lot on money matter since you started your blog.

#103 nomad on 01.04.14 at 12:18 pm

Garth, I got excited for my non-resident brother when you said:
“Non-resident Canadians don’t understand that if they have just a piece of furniture or a car in the country they still qualify for full contributions. ”

But check out this CRA document:
http://www.cra-arc.gc.ca/E/pbg/tf/rc243-sch-b/rc243-sch-b-13e.pdf

“Since Eloise contributed to her TFSA while a non-resident in 2011, and she did not withdraw the entire non-resident contribution until 2012, she must complete
Schedule B for the 2011 calendar year as well as for the 2012 calendar year. She will be taxed 1% per month on the full amount of the contribution until it is
completely withdrawn”

Can he really contribute? Thanks.

#104 Milkman on 01.04.14 at 12:28 pm

Sent a snippet of the article out to some friends, one comes back and says “We haven’t seen 7% in a loooong time”.

I told her the TSX was up 9.6 and the Dow 26% in 2013… no response.

Some folks just don’t get it.

#105 lawrence on 01.04.14 at 12:35 pm

Thanks for the TFSA Garth, we’ve come to Canada at a time when this (TFSA) was started (2009)and I thought this is one of the best savings vehicle this great country offered to its people. More power to your blog…

#106 Doug in London on 01.04.14 at 12:42 pm

@Stoopid idiot, post #53:
Is human made climate change for real or not? I would go with what the climatologists at Environment Canada or NOAA have been trying to tell us for years. Failing that, you should ask the people affected by Hurricane Sandy in late 2012, those who saw record flooding in Muskoka District (unlike anything ever seen before in the area) earlier this year, those affected by the flooding in Alberta in June, those affected by the flooding caused by a torrential downpour in Toronto in early July, those who saw their town in Illinois destroyed by a tornado in November (isn’t, or wasn’t that kind of weather in Illinois unusual for November?) or the people (at least those who survived) who saw the devastation in The Phillipines caused by Typhoon Hiayan, or those people who lost their power due to the ice storm in Toronto, eastern Ontario, southern Quebec, and New Brunswick. Speaking of Australia, how about those people in the country enduring record hot weather there. In Queensland the extreme heat and drought has resulted in many bush fires. That’s odd, isn’t it supposed to be the wet season in Queensland right now?

On a different note, thanks Garth for getting things in motion to bring us the TFSA. While most politicians argue about (and blame each other’s party) about what to do regarding the coming retirement crisis, it’s great to see someone in Ottawa actually took some action.

#107 Bo Boka on 01.04.14 at 12:52 pm

Garth,

I am confused.

Can you please clarify this: ” Worse, most folks have no idea what the basic rules are. They don’t know TFSAs can be used for family income-splitting, for example. Non-resident Canadians don’t understand that if they have just a piece of furniture or a car in the country they still qualify for full contributions.”

You mean full contributions to TFSA? Even if you do not live in Canada? If you are a canadian non resident you do not have to file tax. The money in the TFSA sits there in limbo?

#108 Bo Boka on 01.04.14 at 12:57 pm

Is this right? “Canadian non-residents for tax purposes can continue to maintain a TFSA, and income from the TFSA continues to be non-taxable, but further contributions can not be made.”

Someone please clarify.

#109 Smoking Man on 01.04.14 at 1:00 pm

I have enough writing material around to do an entire encyclopedia, I finally have a plot.

4 books on the go, one is fiction, one a satirical self help book. One on code smithing, and one on gambling strategy and leveraging points,

They are on hold, new idea,

Started at 8 pm last night, 8 chapters done up to now, need some sleep.

You guys are going to love this.

Night night all.

#110 Ralph Cramdown on 01.04.14 at 1:10 pm

#81 AB Boxster — “QE has now seen to it that savers are punished and spenders are rewarded.”

If you read the business section, it’s clear that corporate balance sheets don’t need to borrow your savings. They have cash, they don’t need to invest in new production because consumers aren’t buying enough to max out their current capacity. They’d be more profitable, employ more people and invest more in productive capacity if people saved less and spent more. So why do you think you should be ‘rewarded’ with high interest rates for saving?

Your reward for saving is the same as in my grandparents’ time: Being able to consume without working later in life. My family continues to save in this environment, and I’m betting yours does too, so spare us the BS.

#111 not 1st on 01.04.14 at 1:29 pm

I was in at BMO the other day to open a self directed TFSA for my wife. Another albeit older couple was there to make a deposit into theirs. The rep explained the choices such as GICs or equities. In the end, the opted for cash only deposit, no investment of any kind.

#112 not 1st on 01.04.14 at 1:39 pm

Garth, can a person not create a similar type TFSA vehicle on their own?

If you can take as much $50,000 in dividends untaxed each year and DRIP those in, you can build something a lot bigger and faster than a TFSA and so long as you never sell, there is no capital gains tax. Will it to your kids.

#113 Infused with Opiates on 01.04.14 at 1:42 pm

74 Debtfree – I checked 3 random houses on MLS in the OK and found them to be 7-39% higher than assessed. Are you sure you arent looking at just the land or house value on bc assessment as the two are shown separately?

#114 pinstripe on 01.04.14 at 1:44 pm

The TFSA is not fair to the current Senior.

Is there any possibility that F give the current Senior a one time make-up (20 years x 5500 = $110000) to boost their retirement savings?

Suck it up. You got to buy a house for $50K. — Garth

——————————————————————

That is a weak response. You get another try.

When I purchased my house in 1960, the price was $20000. I was earning $8000. I saved and was able to pay cash for the house always living within my means.

In the late ’60s, and thereafter, the politicians promised many social programs. Everything was to be FREE, FREE, FREE. RRSP was great because the tax would be low at retirement. A Saver would be rewarded. Don’t Worry Be Happy.

Today the saver is punished. Tax on RRSP puts the retiree in the top tax bracket. Clawback on the OAS is common. Where are those politicians today. The politicians LIED and I think it is time for payback.

Either double or triple the TFSA contribution rate or give the Senior a one-time contribution chance as mentioned above. The TFSA is a good idea with a good start, however, the flaw is major and if corrected will be an excellent approach for the Saver. Yes/No?

#115 Min in Mission on 01.04.14 at 1:46 pm

90% ? At least, I am not alone

#116 Shawn on 01.04.14 at 1:50 pm

TFSA and WHO’s YOUR DADDY?

Ronaldo points out that people other than Garth also pushed for the TFSA (and no doubt now claim some credit).

Success, they say, has a thousand parents. Failure is an orphan.

Garth passes the paternity test.

#117 Marco on 01.04.14 at 1:59 pm

ur just anothet salesman bud….Peter Schiff forever….hard assets
will returb to glory and housing is moreimportant and useful
than useless paper

#118 Son of Ponzi on 01.04.14 at 2:38 pm

I stuff my gold into a TFSA and put it under my mattress.
Sleep like a baby.

#119 X on 01.04.14 at 2:56 pm

No 2014 forecasts????

Thus far you have mentioned that 5 year closed rates should end up .66% higher at the end of the year.

F may be introducing something more that the CMHC increased insurance payment to hike up the cost of RE borrowing.

I think you said tapering will end by year end and the lending rate won’t be increased until later this year/possibly next year.

Anything else or stay tuned for future posts…

#120 bleeding in vancity on 01.04.14 at 3:13 pm

Where do people in Vancouver get money to buy half million dollar 2 bedroom condos? Where do people in Vancouver get $3200 to rend a 2 bedroom condo?

#121 AB Boxster on 01.04.14 at 3:15 pm

#109 Ralph Cramdon.

Ok, we know that corporate profits are high.
So they don’t need to pay a return for my savings.
I’m Ok with that.

But why is QE necessary?
Why artificially hold long term govt bond rates down?
It’s not the corporate rate, its the gov’t bond rates that are artificially low.

Again, these rates are purposely kept low.
Hence, artificially high RE prices, high personal debt.

Sure, I still earn income, so I can save by keeping more than I spend.
But others don’t or can’t work, and need some sort of return to survive.

Holding these rates down, so that consumers can buy more stuff, or to trick fools into thinking that they can actually afford the house they just bought, while causing pain to those with fixed incomes who could once rely on a ‘reasonable’ risk free return, does not make sense in my opinion.

#122 Old Man on 01.04.14 at 3:24 pm

I am having computer issues so will try this again, so have any of you with families, assets, and big money ever in your wildest dreams thought of establishing a private holding company? It can be structured with common shares, preferred shares, and even convertible debentures; not to mention shareholder loan advances with an interest rate. This needs expert advice to execute assets in a proper manner for the benefit of all, and beating the taxman in certain well defined situations is so sweet.

#123 Salad bowl on 01.04.14 at 3:24 pm

Garth, I think your math is wrong here. When I punch 5500 into a compound calculator, for 30 years at 7%, I get about $550k. Big difference from $819k. How did you calculate this?

The correct way. You used 30 years, not 35. — Garth

#124 bleeding in vancity on 01.04.14 at 3:26 pm

Make that half a million for 1 bedroom.

#125 TurnerNation on 01.04.14 at 3:52 pm

Re. 7 million visits, I bet 10% are driven by Smoking Man’s posts. I notice Garth has not killed off the goose that lays the Golden Dregs.

….

This blog should sign off with a B. Barker twist: Please remember to spay and neuter your renters.

#126 Salad bowl on 01.04.14 at 4:05 pm

Hm, longtime reader here Garth… I love your blog but here it seems my first comment has been deleted! What gives? I was honestly curious how you got the $819k figure in this post. Thanks.

