Planning

PLANNING

It’s four o’clock on a snowy Tuesday afternoon. The House settles. The gathering winter afternoon darkens the soaring stained glass windows. A young girl in a black vest scurries with a small wooden easel, and sets it on Joe’s desk. He’s nervous. Seriously. He grasps the water glass and takes a final dry gulp.

He looks at his notes for the twentieth time in the last half hour, then glances around him. Everybody’s staring, in anticipation. Andrew Scheer stands and announces him.

Applause. Huzzahs. Jeers. Showtime.

The minister of finance stands, says “Mr. Speaker,” and starts reading. At least, he thinks, there’s one sweet bomb in here. Thank God. “I am pleased to announce the government will be raising the annual personal contribution limit for tax-free savings accounts to $10,000, effective on January 1st, 2016.” The government benches erupt in orchestrated parliamentary orgasm.

I’d say the odds of this happening are now about ten out of ten. As you’d expect, the overriding reasons are political. The Harper government promised richer TFSAs in the last election, whenever the federal budget might be balanced. And the tiny 0.68% shard of black ink in the coming document will be good enough.

Of course, there’s an election in 11 months, and there’s no way the opposition parties can dis this, even though fatter TFSAs promise to make the rich richer and do nothing for people who can’t cough up an extra ten grand a year. The Conservatives understand well how it’ll play to their voting base – which is all that need be maintained for another electoral romp.

And the backroom boys know well a majority of Canadians have now opened a tax-free account, even though 80% sit in cash and most people use them to buy shoes, or drinks with little umbrellas on a Mexican beach. This is a vote-catcher. It will happen.

At the right time, too. After all, by the 19th of October next year, the Fed will have started to raise US interest rates, the bond market will be responding, and the Canadian dollar sliding as a result of that and the ongoing weakness in commodity prices. What better way of taking people’s minds off a substantially slack housing market than with the thought of a husband and wife potentially screwing the feds out of tax on twenty thousand bucks a year?

Well, get ready. And when the bonanza tax break does come, understand just what a salvation it might end up being. After all, a 30-year-old couple who can salt away $1,660 a month in the TFSAs, then enjoy a return of 7% will have a big bundle by age 60. Actually, $2,194,801, of which almost $1.6 million would be tax-free growth.

If they eschewed RRSPs completely and engineered low incomes after retirement, then this whack of money (growing at $154,000 a year) would not even result in a claw-back of their government pogey. And when the dude kicked from having so much joy, it could all fold over into his wife’s account, free of tax.

By the way, a $2.2 million TFSA would be roughly equivalent to a $3 million RRSP, which is completely taxable, and must be turned into an income-spewing RRIF at age 71. In that case the wrinkly would be required to add a minimum of $203,000 to his annual income, and lose almost a hundred grand in tax. Yikes. This is why RRSPs are tax bombs, and why TFSAs can be so sweet in comparison.

But what happens when everybody starts doing this, when the feds are losing out on billions in tax revenues, and old farts are running driving their Mercedes roadsters to Costco to spend their OAS cheques? Nothing. Because it never will.

The latest survey stats show clearly (again) why Canadians will stay in the soup no matter what tax breaks Ottawa dishes out. Manulife just found one in five homeowners figure they’ll have to sell or borrow against their equity to retire. And since most people lie or are financially clueless, that probably means 40% will be in the same boat. The data also reveals 60% of people lack confidence they’ll have enough income to maintain their lifestyles after they stop working. Half of us think we’ll never retire. Just change jobs. Sounds like fun.

And this is even before we start to see real estate give up gains, or interest rates normalize over the years to come. In other words, at least 50% of Canadians are headed for a financial shock, because they have too much house and too few liquid assets. Obsessed with real estate, we now face the consequences.

Here’s how Manulife CEO Rick Lunny put it:

“If people think they’re going to take out second mortgages and larger mortgages when they retire, that’s a pretty concerning view and evidence of no financial plan whatsoever. These people, if they’re going to retire with mortgage debt on their homes, there’s significant risk that interest rates will go up in the future. Canadians have been lulled into this sense of security because they’re paying three per cent or less on their mortgages, but that could change very quickly. People don’t have long memories and if their only reference period is the last five years or so, since the financial crisis, they better be prepared for it.”

See? I’m not the only dishrag around. Lots of people are telling you to smarten up.

Well, doubling the TFSA room has the potential to rescue vast numbers of working families from the painful choices about to level many Boomers, and suck back billions in tax. But that’ll take discipline, investment knowledge plus way less house lust.

And Joe knows what the odds of that are.

HOUSING SPENDING

188 comments ↓

#1 Shawn G in TO on 12.01.14 at 7:28 pm

In the same research, 27% of respondents don’t consider mortgage or car loan as debt. “And 11 per cent said they would consider themselves debt-free despite keeping a balance on a line of credit.”

http://www.cbc.ca/news/business/manulife-survey-suggests-27-don-t-count-mortgages-as-debt-1.2855974

I’m shocked. I don’t know where they get the idea from. They will feel that debt in about 2 or 3 years.

#2 eat pie on 12.01.14 at 7:28 pm

…but the bank manager called me very foolish to open a self directed investment account within a tfsa. Mutual fund are the way to go… mutual funds are diversified he says.

\

#3 Derek R on 12.01.14 at 7:32 pm

Hope you’re right, Garth. That extra $10K contribution room would come in handy.

#4 Randy Randerson on 12.01.14 at 7:33 pm

Huzzah! Doubling TFSA would be sweet. I just transferred $10,000 into my account today, going to juice that sucker up.

Like GT said, most people use TFSA as a saving account, forgoing the tax-free benefits.

#5 Mike S on 12.01.14 at 7:34 pm

20K per family can be challenging, even for high income family

But if you already have 300K invested in balanced portfolio (and not in that condo) yielding 7%, it is just transferring the revenues to your tax free account, without saving another cent.

#6 mid20millenial on 12.01.14 at 7:35 pm

Was about to hit my TFSA cap too. I like this news.

Don’t understand the argument that TFSA increase will just make the rich richer. Tax free gains from $5,000 probably means more to a guy pulling $50k/yr as opposed to a guy bringing in $200k/yr.

#7 espressobob on 12.01.14 at 7:38 pm

10G’s in contribution room yearly in a TFSA?

That’s the sound of music! Can’t wait!

#8 Realties.ca » Planning on 12.01.14 at 7:42 pm

[…] Source: http://www.greaterfool.ca/2014/12/01/planning-7/ […]

#9 bdy sktrn on 12.01.14 at 7:42 pm

this is great news.

rrsp best used up to before 71 then. no?

#10 Strider on 12.01.14 at 7:45 pm

Also from that Manulife survey:

Roughly one-quarter of Canadians don’t think a mortgage or car loan counts as debt.

If you owe someone money, that is a debt, folks. Do we need any more evidence that Canadians are financial basket cases?

#11 Mark on 12.01.14 at 7:45 pm

The problem with TFSA’s is that they effectively force the money of Canadians who participate them into a very narrow set of investments that are administered by only a very small handful of trustees who have gone through the trouble of being authorized by the CRA. In effect, making it more difficult for small business to obtain equity investment. The TFSA, while a good idea in theory, is terrible in the long term for this very reason. Likewise, the young person with credit card debt is far, far better off paying it off, than buying into the TFSA. Going by the numbers that Garth routinely presents on this blog as to how Canadians are actually using their TFSA, I would say its been a dismal failure of a program. An annual cumulative capital gains exemption of a few thousand bucks a year per >18-year-old taxpayer would go much further and be far more equitable.

“In that case the wrinkly would be required to add a minimum of $203,000 to his annual income, and lose almost a hundred grand in tax.”

$200k in Alberta would only attract around $63k in combined provincial/federal income taxes. Not the end of the world.

TFSAs are as wide-open as RRSPs or non-registered accounts. Are you on drugs tonight? — Garth

#12 Frustrated Kiwi on 12.01.14 at 7:49 pm

Apart from huge similarity in house price-to-income ratios, Canada, Australia, and NZ also seem to share similar dynamics in how the housing boom is playing out. In all three countries it is all about the major centres, with the provinces stalling or going backwards. Our host has talked about it being Vancouver, Toronto, and Calgary. Here in NZ it is basically just Auckland and Christchurch and I get the impression the story is similar in Australia. Anyone have any economic or psychological theories for why this is occurring? Or know if Belgium or other countries on the chart above have similar dynamics?

#13 Shawn on 12.01.14 at 7:50 pm

I’m Back… Just to Say Goodbye

A couple months ago I pledged to abstain from posting any comments here until at least December 1.

(A few of the regulars suggested I would continue to post under other names, flattering in a way but not true).

It’s been fun posting here. The blog is addictive and for those of us who post regularly (or did for a time) it becomes extremely addictive.

But it’s far too time consuming.

If one starts trying to correct everyone who seems to post something wrong, then it becomes a full time job (take Mark for example, yes PLEASE take Mark).

After years of posting here it seems most of the regulars at least NEVER change their mind on anything. Everyone wants to teach others, no one seems willing to learn anything new. It’s disheartening to see so many people so wrong and yet so sure they are right.

So I renew my vow of abstinence from posting here until let’s say at least January 1, 2016.

Good luck to all the readers and to Garth and all the regulars here. It’s been fun, but I must move on…

#14 crowdedelevatorfartz on 12.01.14 at 7:53 pm

Most of my friends couldnt contribute $1000.00 to a TFSA let alone $10,000.00.

This election “goodie” could bite the cons in the butt with the average voter seeing this as another “rich man’s” tax break.
Either way, I’ll take full advantage.

#15 crowdedelevatorfartz on 12.01.14 at 7:56 pm

@#2 Shawn
“After years of posting here it seems most of the regulars at least NEVER change their mind on anything. Everyone wants to teach others, no one seems willing to learn anything new. It’s disheartening to see so many people so wrong and yet so sure they are right.”
++++++++++++++++++++++++++++++++++++
Wow! The burden of brilliance without the humility.
Must be frustrating being so smart in a world of intellectual primordial goo.

#16 crowdedelevatorfartz on 12.01.14 at 7:57 pm

Ooops, Shawn turned from a “2” into a “9”

#17 crowdedelevatorfartz on 12.01.14 at 7:58 pm

jayzus! Now he’s a “13”?

#18 Bruce on 12.01.14 at 7:59 pm

How long before the price in the drop of oil hits the real estate market? Are we talking weeks or months?

#19 Danforth2 on 12.01.14 at 8:01 pm

Well, a 10K TFSA contribution limit per year is nice!

Here’s the bigger question… Do we anticipate employers to shift to a “TFSA matching” model, rather than the typical RSP Matching offering out there.

Garth, your prediction on this?

I’m roped into 6% of my income going into RSP, with a dollar-for-dollar match from my employer – so total 12%. Its all RSP, so building the tax bomb.

#20 Kenchie on 12.01.14 at 8:02 pm

#2 Shawn on 12.01.14 at 7:50 pm
“I’m Back… Just to Say Goodbye”

Well said. It’s true, this blog is addictive and time consuming.

It’s definitely pointless to argue over asinine political ideologies with anonymous basement dwellers. But, alas, it’s sometimes fun!

So like, my mother used to say, everything in moderation!

Cheers.

#21 Danforth2 on 12.01.14 at 8:07 pm

#6 mid20millenial
>Don’t understand the argument that TFSA increase will just make the rich richer.

Simple.
The government makes much less money on money which they can only tax once, at the employment income level, as compared to taxing it along the way as it grows (unregistered), or at time of withdrawal after all the growth has happened (RSP).

And the rich have the higher likelyhood of being able to max out a 10K per year allocation, with the comfort of never having to dip into it.
Over the course of a career – age 25-65=40 years.
That’s 400K in contribution room.
That can grow to a few million, with much less tax paid than today’s unregistered or RSP which are taxed along the way, or on all the growth at withdrawal.

#22 souvereigninternational on 12.01.14 at 8:07 pm

Shawn, let the buffet be with you, take care!

a perspective on dropping oil prices:

http://www.activistpost.com/2014/11/guess-what-happened-last-time-price-of.html

Garth I was going to buy some useless relic producers, thinking they will be on sale today after Swiss referendum, What Happened?

#23 Bobby on 12.01.14 at 8:09 pm

For #11 Mark, I agree with Garth, what are you on?

I just met with my financial adviser last week. TSFA’s are both maxed out and in a diversified mix, much like my RRSP’s. Up 9.5% to date this year.

You obviously get your advice from one of those narrow minded trustees, peddling a very narrow choice of investments. Let me guess, Grenada bank futures?

#24 Mark on 12.01.14 at 8:10 pm

“TFSAs are as wide-open as RRSPs or non-registered accounts. “

I disagree. They’re not “wide open as non-registered accounts”. There are strict rules the RRSP/RESP/TFSA trustees must follow in terms of allowable investments. Want to invest in your brother-in-law’s early-stage startup business? You can’t. Want to invest in a private placement? You can’t. Want to leverage equities without using synthetic structures like options? You can’t. Most RE is overpriced today, but in the future, it may not be — forget about investing in such directly through a trusteed account, even if you get a deal of a lifetime on a nice commercial strip mall. The vast majority of the potential investment universe is arbitrarily excluded from the RRSP/TFSA program.

My point is, as an increasing quantum of Canadians’ wealth gets sheltered within the umbrella of these registered/trusteed plans, it becomes more difficult for worthy investments outside of eligibility for such plans to raise capital. The impact of this can be profound over the long term on the entire economy. The TFSA, and even the RRSP/RESPs themselves, are Band-Aid solutions for much bigger problems that the politicians haven’t the courage to address. In the case of the TFSA, the alleged problem the Tories were trying to resolve was high effective marginal tax rates on low-income savers creating a disincentive for saving and investment.

The very flexible rules are there for a reason. To protect you from your BIL’s early-stage start-up, using tax-sheltered money aimed at retirement financing for a speculative gamble. Give your head a shake. — Garth

#25 lee bow on 12.01.14 at 8:12 pm

10K/year in saving is not for rich. At a very reasonable 20% after tax savings rate, anybody making 75-100K should be able to cough out that much. Rich will not notice. Even for the upper middle class that’s peanuts.

But the cedar deck is more important, so won’t happen.

#26 markymark on 12.01.14 at 8:14 pm

Well lets all hope for a double on the TFSA.
I still feel that at some point government will put a ceiling or restrictions on this account, I max mine out every year and the government stands to lose a wheel barrel of tax money if people smarten up and use the tool investing in aggressive all equity growth index etf and indexing funds.

Bring on the 10 k contribution limit..

#27 crowdedelevatorfartz on 12.01.14 at 8:14 pm

Cato.
Its time for your medication. Put down the mouse, step away from the keyboard and take your meds……

#28 Marco on 12.01.14 at 8:15 pm

@#1 Shawn G.

Thanks for the link.
What about in the future?
Paying higher interest rates on a depreciating asset and still not considering it debt. A bitter pill.

#29 Sheane Wallace on 12.01.14 at 8:16 pm

TFSAs are as wide-open as RRSPs or non-registered accounts. Are you on drugs tonight? — Garth
……………………………..
TFSAs have one major shortfall, the dividends on foreign stocks or ETFs are taxable abroad specially US. dividends on RRSPs are not taxed in US.

You are really limited to Canadian market which I prefer to pass.

You are not taxed on capital gains in Canada but will be taxed abroad and US dividend taxes will only increase.

If Canadian dollar tanks and al your investments in TFSA are in Canadian companies you are in trouble,

#30 souvereigninternational on 12.01.14 at 8:16 pm

#11 Mark on 12.01.14 at 7:45 pm

The problem with TFSA’s is that they effectively force the money of Canadians who participate them into a very narrow set of investments that are administered by only a very small handful of trustees who have gone through the trouble of being authorized by the CRA. In effect, making it more difficult for small business to obtain equity investment….

TFSAs are as wide-open as RRSPs or non-registered accounts. Are you on drugs tonight? — Garth

————————

Shawn + drugs = Mark

yes Shawn, it’s a goodbye jab

#31 McFly604 on 12.01.14 at 8:17 pm

#6 mid20millenial
Was about to hit my TFSA cap too. I like this news.

Don’t understand the argument that TFSA increase will just make the rich richer. Tax free gains from $5,000 probably means more to a guy pulling $50k/yr as opposed to a guy bringing in $200k/yr.
++++++++++++++++++++++++++++++++++++

I think the point was that “the rich” understand how to use a TFSA to grow wealth. Most people just use a TFSA as a regular savings account without investing whats inside it.

#32 GeorgeSoonToBeRetired on 12.01.14 at 8:18 pm

“…Canadians will stay in the soup no matter what tax breaks Ottawa dishes out.

In other words, at least 50% of Canadians are headed for a financial shock, because they have too much house and too few liquid assets.”

Garth, so far I read cheering on here about the TFSA limit increase. But your comments are profound and very true.

My income is above average and just might be able to max out my TFSA, barely. But I have zero house debt.

Everyone else I know, at work and in the family, has barely started let alone maxxed out their TFSA.

Only the delusional would support the Harperites if they bring this in.

But sadly, there are many of them.

So being “in the soup” with a “financial shock” sounds like an electrocution financial death sentence for far too many people.

I fear we are headed for great difficulties and terrible wealth disparity as a country.

#33 markymark on 12.01.14 at 8:22 pm

xec 18%
xef 18%
Vun 16%
scz 16%
ZRE 16%
XIC 16%

all equity growth funds global diversification from around the world. You can keep your bonds!!!

#34 rwm on 12.01.14 at 8:22 pm

Bah, not til 2016? Booo ;)

#19 @danforth2
My employer offers this option, albeit a share matching program and not a DCPP. They will match contbutions in your choice of RRSP, TFSA, Non-reg or a combination thereof.

#35 Sheane Wallace on 12.01.14 at 8:27 pm

The very flexible rules are there for a reason. To protect you from your BIL’s early-stage start-up, using tax-sheltered money aimed at retirement financing for a speculative gamble. Give your head a shake. — Garth
………………………
That was one of the funniest thing I ever red.
So they want to protect me from myself and bad investments but encourage and gladly ‘insure’ people with no money buying million dollar shacks?
At my taxpayers expense?

Thank you very much government.

#36 Sheane Wallace on 12.01.14 at 8:33 pm

If governments care about pensioner they should stop suppressing interest rates which is a form of stealing and let the market determine the price of money.

Every saver can claim at least 30 % theft of their savings in the last 6-7 years, market interest rates would be north of 4-5 %, not 0 or 1.

I am sick with people thinking of my well being. God save me from my friends, I can protect myself form my enemy *TM

#37 souvereigninternational on 12.01.14 at 8:35 pm

re.: #27 Sheane Wallace on 12.01.14 at 8:16 pm

TFSAs are as wide-open as RRSPs or non-registered accounts. Are you on drugs tonight? — Garth
……………………………..
TFSAs have one major shortfall, the dividends on foreign stocks or ETFs are taxable abroad specially US. dividends on RRSPs are not taxed in US.

You are really limited to Canadian market which I prefer to pass.

You are not taxed on capital gains in Canada but will be taxed abroad and US dividend taxes will only increase.

If Canadian dollar tanks and al your investments in TFSA are in Canadian companies you are in trouble,

_______________________

Hey Sheane, while I agree with your statement, knowing that you favour precious metals, why not use TFSA for Canadian Miners + metals and diversify yourself in other accounts. Effectively since they(metals) are denominated in US$ you will hedge yourself somewhat against lower C$. Also if the reward turns up to be significant it is nice to avoid taxes on your ten-bangers.

#38 Nomad on 12.01.14 at 8:35 pm

A few months ago, all over the news we read that oil was going to $115. Analysts and news writers are wrong all the time. Right now, previously over-confident analysts on BNN are a bit more timid on air. Larry Berman who one of the few to recommend selling.

That should teach people to reduce their enthusiasm for real-estate. Surprises happen. But then, most who bought real-estate lately don’t invest. So they probably are just happy about gas prices.

BMO earnings tomorrow.

#39 Sheane Wallace on 12.01.14 at 8:36 pm

and no, there would be no interest rates increase in US in 2015 so I am looking forward to that bet/100 $, really symbolic amount.

#40 Happy Renting on 12.01.14 at 8:42 pm

The first few paragraphs read like erotic fantasy fiction for investment nerds. You know your readership, Garth. $10k TFSA yearly contribution limit? I expect at least half the blog dogs will need a cigarette once that’s announced. :)

#41 Godth on 12.01.14 at 8:46 pm

These oil prices are entertaining. Prepare for the great unraveling both domestically and geo-politically.

#42 For those about to flop... on 12.01.14 at 8:46 pm

Hi Garth ,I started reading this blog for real estate purposes but recently I have been picking your brain on TFSA,s any chance you can explain some time what my options are inside of one of these accounts and how to get the 7% return?Love ya work!