Answered. — Garth

#127 T.O. Bubble Boy on 01.04.14 at 4:23 pm

just when you thought Bitcoin was going to fall from the headlines for a while… it finds a new promoter in Zynga (online/social gamimg company, with Farmville etc.):

http://techcrunch.com/2014/01/04/zynga-links-up-with-bitpay-for-a-bitcoin-payment-test-in-farmville-2-cityville-and-other-web-games/

It does seem like a natural fit: paying for virtual crap with a virtual currency.

Bitcoin’s price jumped to $928 on the news:
http://bitcointicker.co/

#128 cecil on 01.04.14 at 4:28 pm

Garth:

Thank you for pushing the TFSA.

IT is only just to me that my earnings are MINE.

None of my already taxed earnings should ever be taxed again.

I believe that all of my savings should be eligible for the TFSA– up to whatever I earn.

The TFSA deposit amount need to be raised substantially ASAP.

#129 Debtfree on 01.04.14 at 4:33 pm

@112 iwo I’ve only been looking at properties with acreage over a million dollars asking . The majority of condos are down from the nosebleed heights of 09 about 100k . Us northern woodsies call that a leg hold connibear trap .
@ Marco 116 the most valuable property of all is intellectual property . The gov. Doesn’t own it . Try not paying your property taxes and you will find out who actually owns your property . Intellectual property can be passed on to your descendants with out tax .
@ 121 OM two words . Family Trust .

#130 espressobob on 01.04.14 at 4:43 pm

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

#131 Dan7 on 01.04.14 at 5:00 pm

Hey Garth,

How much purchasing power will be eroded due to inflation. $819,000 in 30 years will probably only buy half as much. So it sounds good but in reality adjusted for inflation these returns are not the best.

Is that your excuse for not investing? — Garth

#132 Old Man on 01.04.14 at 5:01 pm

Now with a private corporation one can look like a poor man with a personal tax return and pay no tax if rigged right with the taxman, so on a personal return we pay nothing, but with a holding company that is where the money lies, and can be rigged all legal for getting some extra green one way or another. Hey, nothing illegal whatsoever, as work the system, and one needs expert advice to hoop the machine. I am a poor man with my personal tax return, but maybe not.

#133 T.O. Bubble Boy on 01.04.14 at 5:14 pm

@ #119 bleeding in vancity on 01.04.14 at 3:13 pm
Where do people in Vancouver get money to buy half million dollar 2 bedroom condos? Where do people in Vancouver get $3200 to rend a 2 bedroom condo?
—————
A) Drugs
B) Offshore $
C) Debt
D) All of the above

#134 Renter's Revenge! on 01.04.14 at 5:16 pm

#92 Stoopid Idiot, just a thought:

What if all public debt was converted into equity? Would that help? Does that make any sense?

#135 Not 1st on 01.04.14 at 5:20 pm

#121 Old Man on 01.04.14 at 3:24 pm

—–

I have a corporation that i run my business through and invest behind. Do you have more info about private holding companies!

#136 Rob_in_TO on 01.04.14 at 5:31 pm

It was one gift that our present government gave us in 2009 and I plan to contribute early next week $5,500 (wish it could be more) into my brokerage account. It will probably be another ETF – return for the 2013 tax year was just over 15%, and that was only since last April. Pretty good considering…I don’t know why so many people are so risk averse that they stick it in GIC’s, getting a lousy 2%.

Happy New Year Garth and all.

#137 Andrew Woburn on 01.04.14 at 5:56 pm

#99 Ralph Cramdown on 01.04.14 at 11:58 am

The World Gold Council is certainly less bug-eyed-loony than many other gold sites, but who are they? A bunch of gold miners.
=============================

Perhaps you were so busy squashing gold bugs you missed the essential point. The WGC is a trade association and does what trade associations do which is sell their product. They are about as trustworthy as the CREA. However, if they don’t know who is buying gold, who does?

My point is that not even the WGC is claiming that the world is soon returning to a gold standard in a world-wide bonfire of fiat currencies. Hopefully this will convince some readers of King World News not to hock their furniture to buy krugerrands.

Perhaps the other point gold bugs should ponder is that the Shanghai Gold Exchange reports delivering out 2,000 tonnes of gold in 2013 which is about 80% of the world’s annual mine production. What happens if they stop?

Ralph is of course right that a lot of buying will be by individuals and party officials seeking to protect themselves against rampant inflation especially in India. The Chinese central bank may also be buying gold with dollars to manage their foreign exchange rate without taking on any more US bonds.

I don’t own gold and I think that a balanced portfolio is a smarter inflation hedge, but for governments, it is still a strategic asset. One of China’s goals is to break the dominant role of the US dollar in the international oil trade. It is not hard to imagine Gulf oil states agreeing to trade with China for gold or gold-backed instruments instead of dollars. If this resulted in less dollars being held by foreigners, the excess dollars would return to the US and represent a potentially inflationary force.

#138 John on 01.04.14 at 6:05 pm

#121

Corporate holding company offers a few benefits of tax deferral and income splitting. So you can invest with pre tax dollars. But in the end you pay the same tax. I doubt a private holding company offers any benefits.

#139 Alwyn on 01.04.14 at 6:14 pm

#22 not 1st

F enables us to postpone paying tax with RRSPs.

Unless you do not pay income tax, the money one can deposit in a TFSA is net of income tax already paid. In other words, F has already taxed the money that you save tax-free in a TFSA.

For those people who do not want to risk their capital, the rates of GIC interest are often less than non-TFSA savings accounts, but they do just about keep pace with inflation.

The way to getting higher returns is by accepting higher risk.

“You takes your choice, you receives your money”.

#140 amazon girl on 01.04.14 at 6:14 pm

Garth ,so romantic….
LOVE when you write like that
p.s what is your secrect?

Tax shelters turn you on? Send photos. — Garth

#141 Dan7 on 01.04.14 at 6:23 pm

Is that your excuse for not investing? — Garth

Don’t get me wrong Garth. I maxed out tfsa its all in BCE its at $33k without this years contribution, I have 37.5K in my RRSP in stocks as well and i have another $230k in non registered accounts all in stocks. I am 31 but i just want to make sure i am doing the wright things for my future. I feel like i haven’t done enough and even if i have 2 mill when i turn 60 it wont be enough.

p.s. I haven’t bought a house yet waiting for the correction.

100% in stocks? You’re gambling, not investing. You may not like 2014. — Garth

#142 Bucky on 01.04.14 at 6:26 pm

“#53 Totalinvestor, Investing in the 10 “Dogs of the Dow” would have resulted in a 20.9% average annual return since 1973”

Interestingly there is an ETF for that, SDOG

#143 T.O. Bubble Boy on 01.04.14 at 6:36 pm

@ #132 T.O. Bubble Boy on 01.04.14 at 5:14 pm
@ #119 bleeding in vancity on 01.04.14 at 3:13 pm
Where do people in Vancouver get money to buy half million dollar 2 bedroom condos? Where do people in Vancouver get $3200 to rend a 2 bedroom condo?
—————
A) Drugs
B) Offshore $
C) Debt
D) All of the above
——————————————-

ok – I have a new theory on Vancouver… ghosts! Clearly, no one is living in many of the “most valuable” properties, as they are under construction:

http://www.vancouversun.com/business/affordability/Photos+most+valuable+homes+Metro+Vancouver/9343537/story.html

#144 Spectacle on 01.04.14 at 7:16 pm

Stunning ! Hit the bullseye nicely Garth, thanks.

Amazing blog and postings too.
#121 Old Man on 01.04.14 at 3:24 pm
“……..so have any of you with families, assets, and big money ever in your wildest dreams thought of establishing a private holding company? ……expert advice to execute assets in a proper manner for the benefit of all, and beating the taxman in certain well defined situations is so sweet.”

In answer, yes. A friend who owned his own leasing company, for his own cars, stores hard assets, etc but the leasing business had to exist to try to make a profit. But then came the tax loss company structure with Expert Advice! Don’t try this at home yourself, as apparently CRA will call, so have structure air tight. My understanding.

Also the blog responses added great content today, trust there is more of the same!

Regards

#145 Shawn on 01.04.14 at 7:27 pm

DOGS OF THE DOW

“#53 Totalinvestor, Investing in the 10 “Dogs of the Dow” would have resulted in a 20.9% average annual return since 1973″

Interestingly there is an ETF for that, SDOG

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

I am highly skeptical of that 20.9% figure. Not from 1973 through 2013. Possibly from 1973 to 1999?

20.9% is the kind of return that can make one exceedingly rich in 40 years. Just $1000 invested at 20.9% for 40 years becomes $2.76 million, $10,000 would have become $27.6 million.

Although Dogs of the DOW (invested in highest dividend yields on DOW each year) probably did well I don’t think it can claim 20.9% yearly these last 40 years.

#146 not 1st on 01.04.14 at 7:32 pm

113 pinstripe on 01.04.14 at 1:44 pm

—-

This what I refer to as the chronic b*tcher crowd – seniors and older boomers are the worst.

Buddy, you think you are so hard done by go talk to some millennials who will never have the security and quality of life you had and also have to shoulder the debt for taking care of your generation. You thought it was free? Boy are you easily deluded. Free meant somebody else got your bill. Isn’t it time for you to go vote again?

#147 LandoMata on 01.04.14 at 7:42 pm

Garth
Stop spreading erroneous tax advice. If you are deemed a non-resident for tax purposes you don’t get TFSA contribution room. Having property (furniture, investments, houses, etc.) in Canada while living abroad COULD result in you being deemed to still be a Canadian resident for tax purposes, but you need to also consider the tax treaty between the other country and Canada, as this isn’t always the case.

Would hate for a reader to get dinged for over contributing to their TFSA because of your advice.

From the CRA: Even if you no longer live in Canada, you may have residential ties in Canada that are sufficient for you to be considered a factual or deemed resident of Canada. In these cases, the regular rules for opening a TFSA still apply.