#43 souvereigninternational on 12.01.14 at 8:55 pm

#24 Mark on 12.01.14 at 8:10 pm

The vast majority of the potential investment universe is arbitrarily excluded from the RRSP/TFSA program.

—————-

Glad you explained yourself. May be you are on right drugs after all.

I believe that these programs and other incentives create misallocation of capital on a scale of CMHC. But if you want no taxes and truly free markets please put on your tin foil hat end join my revo collective. In the meantime let’s use the matrix to our advantage.

#44 Retired Boomer - WI on 12.01.14 at 9:03 pm

Wow!! 10 GRAND in a tax-free TFSA? Hope this comes to pass!!
Only a Fool would pass up the growth prospects embedded in there! Even if you only have an RRSP at work with a match use it first (free money is ALWAYS best), up to the match, then fund the TFSA to the max you can, up to the limit if you are able.
I would sell the house for an opportunity like that! You might want to consider those growth prospects of TFSA over a house now that I mentioned it. GO CANADA!!

#45 souvereigninternational on 12.01.14 at 9:03 pm

#35 Sheane Wallace on 12.01.14 at 8:27 pm

….At my taxpayers expense?

Thank you very much government. see below

http://www.cbc.ca/news/politics/500m-immunization-fund-pledged-by-canada-for-developing-nations-1.2853472

#46 For those about to flop... on 12.01.14 at 9:07 pm

Re Mark” are you on drugs tonight “.
The problem with someone who is/thinks they are smart is that they tend to over think every little issue.
I do not fully understand TFSA,s but that does not stop me from going to the bank once a year and putting $5500 in my account .I am not a numbers guy but at least I am trying to learn and fend for myself.
I know Garth’s feelings on savings accounts but with so much debt nowadays I think people who have saving accounts should be encouraged not belittled.
We all have to run our own race in life and I accept my race will not be as glamorous as most people ,but I will go to work ,pay my bills and stay out of debt .

#47 Toronto_CA on 12.01.14 at 9:09 pm

It’s been said here many times but a TFSA should always have been called an TFIA (Tax Free Investing Account) to encourage people to invest with it rather than use it to hoard savings.

I could see the rules for OAS being changed to account for TFSA withdrawals as income to determine if clawback is required. And I suppose some similar defense against collecting GIS.

#48 Sheane Wallace on 12.01.14 at 9:11 pm

#37 souvereigninternational

I do not favour precious metals and my exposure is very limited, but I find the whole gold article topic truly fascinating, this could easily be the topic of the decade or century 5-10 years down the road. Or not.

And Yes, TFSA could be a good place for some precious metals miners, if one has the stomach for it. But if it is ETF on NYSE or another US exchange you still get taxed on the dividends. ‘Luckily’ there aren’t any lately…

So I don not recommend precious metals investment, It is not for everyone, if you are adventurous 5 % might just do,

#49 doomsday prepper on 12.01.14 at 9:20 pm

Let’s not forget…The Lord giveth, and the Lord taketh away. The government will just change the rules again at some point, then tax our TFSA gains…
book it!

Just. Silly. — Garth

#50 Victor V on 12.01.14 at 9:21 pm

Great news for investors.

Garth why not take this opportunity to poll your blog dogs again to see what the average visitor here has squirrelled away in their TFSA? Odds are values here should exceed national averages.

#51 Exurban on 12.01.14 at 9:29 pm

#38 Nomad

Right. I can’t recall any predictions that oil prices were going down, but they just dropped by at least one-third in the last two months. Similarly, there weren’t too many people calling for a crash in 2007-8. And when the C$ declines, sometimes it’ll lose 10% of its value justlikethat. Blink and you missed it.

Yeah, surprises.

#52 Canadian Peso on 12.01.14 at 9:30 pm

Garth

I almost get the feeling you and the fellow blog-dawgs have become a type of shadow cabinet, and a major check and balance on the Ottawa big-wigs. Am guessing, they regularly check-in here for ideas, and may even be amongst some of the posters.

My recommendation, is to peg the petrodollarette to the US dollar, and let structural adjustments occur within the system(incl. real estate). To get the full monty adjustment though, the border would have to be opened as well, in which case Canada could become a kind of Acapulco north, without the beaches, weather, or Margaritas….

#53 Adam Smith on 12.01.14 at 9:34 pm

Hopefully I can take advantage of this extra $5000 limit at some point since the refusal to pay down the debt definitely means none the social programs that I pay into my whole life will be around when I retire.

#54 Freedom First on 12.01.14 at 9:40 pm

I am very lucky. RRSP’s were very good to me. The timing of the TFSA’s happening could not have been better for me. Taking advantage of them both the way Garth has clearly laid out is very incredibly financially rewarding. Being bent over [email protected]’s desk in any position is extremely dangerous and not the way to efficiently plan for financial freedom. 2-3% MER’s and/or ball crushing leverage on 1 a$$et is never advised by any financial adviser/manager who has your best interest at heart. No exception.

#55 earthboundmisfit on 12.01.14 at 9:40 pm

In as much as this 10K TFSA limit would benefit me and mine, it is short sighted, moronic and just plain wrong. Again with the good politics, bad policy coming from the Harpocrytes. Never mind the Wrinklies spending their OAS. Fund retirement from a TFSA, defer pension, OAS and RRSP payments until 71, and they can have six years of GIS too. Just. Plain. Wrong.

#56 dd on 12.01.14 at 9:43 pm

Black Friday sales off 11%. A recovery state side? Think again … Rolling over.

Best back-to-back quarterly GDP numbers in a decade. Look at what matters. — Garth

#57 Snagglepuss on 12.01.14 at 9:44 pm

#13 Shawn on 12.01.14 at 7:50 pm
I’m Back… Just to Say Goodbye”

Why all the drama for crissakes….trying to lay a tearful guilt-trip on everyone or what……just take a final bow and head for exit stage left son…..and don’t let the door hit ya ass on the way out…..

#58 mattdog on 12.01.14 at 9:44 pm

uuum, so if you still have a mortgage that is debt.

But you are only comparing that to if you owned the house outright.

It’s probably better to rent as a retiree which means you still have a “debt” like the remaining mortgage. So I don’t really get all the fuss. Sell the fricker and rent

#59 lee bow on 12.01.14 at 9:47 pm

#12 Frustrated Kiwi
Sparsely populated countries? Harsh climate? No idea about New Zealand, but my understanding is that a lot of Australia is desert (bush). In the US, the whole area is very liveable, hence multiple centers. Closer to the border with Canada it’s also sparse.

#60 Bill Gable on 12.01.14 at 9:52 pm

Manulife has released a startling report that “many Canadians are depending on selling their home, or using their home equity, to fund retirement…”.

There you have it in a few words.

What has Mr. Turner been trying to hammer into our pea brains?

1. It all goes by really quickly. Hispters 30 year olds, included.
2. Plan now, or be like a vast number of my boomer cohort – hooped.

#61 Daisy Mae on 12.01.14 at 9:54 pm

#7 espressobob: “10G’s in contribution room yearly in a TFSA? That’s the sound of music! Can’t wait!”

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

Yippee! (???) Maybe you can do it. The vast majority of Canadians, can’t. And that’s what the government is banking on.

These politicians are supposed to be working for us. We ‘hired’ them to do a job. But their only priority is themselves. What a disappointment.

We Canadians are letting ourselves down. But, I guess we get what we deserve….

#62 Nacho Cheese on 12.01.14 at 10:00 pm

#13 Shawn on 12.01.14 at 7:50 pm
I’m Back… Just to Say Goodbye

Sad to see you go, Shawn. You were my favourite poster on here.

Thanks for all your informative posts over the years and wish you well.

PS: Perhaps quitting cold turkey isn’t necessary – you can always share info on undervalued stocks you have your eye on every once in a while. You seem to be a natural at picking solid investments. :)

#63 80'sKid6$4 on 12.01.14 at 10:03 pm

We get taxed on the money when we labour for it, then when we spend it and even when we save it effectively. Tax on tax on tax. Gotta love it!

#64 Darryl on 12.01.14 at 10:04 pm

What if your t4 is at 120k ? Shouldn’t you bring down your taxable first?

#65 Banjopete on 12.01.14 at 10:09 pm

I don’t think anyone is suggesting this as a platform as such. Merely an enticing bone to the already convinced conservative masses. More places to hide my money from the government? Sign me up.

This won’t help everyone but it’s not supposed to, it’s just supposed to sound alluring to those that even understand what it could mean.

Everyone else will just gloss over it and focus on the giant increase… in childcare benefits for young parents or… whatever campaign promise appeals to them, or …whatever it is the person on the tv tells them is important.

#66 dd on 12.01.14 at 10:09 pm

#56 dd on 12.01.14 at 9:43 pm
Black Friday sales off 11%. A recovery state side? Think again … Rolling over.

Best back-to-back quarterly GDP numbers in a decade. Look at what matters. — Garth

YoY GDP a little over 2%. Usually that is a standard measure. You are Cherry picking Garth.

If you claim something is ‘rolling over’ it implies a current action. I just proved you wrong. — Garth

#67 NS in Calgary on 12.01.14 at 10:12 pm

#13 Shawn on 12.01.14 at 7:50 pm

Thanks Shawn for answering my questions in the past and sharing the knowledge.

#68 Happy Renting on 12.01.14 at 10:12 pm

#55 earthboundmisfit on 12.01.14 at 9:40 pm

Take comfort that most people are not crafty and wealthy enough to game the system this way.

I am curious about the nature of the outrage over this loophole. If someone funded their living expenses from 65-71 from a Tangerine 1.30% interest account would people still be as fussed over the pension deferral and GIS collection? Is it mostly that the scenario publicized focuses on TFSA withdrawals? We have known from the start that TFSA withdrawals would not be counted in income used to calculate clawbacks of low-income entitlements. Why the surprised furor over an extreme (and rare, if currently practiced at all) scenario?

#69 Linda on 12.01.14 at 10:15 pm

Love today’s photo! Would also love to see TFSA annual contributions goosed to $10,000 per annum – hope Garth is correct & this little goodie comes our way.

Regarding the TFSA being ‘only for the rich’ I’d say not. If 70% of Canadians have no pension plan they should set up a TFSA & do their best to max it every year. The easiest way to do this is to set up an automatic deduction off the pay so the money isn’t there for you to spend. For all those who say ‘can’t be done’, well yes, if you won’t try you are correct, it can’t be done. Plenty of folks out there who have garnishees because they owe money & surprise, when the garnishee occurs they CAN live on less because they have no other choice. Is it fun? Not at first, because it does take a while to adjust to having less.

#70 TH on 12.01.14 at 10:18 pm

If the $10k limit happens, whats the best way to save? I’m currently putting about 5% of my take home income into my TFSA and 5% into RRSP. Would it be better to max the TFSA (about $385 per biweekly paycheck) or keep an even split between TFSA and RRSP? (Assuming both are invested in balanced portfolios)

#71 Smoking Man on 12.01.14 at 10:27 pm

Don’t leave Shawn. But I do understand some what.
There’s only so many topics you can cover before you sound like a broken record..

What amazes the shit out of me is Gartho.

6 days a week supreme orginality, covering basically the same topic…

Blows my mind. I’m my case these days, I’m having trouble of even saying hello.

It’s not the morning, (as in being sad) at leased I don’t think so.

but actually have gone gang busters on my stupid like book that will never sell.

I can’t give it and this blog 100% they need to take turns.

You can’t be effective and do in both, there’s a seminar by what looks to be a supreme smoking man at the Sheareton in Toronto on Friday. .

Get rich selling your book. Obviously I’m going but, more from a study the sales pitch than a customer.
Plus I may learn something. But more importantly, life is short, another chance for downtown pints.

#72 nonplused on 12.01.14 at 10:35 pm

There is only one thing to do. Reduce the taxes on motorcycles, booze, and smokes so people don’t live so long. But Fukashima may have already taken care of that.

#73 Frustrated Kiwi on 12.01.14 at 10:43 pm

> #42 For those about to flop…
The archives are well worth a read on this site, but here’s a couple of recent posts on your 7% question:
http://www.greaterfool.ca/2014/05/15/the-millennial-portfolio/
http://www.greaterfool.ca/2014/11/14/managing-risk/

#74 blobby on 12.01.14 at 10:45 pm

I still believe we wont be waiting until October for the election.

I bet we’ll have one before April.

The number of ads on the radio/tv the tories are running at the moment (telling us trudeau is evil – and paid for by our tax dollars) seem to be escalating in the last few weeks…

#75 Chickenlittle on 12.01.14 at 10:48 pm

Please don’t mention the election Garth! Trudeau and Mulclair make ol’ Harpo look like a knight on a white horse. (now theres a mental picture) I’d rather see Justin give someones hair highlights than run the country.

I just paid off my Visa..yay. $3k plus gone in one shot. Woohoo. I dont know if anyone else feels like this but here goes: it almost feels like a waste of money paying it all down. I feel like I threw my money away for some odd reason. Was it the right thing to do? Yes! I guess it’s because I worked so hard for that money and now it is gone. I felt like this after my wedding too. Lots of work and for what? I could have gone to city hall, then ordered pizza and wings and the results would have been the same: I’d go home with a husband.

Sheesh! Who knew doing the right thing would be so conflicting!

#76 james on 12.01.14 at 10:53 pm

CTV national news tonight is apparently doing a story on seniors trying to survive retirement by borrowing against their properties.

News at 11.

#77 bigtown on 12.01.14 at 10:55 pm

FOR LEASE VACANT TATOO ARTIST STUDIO in strip mall on well exposed main drag in the Italian cultural centre of Vaughan.

I swear it’s true..and it is right next door to another empty premises with a FOR LEASE sign in a big window.

Does all this real cheap oil come as a harbinger of future prices in overpriced rents and assets?

People are not owning up to the fact that the PEACE DIVIDEND which we all were blessed with in the 1990’s after the collapse of the Soviet Union is OVER and now we are in a very up-in-the-air age of deflation and endless dead-ends in military actions and conflicts. If we could back up the Canada train and put it on the track of peacemaker and humanitarian rescue mission only it might make a difference at home and abroad.

#78 Kenchie on 12.01.14 at 10:57 pm

#46 For those about to flop… on 12.01.14 at 9:07 pm

“I know Garth’s feelings on savings accounts but with so much debt nowadays I think people who have saving accounts should be encouraged not belittled.
We all have to run our own race in life and I accept my race will not be as glamorous as most people ,but I will go to work ,pay my bills and stay out of debt .”

Indeed. Not everyone wants to put their capital at risk. Each to their own. But at least they are saving! Some savings is better than no savings, and god knows that lack of savings is a big problem in North America and the UK (probably Australia and NZ too).

However, the person who mentioned TFSA should be renamed to TFIA is on to something. It could be one of the simplest change that alters behaviour of average joes towards investing.

#79 JSS on 12.01.14 at 10:59 pm

Today I bought shares of CN Rail for the ol’ RRSP.

#80 ozy - TSFA is useless until you've paid your mortgage on 12.01.14 at 11:04 pm

to me – TSFA is useless until you’ve paid your mortgage. Useless, useless, useless. Like all Canadian modern products aimed only at the 1%.

Same goes for RESP. Useless, useless, useless until you’ve paid off the last dollar from the mortgage.

RRSP might makes sense (before paying off your mortgage in an accelerated fashion) but only for individuals in higher income brackets, e.g. $100,000 and up in taxable job income a year aka not a small business.

Cheers to yet another year in which I pay 10% of the mortgage in a lump sum!!! Just in time tomorrow.

I envision a mortgage free Ozy in 2.5 years (or maybe a mere $20000 left on a LOC) and house will be 1.25 million by then. 1.05 mil. currently.

What a beautiful life! Who cares at all about TSX???? hahahaha

#81 Ret on 12.01.14 at 11:07 pm

Let interest rates rise and people will save. Keep distorting risk and reward for savers with suppressed interest rates and they won’t save. Just call me Mr. Genius.

The need to bribe potential voters with TFSA’s is just a reflection of yet another failed government policy, namely, low interest rates at any cost.

Now that housing has been allowed to reach record highs due to CMHC backed mortgages, the poverty groups are demanding that more affordable housing be built. With the price of housing and rents in urban centers, can you blame them?

Let me guess. Another federal government program to somehow “fix” rapidly escalating shelter costs created through government backed CMHC mortgages while not alienating those voters who think that their clapped out semi in Van or T.O. is worth $1M.

The federal Conservatives micro managing a planned Canadian economy and the provincial Liberals stick handling the numbers in Ontario. It just keeps getting better and better.

#82 Victor V on 12.01.14 at 11:17 pm

http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/2014/12/01/canadian-consumer-confidence-on-the-decline-as-worries-about-job-prospects-grow&pubdate=2014-12-01

The Conference Board of Canada’s latest survey, released Monday, showed a continuing three-month decline overall in consumer optimism — coming during a time of an increasingly uncertain economic environment globally and an inconsistent performance in this country.

The Ottawa-based think-tank said its consumer confidence index fell to a reading of 82.7 in November, down 1.4 points from October and 5.2 points from September.

#83 Retired Boomer - WI on 12.01.14 at 11:17 pm

#13 SHAWN

Sorry to see you go, at least until the New Year. Yes, the blog is time consuming, thought provoking, and I have learned a great deal here from the host, as well as informed posters like you.

Better to be here part-time than no time. Consider the options, your posts were helpful and informative, unlike my one-hit wonders.

#84 For those about to flop... on 12.01.14 at 11:17 pm

Re # 73 frustrated kiwi .
I looked at the links you gave but I was more looking with option within the TFSA umbrella .
Thanks my southern neighbour .

#85 Kenchie on 12.01.14 at 11:22 pm

#75 Chickenlittle on 12.01.14 at 10:48 pm

“I just paid off my Visa..yay. $3k plus gone in one shot. Woohoo. I dont know if anyone else feels like this but here goes: it almost feels like a waste of money paying it all down. I feel like I threw my money away for some odd reason.”

Lol, you “threw [your] money away” when you swiped the credit card in store or online!! You figuratively throw away money when you don’t pay off your credit card by the billing date.
——————————

“Was it the right thing to do? Yes! I guess it’s because I worked so hard for that money and now it is gone.
I felt like this after my wedding too. Lots of work and for what? I could have gone to city hall, then ordered pizza and wings and the results would have been the same: I’d go home with a husband.”

Correct. It’s all about choices. Each to their own. Too bad you’re learning this after spending so much capital. But better late than never!
————————-

“Sheesh! Who knew doing the right thing would be so conflicting!”

Often the hardest thing to do and the right thing to do are the same. Think of it this way, the “easy” things to achieve are in oversupply (i.e. low-cost labour), so there is no return on investment in doing them. It’s the hard things to accomplish that are in short supply, and thus offer a premium on investment.

Good luck.

#86 Musty Basement Dweller on 12.01.14 at 11:25 pm

Question: if a boomer mortgages his place to the hilt, then property values drop a lot, then he croaks not long after..what happens to the debt when he croaks? Does that become an different type of gift from the bank of Dad to the millennial kids of the estate?

The estate pays the debt, unless it is insured, usually through the sale of the property. — Garth

#87 JimH on 12.01.14 at 11:36 pm

#56 dd #66 dd

What you fail to realize is that down here, “Black Friday” began sometime around Hallow’een!

I’m currently in Houston, TX; the traffic is horrendous, and most mall parking lots are packed. Internet sales are up and nimble retailers who can adjust to this new paradigm are thriving.

#88 wallflower on 12.01.14 at 11:37 pm

#56 dd on 12.01.14 at 9:43 pm
I would like to know the November 2014 numbers versus November 2013. I did my buying early in the week because the discounts were 40% and I knew I’d get my size/colour.

#89 Frustrated Kiwi on 12.02.14 at 12:03 am

#84 For those about to flop

Well I could be totally wrong, but my impression from reading this site is that you can invest in ETFs (like those in the postings) from a self-directed TFSA. Hopefully someone who actually knows something about it will reply more usefully and definitively.

The Kiwi is correct. — Garth

#90 Bottoms_Up on 12.02.14 at 12:04 am

#1 Shawn G in TO on 12.01.14 at 7:28 pm
————————————————–
Mortgage debt is an interesting thing….it’s back by an asset that has value. Yes that value can fluctuate, but it largely goes up over time [unlike most cars](but can decrease over the short term).

Therefore, someone carrying $100,000 mortgage debt on a $500,000 house may not see that as debt at all, as in the overall balance sheet they are +$400,000.

It’s the news cycle trying to make stories out of nothing.

#91 Bottoms_Up on 12.02.14 at 12:08 am

#13 Shawn on 12.01.14 at 7:50 pm
————————————————–
You shouldn’t feel the need to correct everyone…let them bask in their own ignorance. There are many people on here that do learn from intelligent arguments.