Residential ties include:

a home in Canada;
a spouse or common-law partner or dependants in Canada;
personal property in Canada, such as a car or furniture; or
social ties in Canada.

Other ties that may be relevant include:

a Canadian driver’s licence;
Canadian bank accounts or credit cards; and
hospitalization and medical insurance coverage from a province or territory of Canada.
— Garth

#148 Stoopid Idiot on 01.04.14 at 8:05 pm

105Doug in London

We have always had Ice & Wind Storm’s, Typhoons, Hurricanes, Tsunamis and so on. And as long as mankind desires to live near water, Flood Plaines, Fault Lines we’re going to have 25 year 50 year and 100 year event’s and storms. This does not mean an increase in frequency it means that our short term memory will always’ s acknowledge a new high given our short life span. I’m not sure of your personal belief system regarding what you think or feel is the contributor to the global warming, climate change phenomena but at this time is a religion and each of us are free to believe what we will. I personally think…. It’s a Tax and the Save The Planet religion is based on Apocalyptic Indoctrination, baseless and wrapped in lies and stamped with an agenda

Stoopid

#149 Pr on 01.04.14 at 8:10 pm

Their is a war between CREA and Quebexc realestate board. Read this:Laura Leyser
President
The Canadian Real Estate Association

Ms. Leyser,
It is with great surprise that I read your latest communication to our members, dated January 2,
2014, in which you encourage them to join a second real estate board, while informing them
that following so-called new guidelines from the OACIQ, you are on the verge of offering a
solution to one of the most problematic issues from your organization for Québec real estate
brokers.
As mentioned in my December 23 letter, I’m disappointed with the strategy you and your Board
of Directors have chosen to use. We are simply amazed at the bad faith you are showing. You
are well aware that we chose to withdraw from CREA reluctantly, because of your systematic
refusal to address specific issues facing Québec members, and in particular due to the problem
of Québec FSBOs found on Realtor.ca. We have told you time and time again, in writing or
verbally, that our goal was not to withdraw from CREA, but to protect our members’ and their
clients’ interests. Just last week I informed you again that we remain open to finding solutions to
the issues at hand.
Now, the day after we’ve officially withdrawn from CREA, under the pretext of having new
information from the OACIQ and to bypass the real estate boards, you contact members directly
and dangle possible changes that would enable you to remove the “offending listings” that are
displayed on Realtor.ca by the end of this month. I understand that by “offending listings”, you
are referring to Québec FSBO listings shown on Realtor.ca
It is quite obvious that no new position was announced by the OACIQ between December 31
and January 1. You can certainly imagine my surprise to see that instead of addressing this new
development first with me or with Luce Fecteau, president of the Québec City real estate board
and appointed representative for all the other Québec real estate boards, you chose to
communicate this information directly to our members.
As you know, we take our role of protecting our members’ interests at heart. That is why we’ve
met regularly with the OACIQ in the recent years to discuss this specific issue. Moreover, we
have discussed the OACIQ position with you and your representatives and until now, despite the
fact that you contributed in the violation of Québec laws, you’ve maintained your position that
you could not act on the issue.

#150 coastal on 01.04.14 at 8:13 pm

#70 Andrew,

There are increases in foreclosures in Victoria the last year and is not being reported in the media as per a well known real estate agent who isn’t concerned with his public image like some we know. The local blogsters seem to be in denial too but many a builder or flipper is taking it on the chin right now. Even the shit hole bungalow shacks have dropped under $300,000 for the first time in 5 years. The times are a changing in V-Town but the blinders are on tight.

#151 coastal on 01.04.14 at 8:18 pm

#79 seriouslynorthern, you can trade options with TD’s new system for $9.99 plus a small cost per contract. If you don’t want their system and have $50K in all investment accounts you get the cheap rate on all trades.

#152 HonestScientist on 01.04.14 at 8:19 pm

#105 Doug – unfortunately you don’t understand the basic difference between climate and weather. All the events you list are weather, and none were outside of normal (infrequent yes, but all normal and none unprecedented by a long shot).

You make the major error of assuming that if a weather event is unknown to you it is not normal. Fallacy. Climate and weather have very long time horizons with regard to normality (well beyond the period for we we have records for).

Climate change has existed since the atmosphere formed and is normal and driven by a complex mix of natural drivers. Yes, there can be an influence from human activity (so no you cannot call me a ‘denier’), but it will likely be proven to be small and well overshadowed by the natural drivers (as the post you responded to mentioned, this is starting to show up even in the IPCC reports). We can’t predict what the natural drivers will to do our future climate and weather – and the reality is we have no clue how the small human contribution will layer on top of teh dominant natural drivers.

I know it’s tough to admit to yourself that you have been lied to for purposes of political and social manipulation but that is what the Anthropogenic Climate Alarmists have done.

#153 Stoopid Idiot on 01.04.14 at 8:20 pm

#133Renter’s Revenge!

What if all public debt was converted into equity? Would that help? Does that make any sense?

Makes a lot of sense. But what does that equity look like and what was used to extinguish the debt? and who’s? Provincial, State, Municipal, Federal, Corporate, Private… regardless, It end badly, like Ralph suggested it will be the prudent that are punished

#154 Infused with Opiates on 01.04.14 at 8:33 pm

128 debtfree – if you are looking at $1M+ acreages then they are probably assessed as farmland. Place down the street here originally listed for $1.4M (way to high by any measure). Re-listed for $999 and sold at $920. I had
eyeballed $850 originally. Its assessed for $261. Good luck vultching at the assessed value.

#155 John out West on 01.04.14 at 8:38 pm

Garth

Do you as a financial advisor for say over one million dollars invest as some do for cash flow? If so, about what percentage of investments would generate cash flow?

Every client’s needs are different, and dictate the portfolio built for them. Income is generated to meet that person’s needs, and in as tax-efficient manner as possible. Often it is as return of capital, so the income is not declarable, and untaxed. — Garth

#156 bentoverpayingtaxes on 01.04.14 at 8:40 pm

If there was any level of morality in Canadian politics taxation on retirement savings would be eliminated altogether. The persons who save have advanced the economy already by contributing as consumers and lifetime taxpayers. The argument is that there is a ‘deferral’ offered on RRSP’s… what BS. The fact remains that Canadians are overtaxed in the first place. Taxes by and large can be eliminated by shaving the civil service and clawing back DB pensions. Let all civic servants contribute to an untaxed/self directed RRSP and give them the full CPP/OAS they and all other citizens recieve without additional government funding .

And…………..lets stop wasting billions on the ‘global warming’ boondoggle…when it is obvious there has been no ‘climate change’ ….only a pattern of solar activity that we have no control over. The wind chill factor will put Winnepeg at -7- degrees overnight. This will be the snowiest winter in generations. Canada has shifted billions to third world development under the guise of ‘global warming’…..how much more saving would Canadians enjoy if it wasn’t for the lunatic ‘global warming/sustainable development’ agenda of the liberal fringe?

#157 World Traveller on 01.04.14 at 8:46 pm

It can be done!

http://ca.finance.yahoo.com/news/one-family-paid-off-118-150646318.html

I wonder how much a house in Nashville costs?

#158 Bobby on 01.04.14 at 8:52 pm

For #70 and #149 coastal and Andrew,

Yes, the Victoria market is in a slow, continuous decline. Many of these listings are sitting empty and have been on the market forever. For others the listing just expires.

The BC Assessments are out and properties like mine are down 5%. Realtors like to spin that these assessments are irrelevant but there are a lot of listings where the realtors touts they are below assessed value.

One property I looked at recently has just dropped the price 10%. Still empty and in foreclosure. And it’s waterfront too.

Yes, the realtors are scrambling. Maybe time to make a few offers?

#159 Daisy Mae on 01.04.14 at 9:36 pm

#67 Andrew Woburn: “If inflation is 2% and you are only earning 2% on your GIC, you are going nowhere. If you are paying tax on the GIC interest, you are going backwards and steadily losing your real spending power.”

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

I’ll be driving my neighbour to H&R Block in the spring to pay her taxes — on GICs, and who knows what else. She thinks this is normal — just the way it is.

Ya can’t fix stupid…

Knowing what I do, in very large part due to these blogs, I just shake my head….

#160 Ronaldo on 01.04.14 at 9:43 pm

#115 Shawn – “TFSA and who’s your daddy?”

You can be certain that F will not credit Garth for this. Everything starts with an idea and is built upon by many other individuals over time. Knowing how difficult it is to get governments to move on anything, if it was Garths persistence and he was the one to take the ball and run with it and get the government to move on this, I say three cheers Garth, and thank you.

The TFSA is the best thing that has happened for
everyone with a desire to save for retirement. Especially the lower income. The RRSP was not the vehicle for most people and this has been proven time and time again.

As stated in Wikepidia:

”It was introduced by Jim Flaherty, Canadian federal Minister of Finance, in the 2008 federal budget. It was a significant measure in the budget and came into effect on January 1, 2009.[1]

This measure was supported by the C.D. Howe Institute, which stated; “This tax policy gem is very good news for Canadians, and Mr. Flaherty and his government deserve credit for a novel program”.[2] Furthermore, the Canadian Federation of Independent Business,[3] Canadian Bankers Association,[4] Bank of Montreal economist Doug Porter,[5] the Canadian Chamber of Commerce,[6] and the Canadian Taxpayers Federation[7] also supported this tax policy.”

#161 Shawn on 01.04.14 at 9:50 pm

TSFA and RRSPs are both Great

Garth mentioned in the above article that:

Well, if you put in the maximum $5,500 this year, and kept it up for the next three decades, and earned the same average as the TSX has given for the past 30 years (7%), then you’d retire at 65 with $819,000 in the TFSA. This would be equivalent to an RRSP with $1.1 million in it.