#92 Shawn G in TO on 12.02.14 at 12:10 am

Hey Mark,

sometimes you seem like the most knowledgeable guy on this blog (after Garth, of course), other nights it’s like you left your computer on, and some drunk posted some crazy nonsense while you were away.

Tonight, it’s a little bit of both.

TFSA is still meant to be a retirement saving vehicle. While helping your bro-in-law with his little start-up is nice. but little companies have the nasty tendency of going belly up. not good for your retirement.

However, Mark is not all wrong. Suppose that bro-in-law has a well thought out business plan. Now, TFSA becomes a competition of your investment dollars, and TFSA has the advantage of 0 tax on capital gains.

It’s not hard to see TFSA (and RRSP) has the effects of benefiting the stock markets. As more money is attracted into those types of plans, less money is available to invest in our small and mid-size businesses that are not part of the market. On a country-wide scale, the money diverted is substantial.

#93 Happy Renting on 12.02.14 at 12:12 am

#84 For those about to flop… on 12.01.14 at 11:17 pm

Use the asset allocation suggested by Garth, figure out how much capital you have to invest in RRSPs, TFSAs, and non-registered, and based on tax implications hold the different asset types where it makes the most sense. If you only have the TFSA, then it all goes there. You asked about the 7%-average-returning, diversified portfolio, and that’s what was in the links that Frustrated Kiwi provided.

#94 Bottoms_Up on 12.02.14 at 12:12 am

#25 lee bow on 12.01.14 at 8:12 pm
———————————————–
Disagree. Most people live paycheque to paycheque. The TFSA is largely for people with money to burn…whether that be DINKs (Double Income No Kids) or students on tax-free bursaries. Regular earners in large cities and even upper-middle income families in large families do not have $20,000 kicking around every year as discretionary money.

#95 For those about to flop... on 12.02.14 at 12:21 am

Kiwi and Garth,Thankyou for your patience I am trying to learn when I go to the bank they make it sound so complicated trying to sell me products I,m not interested in ,ideally I think it takes a while to weigh up risk versus reward.

#96 VanDammeCouver on 12.02.14 at 12:47 am

# 91 Bottoms_Up on 12.02.14 at 12:08 am

“There are many people on here that do learn from intelligent arguments.”
___________________________________

Except for Mark, lol

#97 NoName on 12.02.14 at 12:51 am

@crowdedelevatorfartz

you are so rght, that an average voter is or will see this (10k tfsa) as another “rich man’s” tax break. so lets speculate how median suburban canadian family of 4 is doing.

two working parents with median income around 80k. (each person is earning 20$ an hour)
I personally cant see how median suburban canadian family can have any benefit of increased TFSA, maybe, maybe some money goes to one TFSA, but there is no chance in hell to maxed them out on income of 80k, for that family it is partial TFSA or or skip vacation, full funded RESP dilemma.

i kind of made basic monthly budget for that imaginary family of 4, just basic budget would consume 70k out of 80k of pre tax income.
we can argue a point do they need 2 cars, but considering that an average payment for car loan in canada is 550$, 75$ difference could be added toward manufacturers’ recommended maintenance schedule that runs around 600-800$ a year.
so, one car two car red car blue car irrelevant…

http://globalnews.ca/news/1133080/the-rise-of-the-8-year-car-loan/

1300 shelter & property tax
0800 food
0400 car1 loan
0225 car2 loan
0350 car ins
0150 car gas
0170 life insurances
0220 flex benefits
0320 basic discretionary spending clothes
0120 nat gas
0200 hydro/water
0060 cell1
0150 home phone & internet cable
0050 cell2
0100 home insurance
0150 kids sports activities
0050 bacon

#ElectionNightSpecial
https://www.youtube.com/watch?v=31FFTx6AKmU

#98 Frustrated Kiwi on 12.02.14 at 12:56 am

#89 Frustrated Kiwi
The Kiwi is correct. — Garth

Ha! Maybe I can set myself up as a financial advisor to ex-pat Canadians. :-) Or maybe I should just spend less time on this site. For those wanting a chuckle, our semi-equivalent of TFSA is called “kiwisaver.”

#99 Capt. Obvious on 12.02.14 at 12:57 am

I would be stoked to be able to put 10k per year into my TFSA. Let’s do this Joe!

I think they’ll call a spring election. I think the conservatives are shrewd enough to realize a housing melt could play against them, and they will not want to chance being torpedoed by it.

#100 Job Nomore on 12.02.14 at 12:57 am

20 Grand in Tax free contributions per couple…..that’s not what I’m hearing from Junior T and his buddies. I voting for Harper…..twice.

#101 bob on 12.02.14 at 1:03 am

Looks like Alberta oil – western canada select dropping off the cliff, now $55.

Wow!

#102 devore on 12.02.14 at 1:16 am

#90 Bottoms_Up

Mortgage debt is an interesting thing….it’s back by an asset that has value

Therefore, someone carrying $100,000 mortgage debt on a $500,000 house may not see that as debt at all, as in the overall balance sheet they are +$400,000.

It’s still debt, it doesn’t magically become debt only when you cross into negative net worth.

#103 Tony on 12.02.14 at 1:25 am

$5,500 or 10 G’s a year will make the poor slightly less poor. I’m also guessing it’ll make a lot of people poor when the stock market collapses and they never have any money left over again to start any new TFSA. Negative or flat returns will be the norm in the stock market until the stock markets normalize some 75 to 90 percent lower than the present absurd valuations. What needs to get changed in Canada is being able to short stocks in a L.I.R.A. account. ETF’s tend to erode over time as do inverse ETF’s.

#104 ryan on 12.02.14 at 1:34 am

What’s the point of having an RRsp then if it’s taxable? Why not just use TFSA then?

#105 kommykim on 12.02.14 at 1:35 am

RE: #24 Mark on 12.01.14 at 8:10 pm
In the case of the TFSA, the alleged problem the Tories were trying to resolve was high effective marginal tax rates on low-income savers creating a disincentive for saving and investment.

I think what the Tories really intended was for earned income to be taxed TODAY and not sometime in the distant future under another governing party.
Effectively, RRSPs take tax revenue away from the government of today and give it to some other governing party in the future.

#106 kommykim on 12.02.14 at 1:53 am

RE:The estate pays the debt, unless it is insured, usually through the sale of the property. — Garth

Yea, but what happens when the estate doesn’t have enough money to pay off the debt? ie: A 200K mortgage on a 150K house (After a RE crash) and no other assets?
Who pays the bank the 50K?

#107 Mark on 12.02.14 at 2:00 am

“The very flexible rules are there for a reason. To protect you from your BIL’s early-stage start-up, using tax-sheltered money aimed at retirement financing for a speculative gamble.”

Oh come on Garth. As it stands with RRSPs, I can take every last dime of my money and put it into some not-very-viable, albeit publicly listed gold mining company in Manitoba trading at 5 cents/share. The epitome of risk. But the rules won’t allow me to, heaven forbid, invest directly in real estate (even if prices do crash to where we greaterfools think they will). Or invest in the BIL’s start-up.

Seems like a bunch of pretty silly rules to me. On one hand, they purport to protect me by restricting me to only publicly listed investments. On the other hands, there are tons of very crappy publicly traded investments, high-MER mutual funds, or, heaven forbid, the 0% “savings” accounts hawked by [email protected]

Personally I view the whole matter of RRSPs, TFSAs, etc. as symptoms of a system of taxation and government that is out of control and incoherent. We shouldn’t need acts of government to protect us from the workings of government and the tax system. Fix the system, don’t over-complicate the tax code and create a cottage industry of accountants and financial planners to help people game it. I pointed out a profoundly negative systemic problem with allowing Canadians to put more of their money into these tax shelters — the tax shelters create a preference for certain types of investments over others. Almost as bad as what they’ve done with the CMHC, and that is, create an investment preference in subprime debt to the exclusion of many other sectors of the economy that could actually create wealth, diversification, and jobs.

And no, I don’t drink. Never really liked the stuff.

#108 nonplu$$$$ed on 12.02.14 at 2:18 am

Well there is a certain amount of tone today that TFSA’s are only for the rich, because holy moly who can come up with $20,000 a year (as a couple) to save. And yes, you have to be fairly well off to max out your RRSP and then come up with 20 large.

But most people can’t save the full amount available in their RRSP either because your RRSP is limited by income. You have to be making north of $100,000 a year to be able to make the max contribution. So in some ways the TFSA is better, because everybody gets the same contribution room.

Now to be fair I don’t know how someone making $60,000 a year would be able to put $20,000 into a TFSA, but they sure as hell can’t put it in an RRSP.

So the argument might go well, only rich people are able to put in $20,000 a year. The rich should be taxed more. Always more more more, even though 20% of the people pay 80% of the taxes already. But the point is money going into a TFSA has already been taxed! RRSP money no. The only money from a TFSA that hasn’t already been taxed and won’t be is gains. The seed capital is all already taxed.

All that said I don’t see why the government would create such a thing without a purpose. They will come for that money, somehow. Maybe CPP becomes mean tested. It already is somewhat, you have to include it as income along with your pension or RRSP withdrawals. But maybe one day they’ll go “oh, but you have $2mill in a TFSA. No CPP for you.” Probably better to take that risk if you have the means though. I don’t trust CPP as far as I can throw it.

#109 Yitzhak Rabin on 12.02.14 at 2:24 am

“Look at what matters”

Lol. How about the US national debt reaching $18 trillion today. Maybe you are of the Dick Cheney school of thought where debt and deficits don’t matter.

Interesting that you haven’t touched on the BOJs increase in QE two days after the fed ended theirs. Must be slightly uncomfortable for one who thinks “central banks have never been more in control”.

The Dutch also repatriated 122 tons of gold from the US, GOFO rates are negative 1 year out which has never happened before.

Someone may be getting nervous.

#110 Freedom First on 12.02.14 at 4:01 am

#90 Bottoms_Up

Net worth is your assets minus your liabilities. All debt is a liability. No exception. Not even for idiots.

#111 BigM on 12.02.14 at 5:29 am

@86 MBD

The kids would not be forced to pick up the debts.
But the executors of the estate would be forced to sell the house, and any other assets to retire the mortgage.

In your scenario, the kids get.. nothing.

http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/if-parents-die-in-debt-do-children-inherit-the-bills-not-necessarily/article12521231/

#112 CdnFlyer on 12.02.14 at 6:44 am

Anyone else find it ironic that as soon as someone disagrees with Cato the Naive, he attacks you, calling you blind and asks for you to disprove his theories? However, his rants include zero proof, but a tonne of hyperbole.