**********************************
So you need $1.1 million RRSP to have the same after-tax wealth as $819,999 in a TSFA.

This appears to assume a 25% tax rate.

Nothing wrong with that assumption but let’s say we assume a more pessimistic 40% tax. In that case you need $1,366,665 in the RRSP to have the same after-tax wealth as the $819,999 TSFA.

So it sounds like you need to save a lot more in the RRSP to get to the same place.

BUT let’s say we get a 40% tax break on the RRSP contribution.

Now we can either: 1: put $5500 per year in the TFSA or 2. put $9,167 per year in the RRSP, which costs us precisely the same $5500 per year after the tax refund. In effect we put $5500 per year into the RRSP and the government puts in $3667. We can think of “our” RRSP as funded 60% by us and 40% by the government.

Guess what? The two outcomes are precisely the same assuming the same tax rate at the time of RRSP refund as at the time of withdrawal.

Now if the two are precisely the same and we know we pay no tax on our TFSA gains then how much tax do we (ever) pay on our net $5500 contributions to the RRSP?

If you said zero, then you have read this example carefully. The apparent big bad 40% tax on the RRSP is simply repayment of the government’s 40% share of “our” RRSP. Our net $5500 contributions have grown 7% compounded for 35 years absolutely tax free (in this example).

This logic puts the lie to all those who think RRSPs are only a tax deferral. In fact they are a huge tax break.

Now this does NOT mean that RRSPs are just as good as TFSA.

They are IDENTICAL under the precise conditions of same tax rate at time of deposit as at time of withdrawal. But often that is not the case considering there are clawbacks of social benefits.

And TFSAs are far more flexible. You need earned income to qualify for RRSP contributions.

The most aggressive savers in society will max out both.

The main point of my story here is that RRSP is mathematically identical to TFSA under certain circumstances. That being the case and with TFSA being tax free then RRSP is also tax free (on your after-tax contribution amount to RRSP and assuming a constant marginal tax rate).

Despite this most people moan about the taxes they pay on RRSP withdrawals and forget all about the fact that the government subsidized their RRSP at the time of contribution.

#162 Grumpy Auld Scott on 01.04.14 at 9:54 pm

Garth; You can lead a Canadian to the TFSA but you can’t make him or her invest properly….
For the record, my wife and I LOVE the TFSA! Thank you x 100 for this great idea. We have maxed out every year and have had ours in Yankee common shares for a while and have enjoyed the US recovery and a nice bonus with the dollar exchange rate. The only thing I don’t like is that for auld farts like me they should have allowed several years of back dating to compensate for lost time – sigh – shouldn’t be greedy.

#163 World According To Garth on 01.04.14 at 9:54 pm

#132 T.O. Bubble Boy on 01.04.14 at 5:14 pm
@ #119 bleeding in vancity on 01.04.14 at 3:13 pm
Where do people in Vancouver get money to buy half million dollar 2 bedroom condos? Where do people in Vancouver get $3200 to rend a 2 bedroom condo?
—————
A) Drugs
B) Offshore $
C) Debt
D) All of the above
E)$91,000 Govt Salary funded by Wallmart and Tim Horton workers

#164 Knosty The Snowman on 01.04.14 at 9:54 pm

#147 Stoopid Idiot on 01.04.14 at 8:05 pm — “We have always had Ice & Wind Storm’s, Typhoons, Hurricanes, Tsunamis and so on.”,

#151 HonestScientist on 01.04.14 at 8:19 pm — “Climate change has existed since the atmosphere formed and is normal and driven by a complex mix of natural drivers.”
— and —
#154 bentoverpayingtaxes on 01.04.14 at 8:40 pm — “. . . how much more saving would Canadians enjoy if it wasn’t for the lunatic ‘global warming/sustainable development’ agenda of the liberal fringe?”

FYI — Pic of hotel (inside), Sea ice, Homeless Kids and Mars.

Remember when Al Bore said Snowfalls?

“Recent studies by Russian astronomers have concluded that the sun, already known to have the 11 year sunspot cycle and the 22 year magnetic cycle, shows signs of even longer cycles in activity, with the current 1200 year low in solar activity a possible repeat of the Maunder Minimum, bringing with it a new Little Ice age.” wrh.com. Baby it’s cold inside!

#165 Son of Ponzi on 01.04.14 at 9:59 pm

Garth
Stop spreading erroneous tax advice. If you are deemed a non-resident for tax purposes you don’t get TFSA contribution room. Having property (furniture, investments, houses, etc.) in Canada while living abroad COULD result in you being deemed to still be a Canadian resident for tax purposes, but you need to also consider the tax treaty between the other country and Canada, as this isn’t always the case.

Would hate for a reader to get dinged for over contributing to their TFSA because of your advice.

From the CRA: Even if you no longer live in Canada, you may have residential ties in Canada that are sufficient for you to be considered a factual or deemed resident of Canada. In these cases, the regular rules for opening a TFSA still apply.

Residential ties include:

a home in Canada;
a spouse or common-law partner or dependants in Canada;
personal property in Canada, such as a car or furniture; or
social ties in Canada.

Other ties that may be relevant include:

a Canadian driver’s licence;
Canadian bank accounts or credit cards; and
hospitalization and medical insurance coverage from a province or territory of Canada.
– Garth

A Molson Canadian tee shirt “I’m a Canadian” is o.k., too.
Jeez, are we stupid.

#166 Shawn on 01.04.14 at 10:03 pm

RRSPs not for everyone…

What we want to avoid in RRSPs of course is getting say a 25% refund on contributions and then paying a marginal tax of anything higher on withdrawals. And the total tax on withdrawal can hit 55% or more if you have a high income and are subject to the clawback.

A more normal case might be a 40% tax break and a 55% hit on withdrawal. That’s harsh but I believe that still works out to a net tax of 21% on your share of the RRSP contribution (net 15% on your part plus another 15% on the governments 40% portion for a total 21%.

High income earners are probably always going to do well with RRSPs.

TFSAs did not exist years ago and if the math is done most people would find the RRSP has benefited them. (But not everyone).

It’s also my recollection that personal tax rates are LOWER today than they were 25 years ago and so that also helps out in the RRSP comparison. Certainly marginal tax rates are lower here in 10% flat provincial tax Alberta.

Low income earnings were probably wise to have not bothered with RRSP.

As of today the TFSA may be the first vehicle of choice for most. But if in the top tax bracket, I am not so sure. Also the TFSA has the disadvantage of being just too accessible, too easy to spend.

#167 Son of Ponzi on 01.04.14 at 10:04 pm

Why would anyone safe money when borrowing is much cheaper?

#168 Smoking Man on 01.04.14 at 10:22 pm

#124 TurnerNation on 01.04.14 at 3:52 pm
Re. 7 million visits, I bet 10% are driven by Smoking Man’s posts. I notice Garth has not killed off the goose that lays the Golden Dregs
……….

Doubt that, more like 1 %. On a good day.

But it goes to show you something , 7 million and only 200 comment per day.

Humanity is so well trained, so frightened to express an opinion even with the luxury of a made up name.

OK The NSA knows who you really are. So what.

To my most loyal fans 26 and harshest critics, I respect them all when they post.

Ones who are Peeping Toms. Shame.

They don’t post out of fear of being judged, our whole culture is based on, talking with our things rather than our words.

Pure Fear.

Sad indeed.

#169 Macrath on 01.04.14 at 10:30 pm

Uzbekistan- Turon Bank

1 year; GIC- the deposit interest rate is fixed as 14%
Only cash is accepted. Partial withdrawal of assets is not allowed, or maybe you prefer term of the deposit is 3 months, the return is paid as 23% per annum

Call centre
998 95 144-60-00

http://www.turonbank.uz/en/private/deposits/national/

#170 pinstripe on 01.04.14 at 10:42 pm

#145 not 1st.

—————————————————————-

113 pinstripe on 01.04.14 at 1:44 pm

—-

This what I refer to as the chronic b*tcher crowd – seniors and older boomers are the worst.

Buddy, you think you are so hard done by go talk to some millennials who will never have the security and quality of life you had and also have to shoulder the debt for taking care of your generation. You thought it was free? Boy are you easily deluded. Free meant somebody else got your bill. Isn’t it time for you to go vote again?

————————————————————–

I WANT what was promised to me by the politicians. WHY am I being punished for being a SAVER?

I WILL talk to the politicians. I do not appreciate some politician changing the rules on me during the game. I built my own nest with NO debt whatsoever.

I don’t give a hoot about the “millennials”.

#171 Ralph Cramdown on 01.04.14 at 10:53 pm

100% in stocks? You’re gambling, not investing. You may not like 2014. — Garth

He might not. I might not, either. Over the long term, equities have the highest return. That means that if you’re young enough and/or rich enough, the optimal strategy is 100% or more in equities. It won't give you the lowest volatility. It won't give you the highest short term risk-adjusted return. But if you have the stomach for it, it will likely give you the highest absolute return.

And that's just theoretical stuff for any random point in time. Where are we, practically, today? You can find blue chip Canadian stocks whose equities pay a higher dividend than their bonds, with those tax advantaged dividends expected to grow. I know where my money is.

#172 Spaccone on 01.04.14 at 11:17 pm

#150 coastal

What new TD system? I have TD Waterhouse and the couple of times I laid my hands on options the commissions/fees felt prohibitive, and this is with a 6-figure account. A friend of mine raves about really cheap (options) fees at brokerages that aren’t major Canadian banks.

#173 KommyKim on 01.04.14 at 11:43 pm

RE: #167 Macrath on 01.04.14 at 10:30 pm
Uzbekistan- Turon Bank
1 year; GIC- the deposit interest rate is fixed as 14%

Sounds great, until you realize that the Uzbekistan Som has dropped 45% relative to the Canadian dollar in the last 5 yrs.

#174 KommyKim on 01.05.14 at 12:03 am

RE:168 pinstripe on 01.04.14 at 10:42 pm
I don’t give a hoot about the “millennials”.

And that’s why the Millennial’s and Gen X’ers don’t give a crap about your generation either. Why piss off the tax payers who will be funding for YOUR retirement (OAS/GIS) and medical treatments?

#175 Ralph Cramdown on 01.05.14 at 12:21 am

#168 pinstripe — “WHY am I being punished for being a SAVER?”

Still with the whining, Pinstripe? The biggest thing that punishes savers and rewards debtors is inflation. We’ve got low inflation. How low? Below central bank target low. Financial Post talking about rate cuts to stave off deflation low. Credible mainstream economics saying higher inflation would help more people than it hurts low.

If your mama told you that savers are always entitled to a risk-free real interest rate above zero, she lied to you. Sorry.

#176 AB Boxster on 01.05.14 at 1:23 am

#146 Not first

Don’t think that your generation did not benefit from the past decisions as well. Most Millennials were after all procreated from the boomer generation so the benefits attributed to boomers were certainly realized by you as well.

Just remember, the fact that savers are punished today, has a direct impact on your future opportunities. Unable to save with a reliable return, boomers will just continue to work for as long as they can and seniors will return to the job market.

More jobs competition for your generation and less quality of life for you.
Funny how the differing circumstances of generations can impact one another.

#177 prairie person on 01.05.14 at 1:53 am

Before anyone jumps at 14% in Uzbekistan, think back a short time ago when people were pouring money into Icelandic bank accounts because they paid 6% and into Icelandic bonds that paid 15%. Iceland was paying those interest rates because it had to to attract money. Many institutions said it was not sustainable. It wasn’t. The banks collapsed. Businesses collapsed. By by money. If Uzbekistan is paying 14% it is because the risk is so high that they have to. Just like Iceland paying 15%. Iceland is much more inside the legal and political system of the Western world but call some bond holders and ask them how much they’re going to get back on their bonds. Maybe not. They might have a heart attack just talking about it.

#178 Andrew Woburn on 01.05.14 at 1:58 am

#173 KommyKim on 01.05.14 at 12:03 am
RE:168 pinstripe on 01.04.14 at 10:42 pm
I don’t give a hoot about the “millennials”.

And that’s why the Millennial’s and Gen X’ers don’t give a crap about your generation either. Why piss off the tax payers who will be funding for YOUR retirement (OAS/GIS) and medical treatments?

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

Well lets see. Pinstripe and his generation paid for their parents pensions and health care. They probably paid for your parents’ schooling as well as yours. I think used to be called the “Social Contract”.

#179 hypocrisy? on 01.05.14 at 2:00 am

I have been reading this blog for about 4 months, and at first I really liked it, because you preached about real estate exactly what I have been thinking and preaching for the last 8, soon to be 9 years. The thing that is starting to get to me – besides your constantly bashing the people that support you – is your inconsistency.
In March 2008 you mention how the average home price in Toronto was over $400K (not sure if that was meant to include Condo’s or not), and according to the Star, the average home price in Toronto in October 2013 was $533,797 (http://www.thestar.com/business/real_estate/2013/10/03/home_prices_in_the_gta_continue_to_climb_despite_ottawas_efforts_to_cool_real_estate_market.bb.html). This reflects a 33 percent increase since then.
You recently mentioned that a market ‘crash’ is not possible, and that property values may be overpriced by about 10 percent, which would suggest that prices should be closer to $480K in October of last year.
If we take the price of $400K and increase it by inflation of let’s say 2 percent, that would bring us to roughly $450K, which is $30K lower than your proposed fair value now of $480K (assuming a 10% over value in today’s market).
Ok, so let’s say that those are rounding errors, and the $480K equals the $450K (which it doesn’t). Then what were you preaching about in 2008?

I have no idea what you’re getting at. The average Toronto price has indeed increased over the last five years, along with personal debt. It only augments the risk for each new round of buyers. My contention is that prices will correct, significantly as rates borrowing normalize, and remain a poor asset class in which to have the bulk of one’s net worth. Investing in financial assets has been a superior route, and will continue to be so. My published views have not changed. — Garth

#180 NoName on 01.05.14 at 2:16 am

#126 Salad bowl on 01.04.14 at 4:05 pm

http://tinypic.com/view.php?pic=28rocy9&s=5#.Usj08fvWNsw

#181 Renter's Revenge! on 01.05.14 at 2:23 am

To SAVERS:

Maybe you’re being punished for being SAVERS because you’re SAVERS. End the saving, end the punishment. So simple.

Think about it. What if everyone tried to save at the same time? The economy would collapse in a deflationary spiral and there would be no interest for anyone. Is that what you want? Clearly the government is trying to prevent this from happening. If you keep up this destructive behaviour, the next level of punishment for you will be negative interest rates, and then maybe Chinese water torture.

#182 Andrew Woburn on 01.05.14 at 2:51 am

#166 Son of Ponzi on 01.04.14 at 10:04 pm
Why would anyone save money when borrowing is much cheaper?

#168 pinstripe — “WHY am I being punished for being a SAVER?”
==================================

Of all the stunning social changes I have witnessed over the last sixty years including anti-discrimination laws, gay marriage and government sponsored gambling, perhaps the most staggering and unforeseeable was the transformation in our relationship to debt and thrift. I was raised around people who had lived through the Depression and who clung to each dollar as if it were a life raft. They were not so much prudent as terrified of debt. Consumer credit existed but it wasn’t easy to get. Now I see 19 year olds with $10K on their credit cards and 30 year olds who owe $200K without even a house to show for it. Nice vacations though.

Consumer debt is like heroin. The first little bit made the economy feel good but now it takes ever increasing hits to stay in the same place. The part I don’t get is that the more that Canadians pay in interest charges, the less they have to spend in the real productive economy. Does the government really think this is good policy or are they now simply unable to get off the runaway horse?

Son of Ponzi is right and so is Pinstripe. Pinstripe is being punished by what is called financial repression, one form of which is government action to suppress interest rates so that the government can pay less interest on its own debt. This amounts to a tax but it is not so obvious.

#183 Chuggy on 01.05.14 at 3:09 am

#50 do what you think is right but for the last five years you would have been much better off maxing your tfsa in an etf and not paying down the mortgage you would have made out like a bandit in the market and i bet your mortgage is 3% or less.

#184 Ronaldo on 01.05.14 at 3:15 am

A refresher from Garth from November 2012 on RSP’s for those who missed it.

http://www.greaterfool.ca/2012/11/08/the-tax-trap/

#185 Harry Wilson on 01.05.14 at 5:29 am

Some questions for any smart folks with some insight on this:

We all know how sweet a deal the TFSA is for individuals, but I’m curious about how beneficial the plan is for the government, and about its effect on the Canadian economy in general.

Right now, TFSA participation is around 50 percent, with about 20 percent of those people investing in anything substantial, so only about 10 percent of qualified Canadians have anything other than diddly in their TFSA.

Is this close to the participation levels that the government expected?

How much of this is investment that would have happened anyway, regardless of the TFSA shelter?

From the government’s perspective, is the loss of tax revenue from individual’s profits offset by the economic benefits of greater investment?

What would be the effect on government revenues, and on the economy, of an increase in participation with any legs from 10 percent to 20 percent?

What would be the effects all around of the non-participating 50 percent starting to use their TFSA, but with wimpier products like GICs and HISAs?

Political bragging rights and vote-getting aside, do F, H, and the backroom boys still think the TFSA was a good idea?

Thanks for listening!

#186 live within your means on 01.05.14 at 8:19 am

#167 Smoking Man on 01.04.14 at 10:22 pm

“Ones who are Peeping Toms. Shame.

They don’t post out of fear of being judged, our whole culture is based on, talking with our things rather than our words.

Pure Fear.

Sad indeed.”
…………………………..
Sometimes it’s “Better to remain silent and be thought a fool than to speak out and remove all doubt.
Abraham Lincoln”

Because I know very little about investing, I don’t comment on specifics. Our investments are in the hands of yours truly who I believe has our best interests at heart. Have to discuss w/hubby about putting more this year into our TFSA’s. He returns tomorrow eve. & will no doubt be stressed out for awhile due to work, etc. so I’ll have to wait before broaching the subject.

Hubby & I disagree with basic financial decisions made by many of our family members. Like many on this blog, it’s not worth creating disharmony.

#187 Stickler on 01.05.14 at 8:50 am

@ #174 Ralph Cramdown on 01.05.14 at 12:21 am

#168 pinstripe — “WHY am I being punished for being a SAVER?”

Still with the whining, Pinstripe? The biggest thing that punishes savers and rewards debtors is inflation. We’ve got low inflation. How low? Below central bank target low. Financial Post talking about rate cuts to stave off deflation low. Credible mainstream economics saying higher inflation would help more people than it hurts low.

If your mama told you that savers are always entitled to a risk-free real interest rate above zero, she lied to you. Sorry

——————————
Let’s be honest here.
Inflation helps banks.
Banks rule the world.

Banks are more important then savers, and must be recapitalized at any (taxpayers, savers) cost.

That is why you should own bank shares.

#188 Herb on 01.05.14 at 9:40 am

#167 Smoking Man,

“They don’t post out of fear of being judged …”

Easy on the universal condemnation there, SM. Some of us don’t post when we have nothing to say on a subject, unlike some people …

#189 Herb on 01.05.14 at 10:03 am

#164 Son of Ponzi,

“A Molson Canadian tee shirt “I’m a Canadian” is o.k., too.
Jeez, are we stupid.”