#113 Millenial on 12.02.14 at 7:18 am

Hey Garth,

Why do you think it’s going all the way up to $10,000? I mean, that’s a big jump, from $5500 to $10k. Why not $6500 or $7500.

I agree with other posters, if you less than $60k a year like most Canadians, putting $10k in a tfsa is almost impossible unless you eat spaghetti every night, walk to work, and live with your mom.

The move to $10K was promised in the last federal election. — Garth

#114 I'm stupid on 12.02.14 at 7:43 am

106 Kommykim

No one, the bank loses the money. It’s the same as a bankruptcy, just due to death.

Not exactly. Any debt of the estate, guaranteed by the deceased, is payable by the estate, which means all assets are taken into consideration. — Garth

#115 I'm stupid on 12.02.14 at 7:48 am

#70 TH

That depends, are you expecting your income to be more or less in the future? If it’s more max out your tfsa first. If it’s less max out the rrsp, then when your income falls, withdraw from your rrsp and put the funds in the tfsa.

#116 Kevin on 12.02.14 at 8:17 am

If they eschewed RRSPs completely and engineered low incomes after retirement, then this whack of money (growing at $154,000 a year) would not even result in a claw-back of their government pogey.

Don’t count on it. 30 years is more than enough time for political sentiment to turn against this “welfare for the rich” and make TFSA’s much less financially compelling.

Abandon good investing habits today because of what might potentially happen in 30 years. Yeah, that’s wise. — Garth

#117 Victor V on 12.02.14 at 8:30 am

http://m.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/as-oil-prices-tank-alberta-boomtown-fort-mcmurray-yields-to-caution/article21865008/?service=mobile

“You want to make sure that our $1.5-million houses’ value is not going to be $200,000 in 10 years,” one municipal official said at that meeting. She said the oil companies and city are working together to make sure noting of the sort happens: “These discussions are very serious, in the high level.” Some homeowners say the real estate market was softening long before the price of oil started to drop.

“We’ve seen our price dip 15 to 20 per cent over the last 18 months,” said Jon Tupper, 41, the homeowner who asked whether he should sell his house. But he adds that he still wants to upgrade to a home nearby.

#118 Craig on 12.02.14 at 8:46 am

Most of my friends couldnt contribute $1000.00 to a TFSA let alone $10,000.00.

This election “goodie” could bite the cons in the butt with the average voter seeing this as another “rich man’s” tax break.
Either way, I’ll take full advantage.

It’s not that they CANT. It’s thay they won’t, our generation (gen y) would much rather go out on the town every weekend then save 100-200 a week and invest in their future . Schools don’t teach financial responsibility which will be the downfall of our future. Baby boomers money will be wasted on the coolest new cars, the biggest TVs and family vacations.

#119 Detalumis on 12.02.14 at 9:10 am

#24 Mark is right. You need to give your own head a shake. You congratulate and encourage this ragbag of cheapskate future senior millionaires who think collecting GIS while having a multi million dollar TFSA account is the golden ring.

What exactly is wrong with supporting the dreamers in the basement who have more ideas than “sense”. Joyce Young, the aunt of Bob Young, was stupid and silly to invest in Red Hat shares to fund her nephew’s startup. As she said “While I respect Bob as a businessman, I quite honestly never thought I’d see my money again. I really just wanted to support him”.

Okay she did go on to sell 40 million dollars worth of shares and donate it to charity but hey she didn’t have a BALANCED PORTFOLIO and that’s all that counts in life. Her nephew should have got a real job in Fort McMurray kept his nose to the grindstone and his head out of the clouds.

Keep on encouraging everyone to live narrow little lives, afraid of taking a risk, castigating the dreamers and living a life that’s “a whole lot of nothing”. After all that’s the great Canadian dream, to get a place in the really, really good retirement home, the one that has the menu where everything is “au jus” and the lettuce is always “crisp”.

Take as much risk as you want. But don’t expect to use a tax shelter to do it. The risk properly belongs to the investor (who will keep the profit), not the taxpayer. The rules already allow you to deduct losses from gains for speculative ventures – that’s enough of a subsidy. So stick your entitled indignation. — Garth

#120 TurnerNation on 12.02.14 at 9:25 am

Where’s ozy – Kanatians paying a million bucks for simple houses, plus mandatory monthly payments to the service cartels and oligopolies.

But tax farm slaves living in this open air camp are not allowed to escape their fate mentally even. Any involvement in illegal drugs nets them a stay in a metal cage. So dangerous are they! Blessed are our elected tax farm overlords on this the lower level of the pyramid.
You can have any color so long as it’s black.

#121 Nomad on 12.02.14 at 9:25 am

#51 Exurban

Yep. It’s exciting to pick sectors or asset types to pour a larger portion on our money into because we “feel” it’ll go better, but on the long run, it’s better to split money between real-estate and all market sectors.

BMO missed on earnings.
Don’t tell me the banks are next in line for a sell-off. Even a small one would be, annoying.

#122 miketheengineer on 12.02.14 at 9:33 am

Garth et al:

I am pretty sure someone else stated this…
But I went and double checked the charts this morning.

Price of Gasoline should be below a $1.00 a litre. We are getting hosed again.

Check for yourself:

http://www.infomine.com/investment/metal-prices/crude-oil/all/

And

http://www.gasbuddy.com/gb_retail_price_chart.aspx

Don’t you just love knowing that you are getting screwed again!

#123 Waterloo Resident on 12.02.14 at 9:35 am

Yesterday my timing system gave a major sell signal and I sold all UPRO at the $133.15 sell-stop signal I set the day ahead of time.

If you have not already sold your holdings, then it might be a good idea to sell soon, but then again, with this market it might just zoom up from here and I will look kind of stupid for selling. Just letting everyone know that I’m out, now in cash until the next buy signal comes along.

#124 crowdedelevatorfartz on 12.02.14 at 9:40 am

@#118 Craig

While I agree with you that most of my friend’s financial priorities are about as responsible as a 6 year old in an ice cream parlour on a hot day.
Most of them have no savings, live pay cheque to pay cheque, and see nothing wrong with financing a new tv.
These are people in their late 40’s , early 50’s.
They are doomed to work until they die because they have zero financial intelligence and argue with anyone trying to inform them otherwise.
Gen x and Gen y have, unfortunately, learned from their parents ridiculous spending habits.
They, for the most part, are doomed too.

One particularly bothersome type of individual is the retiree (65, 70, 75) that has no money and is constantly badgering elderly people(friends, relatives) WITH money for “loans”.
I see it all the time.
These people deserve to be tattooed with “BROKE” on their foreheads.
Their financial stupidity shouldnt be a burden to the ‘savers” of the world.

#125 Mike in Toronto on 12.02.14 at 9:54 am

#118 Craig

Financial responsiblity has been a losing strategy for Gen Y. Taking time to save meant increased tuition, increased housing prices. Meanwhile interest rates have always been at historic lows, internships don’t pay, etc. etc.

OTOH, the trades have been booming, so not much sympathy for the joblessness for the generation. In the 90’s in highschool I had to compete with grads for McDonalds, trades were disappearing and programming was being mass-outsourced. The housing crisis meant bidding wars on basement apartments, giving out credit card numbers with your applications, signing leases before being offered the apartment, and lots of fraud.

I’m glad those days are over. The only problem now is that money is nearly worthless for those of us who were raised in horrible scarcity and have been saving diligently.

Recommendation for gen Y: Get a trade, try flipping some condos on the side. Declare bankruptcy if it doesn’t work. The CMHC will foot the bill. It’s a strategy called “Moral Hazard” and it works great if you have nothing to lose. Once you save a few bucks, you wont’ be able to do it anymore.

#126 Ray Skunk on 12.02.14 at 10:04 am

All good stuff for the increased TFSA contribution, but don’t be too successful with it…

http://business.financialpost.com/2014/12/02/canadians-with-too-many-wins-in-their-tfsa-being-targetted-by-cra/?__lsa=991c-02e4

Cheeky bastards in Ottawa want their slice after all.

#127 NoName on 12.02.14 at 10:15 am

#114 I’m stupid on 12.02.14 at 7:43 am

fine print is biach!
(car lease example)

http://blog.timesunion.com/advocate/a-gmac-lease-lingers-even-after-a-death/150/

#128 Holy Cow on 12.02.14 at 10:28 am

CRA on the audit attack if you’ve made money in your TFSA national news reports of governments flip flop on TFSA tax free rules.

Not exactly. The TFSA is a retirement savings vehicle, not a shell within which to do day trading and earn income. I can understand the CRA’s concern. — Garth

#129 Canaan on 12.02.14 at 10:44 am

Speaking of TFSAs, check this out….

http://business.financialpost.com/2014/12/02/canadians-with-too-many-wins-in-their-tfsa-being-targetted-by-cra/?__lsa=7afe-2130

#130 Chickenlittle on 12.02.14 at 11:01 am

In my defence. ..th credit card was used after my husband got laid off..that is what all 3k was…food, gas, bills. It wasn’t shoes or crap like that. Still a waste of money though!

Who was it that posted that teachers are some of the worst spenders? Is it any wonder then that most of us can’t figure out what to do with our money?

#131 Leo Tolstoy on 12.02.14 at 11:13 am

The problem with TFSA’s is that they effectively force the money of Canadians who participate them into a very narrow set of investments that are administered by only a very small handful of trustees…

No credibility…

Seriously.

#132 CP on 12.02.14 at 11:13 am

Go ahead and invest in your retirement, just don’t do TOO good a job or else we’ll come for you!

http://business.financialpost.com/2014/12/02/canadians-with-too-many-wins-in-their-tfsa-being-targetted-by-cra/?__lsa=6143-524e

#133 Millmech on 12.02.14 at 11:13 am

[email protected]
I make just over 60k/yr,putting away 800/cheque to our host,rent and eat out at least once a week and still save cash it’s all about priorities.I pay myself first and it has worked very well and looking forward to the higher limit for the TFSA.

#134 JL on 12.02.14 at 11:16 am

I’ll take the TFSA room, but never vote for the man. The claw-back issue is ridiculous: people who have that much income/many assets (i hope that will include me) SHOULD HAVE THE EXTRA CLAWED BACK! they simply do NOT need it. let’s encourage savings but not further benefit those who do not need it. let’s help those who REALLY need it.

#135 AB Boxster on 12.02.14 at 11:19 am

Interesting article in Nat Post today.