Actually, no. With your T-shirt and TFSA contribution room you also get the obligation to pay Canadian Income Tax on your world income.

It’s actually quite simple. You want access to the benefits available to a Canadian taxpayer, such as TFSAs, you pay the whole nine yards of Canadian taxes.

Unless you meet all, repeat all, of the requirements for officially declaring yourself a non-resident for income tax purposes – and it’s not that easy if you want to maintain some ties to Canada – CRA will claim you as one of its own.

#190 Bgreene on 01.05.14 at 10:13 am

@ #160 Shawn,

You wrote so much, but missed the strongest and most obvious factor in favour of RRSP – the difference between marginal (what you save) and effective/average(what you pay) tax rate.

Let me give you the advice I give to my students – think more, write less.

#191 Macrath on 01.05.14 at 10:59 am

#172 KommyKim
#176 prairie person

I just had a good lesson in leverage, currency, liquidity and emerging market bonds courtesy of Aberdeen FAP.TO with a 10% yield . It paid well for years then a -33% taper talk swift kick in the nads.

It`s strange that my backwater credit union pays much better than any corporate bond that I could find at the discount brokerage and they are supposedly the best for bond pricing and selection.

#192 rosie "moving forward" in the knowledge that, "this won't end well" on 01.05.14 at 11:05 am

#183 and others.

The TFSA was introduced to allow people to save for whatever in a tax free instrument. Like all registered and non registered investing, the amount saved is the responsibility of the individual. It’s a free country. The government is simply allowing people to keep more of their money. This is a good thing people.

#193 Ronaldo on 01.05.14 at 11:12 am

With RSP season now in full swing, the NL’[email protected]’s (including the tellers) and so-called Financial Planners will be coaxing anyone with a pulse to load up on RSP’s without any regard or knowledge of their financial or personal situation. Get ready for the onslaught.

The following may be of assistance to those people considered to be, according to Richard Shillington (C.D. Howe Institute) ”The Rest of Us”. These are the people without any Pension Plan, which is many, and likely to get worse as time goes on, and those at the low income levels, and those approaching retirement.

Don’t become one of the many, especially seniors without pension plans who saved diligently only to find that by doing so they would be penalized at retirement with clawbacks to their GIS (sometimes up to 70%).

This is the reason that many seniors without pension plans are sitting on a huge amounts of RSP’s that they are not tapping into because for every dollar that they withdraw, they will lose 50 cents of their GIS in addition to the tax they will pay on the withdrawal depending on how much they withdraw. So they avoid (and do without) drawing on these until forced to at age 71.

Withdrawals will also will affect any other entitlements they may be eligible for as it places them in a higher income bracket and results in disentitlement.

The effect for most in this situation and the reason for their dissatisfaction is that they would have been better to have stashed this money outside of an RSP so as to avoid the clawbacks. This is one of the main reasons that TFSA’s have come to pass. To rectify the inequities that RSP’s have on low income earners and those without pension plans.

Richard Shillington and others at the C.D. Howe institute have been researching these things for years and have lobbied the government for changes. Refer to link below. Go to the home page and you will find many other links pertaining to many other things that you will find very helpful if you are one of those people considered ”The Rest of Us”. Don’t fall into the trap as many have.

Garth has spoken to us about this in past blogs and in his books and has talked about “melting down of RSP’s”. This is a great strategy not just for low income earners but high income earners as well who are concerned about the clawback of their OAS.

Starting at age 54 (13 years ago), I started this process which enabled me to retire 10 years sooner than I’d planned. I was one of those people that started at a young age putting the maximum into RSP’s each year in addition to having a pension plan. For me being in a high tax bracket at the time, RSP’s worked out well for me. For others, it may not be so great.

Garth is doing us a great service here and we should all be very grateful. It’s unfortunate that there are so many out there that are not aware or just don’t care.

For those on this blog who are in the F.P. business, you need to read the following.

http://www.shillington.ca/Financial_Planning/Index.htm

#194 Colonial tax slave #3kj2jd76dh on 01.05.14 at 11:15 am

@stickler
That is why you should own bank shares.
—-

You should pick up a few shares in the Bank of England or the Federal Reserve System, maybe the Bank of Canada, that would be nice

#195 live within your means on 01.05.14 at 11:18 am

#180 Andrew Woburn on 01.05.14 at 2:51 am

Of all the stunning social changes I have witnessed over the last sixty years including anti-discrimination laws, gay marriage and government sponsored gambling, perhaps the most staggering and unforeseeable was the transformation in our relationship to debt and thrift. I was raised around people who had lived through the Depression and who clung to each dollar as if it were a life raft. They were not so much prudent as terrified of debt. Consumer credit existed but it wasn’t easy to get. Now I see 19 year olds with $10K on their credit cards and 30 year olds who owe $200K without even a house to show for it. Nice vacations though.
………………..

Exactly. My parents grew up during the Depression & hubby’s parents, as children, did without during the Nazi occupation. Hubby & I grew up frugally, yet his twin bro & wife have to have the granite & stainless. Both the children are spoiled.

We know several couples our age whose children were spoiled & are now spoiling their grandchildren. They’ve all got to have the latest toys, vacations, etc.

#196 Ralph Cramdown on 01.05.14 at 11:22 am

#183 Harry Wilson — ” I’m curious about how beneficial the [TFSA] plan is for the government, and about its effect on the Canadian economy in general.”

It’s a no brainer for individuals to use TFSAs, and to max them out. But who is most likely to have $5,500 of extra after tax cash per person unused after a year? High earners, and the rich. Who are in the highest marginal tax brackets? High earners, and the rich. Who would have saved and invested the money anyway? High earners, and the rich. So on a typical dollar in a TFSA, the government will lose 7%*(22% to 50%), or 1.5 to 3.5 cents of tax revenue in a year. That’s currently $500-$1,200 per TFSA of a high bracket Ontario taxpayer this year. Effectively a nice little bonus tax deduction, but not a huge one. But this amount grows exponentially every year. The benefit accrues disproportionately to those in the highest tax brackets, both because they have the means to fully fund their plan (and their kids’, who will graduate into the highest brackets later in life), and because they save the most tax.

It makes our tax system less progressive, and in a way that’s politically harder to reverse than simply lowering high bracket tax rates.

As well, there’s the banking system to consider. Less sophisticated/poorer people (say those without an accountant) are likely to be steered into TFSA savings accounts, GICs or maybe high cost bank mutual funds; they’ll serve as cheap funding for bank balance sheets or easy revenue. And for all TFSA holders, having one more account with a financial institution increases “stickiness,” which is how much of a time/money pain switching institutions would cost, allowing institutions to be less competitive.

#197 Ronaldo on 01.05.14 at 11:27 am

#180 – Andrew Woburn – good post. Right on the money.

#198 Daisy Mae on 01.05.14 at 11:57 am

#163 Nosty: http://imgur.com/rgfdnRD

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

Good luck exiting, in the event of a fire. :-(

#199 };-) aka Devil's Advocate on 01.05.14 at 11:59 am

Gotta admit I am a little concerned about prices in Kelowna these days. Inventory (supply) is down and unit sales (demand) is up (42% this Dec over last Dec). The only thing holding prices in check at the moment is the resistance to prices at the lower end (first time buyers) which works it’s way up through the food chain or not as the case may be.

While prices at the low end remain stable those rents are increasing and it is making home ownership look like a whole lot more viable option to more and more renters. This is a large contingent of what has been responsible for those increased volumes of late as the leading edge of first time buyers etc returns to the market.

If this continues prices are going to break loose and bolt forward as an onslaught of buyers perceive the need to rush in and buy before they are priced out of the market by those rising prices. If that happens, the way it typically does, this soon after 2008 somewhere down the road we’re going to end up paying a hefty price for that madness. I’m sensing it’s likely to go that way.

Might be a good time to sell… might be a good time to buy… might be a good time to sit back and watch. Your call.

};-)

#200 Ronaldo on 01.05.14 at 12:08 pm

Ever wonder what a trillion dollars looks like? Check this out.

http://governmentgonewild.org/brothercanyouspareatrillion

#201 };-) aka Devil's Advocate on 01.05.14 at 12:11 pm

#195 Ronaldo on 01.05.14 at 11:27 am

#180 – Andrew Woburn – good post. Right on the money.

Get used to it. It isn’t going away. It is, however, the beginning of the end of an unsustainable socio-economic system.

#202 Mister Obvious on 01.05.14 at 12:13 pm

#183 Harry Wilson

The greatest mistake the government made when implementing the TFSA was naming it inaccurately.

It’s an ‘investment account’ devoid of taxes, not a ‘savings account’. The general public is not too financially bright and the inclusion of the word “investment” might have caused a few more citizens to realize this was a different animal.

On the other hand, a cynic might conclude it was intentionally named a ‘savings account’ so people would ignore it like their ordinary savings accounts.

But imagine a world where Canadians abandoned RRSP’s and switched to TFSA’s en masse. There would probably be a federal surplus overnight.

Obviously, that will never happen. People are far too used to spending borrowed future tax dollars today.

I think F looked at it as a win-win. It’s a great political announcement to make (especially as it contains the words “tax tree”) and chances are good that few will make proper use of it anyway.

But, even if they do, it will likely be at the expense of RRSP contributions (i.e. more tax collected now) and if they don’t, the status quo will remain (more tax collected in the future).

#203 };-) aka Devil's Advocate on 01.05.14 at 12:15 pm

Ronaldo and Andrew

You might find this interesting

http://cultureindecline.com/

There IS however light at the end of the tunnel

};-)

#204 Ronaldo on 01.05.14 at 12:25 pm

#197 Devil’s Advocate says:

”Gotta admit I am a little concerned about prices in Kelowna these days. Inventory (supply) is down and unit sales (demand) is up (42% this Dec over last Dec).”