CRA is going after those who make too much in their TFSA.
“The lord giveth and the lord taketh away”

http://business.financialpost.com/2014/12/02/canadians-with-too-many-wins-in-their-tfsa-being-targetted-by-cra/?__lsa=6d5f-a50f

Nothing is being taken away. TFSAs were never intended as vehicles within which day traders could earn tax-free income. — Garth

#136 Jen on 12.02.14 at 11:22 am

Hi Garth,
In your example of the 30-year old couple, why would only 1.6M be tax free and not the full $2,194,801?
Thanks!

It’s all tax-free. The growth of $1.6 million is mentioned to illustrate the awesome impact of tax-free compounding. — Garth

#137 Tony Blair on 12.02.14 at 11:23 am

Hello Mr. Turner,

Happy Christmas to all the Canadians!

Coincidentally, just before Cherie and I got our Christmas card photo taken, we had some bangers and mash with Mark Carney, who told us privately what he really thinks about the future of real estate in Canada and the U.K.

Yours Truly,

Tony

http://www.bbc.com/news/blogs-magazine-monitor-30289820

#138 Bottoms_Up on 12.02.14 at 11:34 am

#102 devore on 12.02.14 at 1:16 am
—————————————-
There are obviously different kinds of debt….secured and unsecured, “good” and “bad”. Without a properly worded question and context, throwing out a stat like “27% of Canadians don’t see mortgage debt as ‘debt'” is just propaganda and misleading and says nothing about their actual attitude toward ‘debt’.

#139 Piccaso on 12.02.14 at 11:35 am

BMO says low oil prices will cut migration to Alberta in half.

#140 Bottoms_Up on 12.02.14 at 11:37 am

#110 Freedom First on 12.02.14 at 4:01 am
———————————————-
Ok, let’s take your ‘liability’ idea one step further. Property tax is a recurring liability, therefore it should be considered debt (i.e., you owe it every year….)?

#141 Mike S on 12.02.14 at 11:50 am

“Canadians with too many wins in their TFSA are being targetted by CRA”

Expected a different TFSA related story today …

The good one comes in February. — Garth

#142 justeunperdant on 12.02.14 at 12:20 pm

Not exactly. The TFSA is a retirement savings vehicle, not a shell within which to do day trading and earn income. I can understand the CRA’s concern. — Garth

I thought we already have a retirement saving vehicle and it is called RRSP. People are very naive to think that eventually the government won’t tax the money on a TFSA account. Basically the rules on the TFSA account are vague and imprecise and it is been done on purpose. The government will now decide what is an acceptable return that you should have on your TFSA.

Let’s said you invest in the stock market at the begging of a bull market and make 30 % return. The government can come and say that a acceptable return should be 10% and tax you on the 20% return. Basically you can now consider the TFSA not being a TSFA and you are at the mercy of whatever the gouvement decide is a good return and you are taxed on the difference.

Canada is a banana republic where the words of women means more the man. Just look at the false rape accusations cases. No point trying to be rich in Canada.
I am laughing my ass off at the Canada sheep.

CRA does not care about the returns, but the activity. The TFSA was created as a tax shelter to assist people with retirement funding. It was not designed as a tax-avoidance mechanism for day traders. In a similar vein, CRA has pursued condo-flippers in the sense that they are generating income, not capital gains, and are taxed as such. Use the smell test. — Garth

#143 Mike S on 12.02.14 at 12:24 pm

“We shouldn’t need acts of government to protect us from the workings of government and the tax system. Fix the system, don’t over-complicate the tax code and create a cottage industry of accountants and financial planners to help people game it”

Well said.
And the sad thing it doesn’t only happen on the financial side of things. Take immigration/citizenship for example they just keep adding more and more complex rules and programs, that necessitate lawyers to get everything sorted out.

There is no real problem in doing simple changes, instead they do a complex reform just to create more job for themselves

#144 Holy Crap Wheres The Tylenol on 12.02.14 at 12:32 pm

#141 Mike S on 12.02.14 at 11:50 am
“Canadians with too many wins in their TFSA are being targetted by CRA”
Expected a different TFSA related story today …
The good one comes in February. — Garth
_____________________________________________

The lord givith and the lord taketh!

I do not see anything being taken. — Garth

#145 Doug in London on 12.02.14 at 12:33 pm

Yes, I’ll gladly take advantage of higher TFSA contribution limits. I wonder, if tax revenues from oil or other commodity producing companies fall and that projected surplus vanishes, how are we to pay for it?

@miketheengineer, post #122:
Maybe the price of Gasoline should be below a $1.00 a litre. I find it pricey, even at the recent price of $1.08 per litre, but it’s obvious most people don’t agree with me. Despite these high prices, I see a lot of new vehicles being sold are trucks and SUVs. When I see a lot more people doing what I do, namely driving a smaller more fuel efficient car, as well as walking and biking a lot more, then I’ll believe fuel prices are too high.

#146 Holy Crap Wheres The Tylenol on 12.02.14 at 12:40 pm

Oh how low can you go!
Now this is starting to get really interesting. What is going to happen to all of the oil producers in the next quarter?

http://business.financialpost.com/2014/12/01/here-are-the-breakeven-oil-prices-for-every-drilling-project-in-the-world/

#147 Mike S on 12.02.14 at 12:42 pm

“Nothing is being taken away. TFSAs were never intended as vehicles within which day traders could earn tax-free income. — Garth”

Garth,
I think it would be good to clarify what exactly is disallowed inside a TFSA

If I re-balance often (like once a month), which may mean 12*5 trades per year. Is this allowed?

If I invest in single stocks, which happen to increase a tenfold or more in a few years. Is this allowed?

To my knowledge, nothing is being ‘disallowed.’ However the CRA is looking at those who day-trade (and who may do dozens of transactions). Relax. — Garth

#148 Alex on 12.02.14 at 1:05 pm

doomsday prepper on 12.01.14 at 9:20 pm

Let’s not forget…The Lord giveth, and the Lord taketh away. The government will just change the rules again at some point, then tax our TFSA gains…
book it!

Just. Silly. — Garth

Really Garth ???

http://business.financialpost.com/2014/12/02/canadians-with-too-many-wins-in-their-tfsa-being-targetted-by-cra/?__lsa=894e-bb93

Really. No rule has changed. — Garth

#149 calgaryPhantom on 12.02.14 at 1:10 pm

CRA does not care about the returns, but the activity. The TFSA was created as a tax shelter to assist people with retirement funding. It was not designed as a tax-avoidance mechanism for day traders. In a similar vein, CRA has pursued condo-flippers in the sense that they are generating income, not capital gains, and are taxed as such. Use the smell test. — Garth

—————————————————————

Well, than CRA should also audit people who have been day trading and have huge losses in their TFSAs. Then they should provide a tax loss deduction to those.
But i know they will not do it. Pathetic dictators.

If gains are taxed as income, I would expect losses to be expensed. — Garth

#150 Mister Obvious on 12.02.14 at 1:12 pm

“The TFSA is a retirement savings vehicle, not a shell within which to do day trading and earn income”

I wholeheartedly agree with this statement.

But still, something seems amiss. To the average taxpayer it looks like the rules have been left deliberately vague to allow the CRA to interpret the extent of acceptable trading frequency.

We still have in Ottawa the same federal government who promised just before an election that income trusts would remain untaxed, followed soon thereafter by F’s Halloween surprise announcement.

In my own province of BC the Gordon Campbell liberals boldly stated a month before their election that there would be no HST. It was a “read my lips” sort of thing.

The HST was implemented scant weeks after the election and eventually proved to be Campbell’s political downfall, although the PM did compensate him for brave service with a plumb appointment in London thus saving him from a lynch mob.

When someone wins a $30M lottery they are not taxed. That’s because the tax is already paid on the winner’s behalf by millions of losers. Same deal as the racetrack. Same deal as the casino.

But day trading in a TFSA? Well… not so much. So, it needs to be clearly spelled out. Suppose I am an utter fool and lose everything in my TFSA on insanely risky investments. Will I ever be able to apply these losses to future gains anywhere else? Not a chance.

It’s an issue of trust. But the CRA hasn’t garnered much trust in the public eye these days (read up on the T-1135 form). The public tends to respond in kind.

Can we blame the average innumerate reading the National Post for wondering which part of the term ‘Tax Free’ is open to interpretation?

#151 rosie "moving forward" in the knowledge that, "this won't end well" on 12.02.14 at 1:13 pm

Interesting stats from another fool.

http://www.fool.ca/2014/12/02/10-jaw-dropping-numbers-from-canadas-real-estate-market-2/

#152 Vancouver right? on 12.02.14 at 1:20 pm

All you tin foils relax, 99 percent of Canadians think rrsps are a product you buy from the [email protected], there will not be enough people who really know how to index invest and grow a large tfsa to get the taxman mad , Most use a tfsa for their next sunwing vacation. This tfsa increase is a gift from god for all the nerds and people without lives that come to this blog everyday. Hallelujah !

#153 rosie "moving forward" in the knowledge that, "this won't end well" on 12.02.14 at 1:24 pm

It is all very clear. Self directed TFSA indeed.

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

#154 Mike S on 12.02.14 at 1:28 pm

“To my knowledge, nothing is being ‘disallowed.’ However the CRA is looking at those who day-trade (and who may do dozens of transactions). Relax. — Garth”

The reason I as is as follows:
Until this year me and my wife have our TFSA in our regular bank. It was invested in a mutual fund, which did OK, but going forward the MER is going to be too high. Which is why we are going to withdraw the TFSA this month and will be able to recontribute (+2*5.5K) to our brokerage account in January

Now. because we have a bigger taxable accounts there are a few ways to do that

1) manage it as a stand alone account, consisting of 4-5 etfs and rebalanced once a year (at least until it grows to something bigger)

2) manage it as part of the bigger portfolio, while holding the riskier components (like small caps, emerging markets etc) inside the TFSA (again at least until it grows bigger). the greater volatility of such investments, will naturally require a more frequent re balancing

If the CRA is going to have a problem with #2, I would like to know in advance

Of course not. This is a non-event for 99.9% of people with a TFSA. — Garth

#155 RealistvsExtremist on 12.02.14 at 1:38 pm

#66 dd on 12.01.14 at 10:09 pm
#56 dd on 12.01.14 at 9:43 pm
Black Friday sales off 11%. A recovery state side? Think again … Rolling over.

Best back-to-back quarterly GDP numbers in a decade. Look at what matters. — Garth

YoY GDP a little over 2%. Usually that is a standard measure. You are Cherry picking Garth.