You’re back. So, what is your concern about the prices? That they are going to go up? Going down? What were the actual sales in December of 2012 vs. 2013? What were the sales in December of 2013 vs. those in December 0f 2009, 2010, 2011. Give us some numbers otherwise this 42% your throwing out is meaningless.

Sister has had their home on the market in Vernon since August. Newer home (1992) in the 400g range, new roof, upgraded, an awesome place. So far, a few showings, 1 low ball offer. Price reduced twice. Their own realtor has had no prospects. Just got their assessment. Down 30,000 or around 8%. Market is dead.

#205 Infused with Opiates on 01.05.14 at 12:35 pm

188 Bgreene – I understood Shawns post but I am not getting your point – can you give an example?

#206 TurnerNation on 01.05.14 at 12:37 pm

ZOMG heard part of the real estate humping show on AM 640 this am.

Realtor host said do not sell, just buy buy buy now.

– Caller said he won’t have a pension so wishes to buy a # of properties as rentals. He doesn’t have a down payment but is ‘working on it’.

– Commercials warn of paper currency and asset confiscation worldwide, that you must buy Fancy Coloured Kias and other ‘hard assets’.

– Guest host (Fort. Capital) pumping syndicated mortgages. 8% returns. Defined exit. Doubtless funded by new depositors…

(which type of borrower gets charged a rate that high…)

Am gobsmacked listening. My blood pressure went uppa uppa.

#207 Smoking Man on 01.05.14 at 12:43 pm

#186 Herb on 01.05.14 at 9:40 am
Easy on the universal condemnation there, SM. Some of us don’t post when we have nothing to say on a subject, unlike some people …
…………

You’re wrong Herb. If anyone knows the Herd it’s me.

They don’t post because of life experiences in school, they don’t want to be the kid that got centered out by the teacher and class mates when the answer to the question was not what the teacher wanted. They have seen the humiliation brought on to creative thinkers, and that fear resonates there entire life.

Much better to live in a big house, show up in a BMW, lips glued shut, things do the talking.

I ditched my things, grew my wealth, a talk alot, dare anyone that don’t like that to debate me.

No one will shut me up.
I’m superior in spirt to my teachers, and the herd that swallowed the cool aid.

#208 Peter Anderson on 01.05.14 at 12:53 pm

>>earned the same average as the TSX has given for the past 30 years (7%)

Why do you just make up figures like this? Stop deceiving people, Garth: a lot of the people who follow your blog are even dimmer than you are, and may easily lose money by following your ‘advice’.

Average TSX return since 1984 is 6%, without all dividends included. — Garth

#209 Julia on 01.05.14 at 1:08 pm

#195 Ralph Cramdown on 01.05.14 at 11:22 am

While I personally appreciate the TFSA and take advantage of it myself, i agree with Ralph’s analysis that it dispropotionately advantages those with more money, and I think this advanage with increase over time. I don’t belive that this was Garth’s intension though when he advocated for it, but i fear it will be the result.

#210 OttawaMike on 01.05.14 at 1:09 pm

Devil’s Idiot the Used House Salesman is baaack!

We’re all hanging on every one of your many words Devil.

#211 Banjopete on 01.05.14 at 1:13 pm

The sad reality as has been pointed out to me in the past is that the concerned few are exactly that, a concerned few. Think of your circle of friends and family, how many take advantage of these options? And how many of the same have the latest iphone, car leases, etc and are expecting to roll into retirement with mortgages and HELOC’s outstanding.

No big deal they think, it’s normal… Everyone’s doing it so it must be fine. Call it a social contract but at what point will people who planned and saved a little be fed up with supporting the 95% that didn’t bother because that ipad4s was impossible to resist again.

I work in corporate cubicle world and get to hear many things about folks’ lives around me for example:

23 year old coworker – very recently married, mortgaged, dog, no kids, she was aching about getting financing sorted out on her 2014 SUV of choice, just had to get it before christmas to carry a series of xmas decorating boxes. Apparently it wasn’t possible in her old beater. Final price $800/month all totalled here in Edmonton. A few weeks later, puppy’s in at the vet with a large vet bill and guess who’s freaking out on the phone to DH saying they can’t pay the bill right now and yammering about expecting a work bonus that’s been unannounced as yet this year. Happy New Year!

The little glimpses entertain me while I toil away at the salt mine. I want to slap her, and say hey! wake up you dummy! Why bother, TFSA what?, RRSP what? sound confusing, ooh but look a new dress, and those shoes, OMG!

#212 John on 01.05.14 at 1:15 pm

#206

haha… only in your dreams… a perfect post to illustrate why so many don’t bother. Utter crap out of the mouths of utter fools. And so often.

#213 Ralph Cramdown on 01.05.14 at 1:22 pm

#205 TurnerNation — “Guest host (Fort. Capital) pumping syndicated mortgages. 8% returns. Defined exit. Doubtless funded by new depositors…”

Certainly NOT funded by new depositors. That business model would leave Fortress at risk if the supply of new suckers were to run out. Fortress does deals and takes an upfront percentage, with all the risk on the individual lenders/investors.

I love Fortress Capital, because it presents a convenient antidote to all the good value, soft landing stories that banks and others spin. Fact: Bank balance sheets are awash in cash. Fact: Real estate developers are willing to pay 12%+, plus a generous fee to Fortress to borrow money for their projects. In this environment, those are rates a bank would jump at if it thought it was backed by a good business plan.

#214 googool on 01.05.14 at 1:33 pm

Garth is this for real or is it just another doomer gloomer piece of fantasy?

it says IMF is working on seizure of funds

http://armstrongeconomics.com/2014/01/05/imf-urging-rapid-seizure-of-funds-in-europe/

Of course it is crap. I am always astounded at what people want to believe, and dismayed at the charlatans who feed them. — Garth

#215 coastal on 01.05.14 at 1:37 pm

#172 Spaccone,

Here’s some TD links.

http://www.tdwaterhouse.ca/products-services/investing/td-direct-investing/commissions-fees/index.jsp

Advanced dashboard is the new system for the more active trader with same low rates.

http://www.tdwaterhouse.ca/products-services/investing/td-direct-investing/trading-platforms/advanceddashboard.jsp

#216 Bgreene on 01.05.14 at 1:42 pm

@ #195 Ralph Cramdown,

Further to what you wrote, higher income families can benefit from TFSA by helping their children maxing their contributions limits. A family with 2 children in college stashing $22k per year in tax sheltered accounts.

It is interesting that the US Roth IRA, after which the TFSA is modeled, is more progressive in this regard – there’s income cap and requirement for earned income.

As always, the laws benefit most those who the people in power represent.

#217 Obvious Truth on 01.05.14 at 2:06 pm

The Tfsa disproportionately benefits anyone that saves. Especially those not in the top tax bracket.

Wealthy people don’t care about claw backs and have other ways to be tax efficient. Many have corporations. They can retire early and eat up rsps. Income splitting was introduced for theses people too.

Remember our young family from out east. That’s who it will benefit. The average family will not suffer any claw backs or be put in a higher tax bracket.

Truth is that in Canada we are blessed with incentives to save and invest.

You get to take the investment path that works for you and then you take responsibility for your investments.

Saving is for smart people not rich folk.

#218 rosie "moving forward" in the knowledge that, "this won't end well" on 01.05.14 at 2:35 pm

Long read but well worth it for those who have the patience.

http://www.salon.com/2014/01/04/how_baby_boomers_screwed_their_kids_—_and_created_millennial_impatience/

#219 Sparky on 01.05.14 at 2:54 pm

It doesnt’ help when the information most people get about tfsa’s (and rrsp’s) is [email protected]

My wife and I went into CIBC the 2nd year they were available and the manager of the investment accounts told us tfsa’s were created by CIBC, and exclusive as well. If we wanted one we had to get it from them. Now what she was really saying wS she wanted us in CIBC’s specific tfsa “savings account”, but she really thought tfsa’s were exclusive to them. She had no idea about them other than what is read in the direction emails and however else they script their minions down below.

She actually thought she was helping us and that we didn’t have our facts straight. You see, even when [email protected] are sincere in their dealings with you, they are usually only know what the master tells them. Of course this translates into reaching in to our collective pockets and draining our cash for shareholder value.

#220 not 1st on 01.05.14 at 2:58 pm

Does a minor earn any TFSA contribution room prior to turning 18, or do they start from scratch once eligible?

Nope. 18 or nothing. — Garth

#221 Andrew Woburn on 01.05.14 at 3:16 pm

204 Infused with Opiates on 01.05.14 at 12:35 pm
188 Bgreene – I understood Shawns post but I am not getting your point – can you give an example?
==================================

I believe what Bgreene is saying is that, if you are resident for one purpose of the tax act, you are resident for all purposes, and therefore you would have to file a T1 in Canada and declare your world income. Whether that would significantly increase your tax burden depends on the source of any income you are reporting and whether a tax treaty between Canada and the country in which you are living to allow credit in Canada for any tax you paid overseas. Note there is nothing to prevent you from being a taxable resident in two or more countries at the same time.

The classic case on Canadian residency concerned a sea captain from the Maritimes who spent many years outside the country but kept his spare clothes at his parents house. As I recall it, he was found liable for Canadian tax because his habits indicated an intention to return and because he had not clearly established residency somewhere else.

Tax advisors will tell you to sever all visible ties with Canada such as bank accounts and club memberships is you want to claim you are no longer resident here so the reverse is true if you want to maintain residency. Tax residency is a legal minefield and you definitely need professional assistance. For instance, it would take all the fun out of a TFSA is you had to pay tax on its earnings in another country.

#222 Harry Wilson on 01.05.14 at 3:53 pm

Re: #195 Ralph Cramdown / #201 Mister Obvious

Thanks for your lucid thoughts, Misters Cramdown & Obvious.

Mr. C, you mentioned the stickiness of customers to their financial institutions. Here’s hoping that the TFSA will, for some, act as a ‘biopsy’ of their savings: take a measured amount ($5500), put it under a microscope, and watch it does. Sounds far-fetched, but it worked for me, and my stickiness evaporated like a year-old post-it note’s. (80% of my TFSA came out of Big Blue in December; the rest comes out in 2014.)

Mr. O, I never even considered that the TFSA may entice some dollars out of an RRSP a little sooner than it would come out otherwise; I’m sure that F wouldn’t mind even a little more tax revenue a little sooner.

If I was in charge of renaming the plan, I’d go with Tax-Free Earnings Account. To most people, ‘Savings’ is boring, ‘Investment’ is scary, but ‘Earnings’ are something that we can all enjoy, and they are what is tax-free.

Again, thank you both!

#223 espressobob on 01.05.14 at 4:28 pm

#218 Sparky

CIBC investor’s edge might be the best revenge. Bank staff are daff! I know the feeling.

https://www.investorsedge.cibc.com/ie/index.html

#224 Peter on 01.05.14 at 4:36 pm

#196

It’s a no brainer for individuals to use TFSAs, and to max them out. But who is most likely to have $5,500 of extra after tax cash per person unused after a year? High earners, and the rich. Who are in the highest marginal tax brackets? High earners, and the rich. Who would have saved and invested the money anyway? High earners, and the rich. So on a typical dollar in a TFSA, the government will lose 7%*(22% to 50%), or 1.5 to 3.5 cents of tax revenue in a year. That’s currently $500-$1,200 per TFSA of a high bracket Ontario taxpayer this year. Effectively a nice little bonus tax deduction, but not a huge one. But this amount grows exponentially every year. The benefit accrues disproportionately to those in the highest tax brackets, both because they have the means to fully fund their plan (and their kids’, who will graduate into the highest brackets later in life), and because they save the most tax.

——————-

You are correct here. As always, the government comes up with schemes to make the rich richer, and the poor, poorer. Obviously whoever makes more money will be better off with TFSAs, even if the average Canadian gets a small advantage (probably paying for it through social programs and such).

The average Canadian has to pay for expensive housing, child care, child education, etc. They will unlikely have the amount to save. And even if they did, their marginal tax rate is far too low for it to make a huge difference.

Probably why 90% realize it’s useless. The 10% (aka the rich) like it though.

Thank the conservative government for that.

Life is about choices. You can put all your money into a house and take on the decades-long obligation and joy of children, or you can save and invest. Sounds like you are bitter you cannot have it all. The TFSA is elegantly democratic. — Garth

#225 Doug in London on 01.05.14 at 4:37 pm

Honest Scientist, post #152:
I actually DO know the difference between weather and climate. Climate is average weather over a longer time period. Yes, we have always had extreme weather events, but what was once a 100 year storm is occurring far more than once every 100 years. What’s the cause, is it natural or human made? It’s most likely some of both, but why wait until it’s too late to find out the human made part is the dominant cause? We’re taking a hell of a risk not curbing carbon emissions going forward.

Stoopid Idiot (appropriate name), post #148:

Do you really believe it’s a Tax and the Save The Planet religion based on Apocalyptic Indoctrination, baseless and wrapped in lies and stamped with an agenda? You probably also believe conspiracy theories like the tragic events of 911 we’re an inside job done by the U.S. government (how did I not see that, aren’t ALL governments out to kill, injure or cause other hardship to those they govern?), or that the push to eliminate CFCs because they damage the ozone layer was also Apocalyptic Indoctrination? You probably also believe that when the medical profession tried to inform the public about the dangers of smoking in the 1960s (with much opposition from tobacco companies) that was also Apocalyptic Indoctrination, baseless and wrapped in lies and also stamped with an agenda. Of course, all doctors and others in the medical profession are communists that are out solely out to interfere with big business! How did I miss that obvious fact? Why don’t you in your opinion enlighten us (more like entertain us, to the point of hysterical laughter) with more of your paranoid conspiracy theories?

#226 KommyKim on 01.05.14 at 5:16 pm

RE: #178 Andrew Woburn on 01.05.14 at 1:58 am

#173 KommyKim on 01.05.14 at 12:03 am
RE:168 pinstripe on 01.04.14 at 10:42 pm
I don’t give a hoot about the “millennials”.

And that’s why the Millennial’s and Gen X’ers don’t give a crap about your generation either. Why piss off the tax payers who will be funding for YOUR retirement (OAS/GIS) and medical treatments?

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

Well lets see. Pinstripe and his generation paid for their parents pensions and health care. They probably paid for your parents’ schooling as well as yours. I think used to be called the “Social Contract”

That’s exactly my point. Pinstripe and his generation should care about the following generations. If they do well, they will be able to pay for his pension via taxes. Both OAS and GIS come from general revenue. The actual pensioner’s contributions have nothing to do with that.

#227 sutluc on 01.05.14 at 5:25 pm

Smoking Man; some of us are just quiet. I spent no time in school, (home schooled, grew up just past the end of the earth) but I don’t comment much.
I think the circumstances of my upbringing are the cause of my not fitting in well, but that’s another story.

I do occasionally comment on your blog.

#228 Ontario's Left Coast on 01.05.14 at 5:59 pm

Smoking Man – No one will shut me up.

While this may be true, oh how we can dream. Never confuse batpoop crazy and self-idolatry with wisdom and a sense of purpose. You are a buffoon in every sense of the word and contribute virtually nothing to this blog.

#229 Ret on 01.05.14 at 6:05 pm

I think that I have got it. Seniors put money into RRSP’s for years and got back huge refunds back each year for doing so.

In retirement, those RRSP holders decide to not cash in those RRSP’s so that they can get government welfare, sorry “entitlements”, like GIS, free bus passes, no or lower Ontario health tax premiums etc.

On their death, any unused RRSP funds are passed on to their spouse to avoid paying any taxes at that time.

They are sooo smart but unfortunately for them, they have done just what the banks and the government wanted them to do.

The CRA, in the name of all Canadian taxpayers, will plunder their estates when that day comes and so they should.

If they die in the month of December, their executor will be adding all of those pension checks for their final tax year to the RRSP funds which are now deemed as being cashed in. This pushes even more RRSP money into that top tax tier.

CRA has a feeding frenzy with the estate. Probate fees, provincial health payment surtaxes and OAS claw backs all click in too!

#230 Herb on 01.05.14 at 6:09 pm

“… take on the decades-long obligation and joy of children, or you can save and invest.”

Damnation, no one warned me, and now I see I made the wrong choice. And the offspring isn’t even grateful!

#231 nonplused on 01.05.14 at 6:20 pm

I finally got one of these and plan to put the $31,000 in and probably buy some iShares. Maybe TSX and energy. Or a growth fund if they have one. It’s not a lot of money so I don’t want to bother trading it too much, so I’ll stay away from individual names and balance the portfolio elsewhere.

So thanks Garth!!

Ps my wife already has one and she’s been squirrelling away money in it.

#232 live within your means on 01.05.14 at 6:53 pm

#209 Julia on 01.05.14 at 1:08 pm
#195 Ralph Cramdown on 01.05.14 at 11:22 am

While I personally appreciate the TFSA and take advantage of it myself, i agree with Ralph’s analysis that it dispropotionately advantages those with more money, and I think this advanage with increase over time. I don’t belive that this was Garth’s intension though when he advocated for it, but i fear it will be the result.
………………..

Do agree with you as well Julia.

#233 Lando Mata on 01.05.14 at 7:15 pm

Again, pretty misleading that the original post says all you need is some “furniture and a savings account”, and responses to the comments which state that claim isn’t entirely accurate are either deleted or passed off as incorrect. Direct from CRA website:

If you established ties in a country that Canada has a tax treaty with and you are considered a resident of that country, but you are otherwise a factual resident of Canada, meaning you maintain significant residential ties with Canada, you may be considered a deemed non-resident of Canada. The same rules apply to deemed non-residents as non-residents of Canada.

As with taxes, there are always exceptions to the rules, being deemed a resident in a tax treaty country = NO TFSA contribution

#234 Peter on 01.05.14 at 11:05 pm

Life is about choices. You can put all your money into a house and take on the decades-long obligation and joy of children, or you can save and invest. Sounds like you are bitter you cannot have it all. The TFSA is elegantly democratic. — Garth

———————————–

With the average wage in Canada being $46000, those below the average, at $20-$30k will see almost no benefit. How is that democratic in anyway?

As well, you seem to suggest that having children is a selfish decision and the wise decision is to not have children, live a minimal life not spending anything, and save and invest.

Well, I can’t see how your investments and the economy in general will do well without people spending money on things the companies that you invest in make! It makes no sense.

And who will support the older population if everybody 20-40 years old right now decided to stop having babies and invest? Who will keep the economy of the future (upon which your investments depend on) going, as well as the CPP premiums?

Makes no sense to me.

Instead, take the money thrown at the rich through the TFSA scheme (and maybe more) and invest it education. Make education universal, just like in Europe for all. Especially now, when higher education is the new high school diploma, and you can’t even get the $14/hr job without it!

That’s how you grow an economy. An educated populous with an incentive to spend money.

Otherwise we’ll be Japan version 2.0.

#235 Nathan on 01.06.14 at 6:07 am

Assuming you’re not holding 100% equities, and very few people should be, the 3% HISAs you can get in TFSAs are pretty much the best deal out there in fixed income right now. Hardly idiotic. Now, having your entire portfolio in fixed income, unless you’ve already won the game: that’s probably a mistake.