If you claim something is ‘rolling over’ it implies a current action. I just proved you wrong. — Garth
++++++++++++++++++++++++++++++++

Phony numbers. No one believes them. Especially when you keep hearing on the radio

Black Friday !!
Cyber Monday
Cyber Monday Week
Cyber Monday till Xmas
Black Friday Cyber Monday till the end of the year

If sales were so great there would not be boatloads of chinese crap still on sale.

etc etc etc

Radio ads. Yes, far more credible than government stats. — Garth

#156 calgaryPhantom on 12.02.14 at 1:40 pm

Just stumbled upon this last night. Mark Cuban: “diversification is for idiots”.

https://www.youtube.com/watch?v=u5Pp1HEKSPM

Was surprised by how blunt he was, knowing that some people might follow him and loose a lot of money.

#157 SWL1976 on 12.02.14 at 1:51 pm

#134 JL on 12.02.14 at 11:16 am

I’ll take the TFSA room, but never vote for the man. The claw-back issue is ridiculous: people who have that much income/many assets (i hope that will include me) SHOULD HAVE THE EXTRA CLAWED BACK! they simply do NOT need it. let’s encourage savings but not further benefit those who do not need it. let’s help those who REALLY need it.

——————————————————–

I don’t normally chirp people on here for their comments, but this one is ridiculous. I hope you are joking, but I think not.

You really think that people who can save 10k a year have too much income?

Have you even considered that those who are able to save 10k a year are already in a heavy tax bracket?

Do you not think the government already takes enough off the top and squanders it away on many useless programs?

I agree with helping out those who need it, but your theory hurts my head. How do you know who needs and doesn’t need help? I am all for helping my fellow man, but there are those who truly need help and there are those with there hand out steady looking for their next free meal

its the big big business and government you should be upset with, not the guy down the street who can manage to still save 10k for their TSFA after all the taxes and deductions we pay to live in this great country

Think about it

#158 Holy Crap Wheres The Tylenol on 12.02.14 at 2:03 pm

#144 Holy Crap Wheres The Tylenol on 12.02.14 at 12:32 pm

#141 Mike S on 12.02.14 at 11:50 am
“Canadians with too many wins in their TFSA are being targetted by CRA”
Expected a different TFSA related story today …
The good one comes in February. — Garth
_____________________________________________
The lord givith and the lord taketh!

I do not see anything being taken. — Garth
_______________________________________
Come on Garth you were once in politics. Youve seen first hand how rules are written to be changes and nothing is forever.
One day, perhaps when I’m dead I see a user pay system for health care just like the good old USA!

https://www.youtube.com/watch?v=J3I97IFc_zU

It would be in the government’s worst interest to prevent people from saving more for retirement. I anticipate no changes. — Garth

#159 markymark on 12.02.14 at 2:22 pm

For all the bitchers and complainers that say they will never be able to max out a TFSA get a life, give your head a shake, take a second job, be creative.
I live in northern b.c. I am male, have a teenager, live on one income, of 60k + or – a few grand.
Remember in school they use to give you a pencil to actually write things with………take one and sit down and do a budget of every dollar you spend for 2 months, everything.
I can make my 5500 max contribution to my TFSA if I want. I can make my 11000 dollar max contribution every year if I want. It will be tight at 11k but I CAN do it if I want to, most on here don’t want to, but rather bitch about no money.
I will be 65 in 12 years, I aggressively invest all of my TFSA money in equity index/ETF’s as recommended by Garth, on a global scale to spread the money around. I choose no fix-income as I want all the gains I can get from the stock market, at 7.5 % projections are in the 280,000 to 300,000 range which is more than enough for me to live in a shack in the woods.
Most people just don’t want to budget for there retirement period. I pay rent, I have a car, internet, cell phone, food in the house, and maxed TFSA every year………so really have a look in the mirror and make some adjustments…..se ya at the finish line :)

#160 Godth on 12.02.14 at 2:32 pm

#146 Holy Crap Wheres The Tylenol

Another part of the story:
The Oil-Drenched Black Swan, Part 2: The Financialization of Oil
http://charleshughsmith.blogspot.ca/2014/12/the-oil-drenched-black-swan-part-2.html

#161 RealistvsExtremist on 12.02.14 at 2:36 pm

If sales were so great there would not be boatloads of chinese crap still on sale.

etc etc etc

Radio ads. Yes, far more credible than government stats. — Garth
++++++++++++++++++++++++++

Crap touche !!

However….I think many people would agree that Corporate Stats and Govt Stats…….are both phony.

On another note…..Al “World Melting” Gore said his thing about 8 years ago when Vancouver hit a record for energy use to keep warm. We almost broke that record again last nigh because of the “record” cold weather (yes we broke some records) even with all the “save energy” here there and everywhere devices going on. Look forward to “more cold weather” around the world truthers…..

#162 not 1st on 12.02.14 at 2:38 pm

Garth, being in govt yourself, you know the govt cannot resist getting their hands on our money one way or another. When big balances start accumulating in those TFSAs (like that business post article), they can just modify the rules with a stroke of the pen like income trusts or GTS or CPP or OAS.

Sure. But it won’t happen with registered retirement vehicles. — Garth

#163 bdy sktrn on 12.02.14 at 2:45 pm

#153 rosie “moving forward” in the knowledge that, “this won’t end well” on 12.02.14 at 1:24 pm
It is all very clear. Self directed TFSA indeed.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/glssry-eng.html#nnqlfyngnvstmnt
——————
from your link

“Self-directed TFSA
a vehicle that allows you to build and manage your own investment portfolio by buying and selling, but not too frequently, nor excessively profitably, various types of investments.” ;)

sounds like something a business would do???

#164 Mister Obvious on 12.02.14 at 3:13 pm

#152 Vancouver right?

…there will not be enough people who really know how to index invest and grow a large tfsa to get the taxman mad…
——————————–

I believe that is quite correct. Therefore, I see no need for the CRA to initiate a specific crackdown. But they have begun to do so.

As the years go by, TFSA headroom is increasing to something quite significant. In 2009 it seemed a rather piddling vehicle but it’s now moving into the big leagues and attracting attention in the process.

Remember, perception trumps fact. It’s that “large TFSA = taxman mad” thing you said that makes people a bit edgy.

#165 mid20millenial on 12.02.14 at 3:14 pm

#104 ryan on 12.02.14 at 1:34 am
What’s the point of having an RRsp then if it’s taxable? Why not just use TFSA then?
———

You can deduct RRSP contributions from your income, whereas you can’t with a TFSA.

#166 saskatoon on 12.02.14 at 3:32 pm

#147 Mike S

wait…is it against the “rules” to push multiple trades/day in a tfsa?

what are the specifics on this?

#167 espressobob on 12.02.14 at 3:33 pm

#104 ryan

What’s the point of having an RRsp then if it’s taxable? Why not just use TFSA then?
………………………………………………………………..

Tax shifting!

#168 saskatoon on 12.02.14 at 3:39 pm

“The CRA says that means you are trader in securities and you are carrying on a business.”

why would this be considered a “business”?

#169 young & foolish on 12.02.14 at 3:45 pm

mortgage is not debt definition:

you pay the bank, or you pay your landlord …. either way, you pay to live somewhere

#170 None on 12.02.14 at 3:58 pm

#142 justeunperdant on 12.02.14 at 12:20 pm
Canada is a banana republic where the words of women means more the man. Just look at the false rape accusations cases. No point trying to be rich in Canada.

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

You sound like a lonely jaded man who wonders why women don’t like his 1950s attitudes.

#171 Rebs on 12.02.14 at 4:18 pm

I think I’m starting to get the TFSA vs RRSP thing, but for a regular Joe Blo that doesn’t feel comfortable with monitoring investments themselves – but doesn’t necessarily have enough built up to pay someone to do it either, it’s easy to just keep the $ in a savings account; which only gets piddly returns.

The refund from RRSP deductions are nice to have also. Is there a better way to think about this?

#172 Retired Boomer - WI on 12.02.14 at 4:55 pm

Might their be an ugly “downside” to Cheap Oil now?

?I have been reading several articles today that cast warning on debt issued by various oil firms who invested in more expensive oil recoveries. With Saudi lowering its oil prices, these higher cost producers are being squeezed.

Banks who lent them the capital to invest are now playing cautious as the quality of that debt gets questionable. I would say that is normal progression in ever changing -now manipulated- oil commodity market. Several large US Banks will be affected if these loans go bad. How much, I don’t know but, you can bet it will be noticeable.

Every silver lining has a dark cloud attached it seems. Just something more to add to the mix of the blessing of “artificially cheap oil.” Gotta Think this one through…

#173 jess on 12.02.14 at 5:27 pm

no corporation tax in the UK tax for 16 years?
http://www.independent.co.uk/news/business/news/starbucks-completes-20-million-tax-payment-as-coffee-chain-seeks-to-put-scandal-behind-9896360.html

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The futility of tax competition
Posted on December 1 2014
– See more at: http://www.taxresearch.org.uk/Blog/2014/12/01/the-futility-of-tax-competition/#sthash.W8FkSluT.dpuf

#174 Purdy on 12.02.14 at 5:32 pm

I have a defined benefit pension. I only started INVESTING in my TFSA last year so that 31k hasn’t really grown all that much (6%). I also max out my available RRSP room. I’m 33 and it’s impossible to guess what the tax brackets will look like in 20-25 years. But this blog is making me worried about that RRSP. I feel like I should stop contributing there, but that tax return is hard to say no to. mmm immediate gratification.

#175 Renter's Revenge! on 12.02.14 at 5:44 pm

#142 justeunperdant on 12.02.14 at 12:20 pm
Canada is a banana republic where the words of women means more the man. Just look at the false rape accusations cases. No point trying to be rich in Canada.

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#170 None on 12.02.14 at 3:58 pm

You sound like a lonely jaded man who wonders why women don’t like his 1950s attitudes.

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It’s either that or all those movies and TV shows that portrayed all women as helpless and innocent left men unprepared for reality. Just as there are both good men and evil men, there are both good women and evil women. With women having an equal voice in society, men have to be more selective in who they choose to spend their time with. Let’s not paint every woman with the same brush. There are some female posters on here who leave insightful comments and we don’t want to alienate them with sexist comments. It’s also obvious who the fem-trolls are. Use your judgement, blog dogs!

#176 Mike S on 12.02.14 at 5:45 pm

““The CRA says that means you are trader in securities and you are carrying on a business.”

why would this be considered a “business”?”

In a taxable account if you carry a “business” of day trading (even if it is just a few hours a day, after the day time job). It goes both ways. I.e. you are taxed as income on your gains, but you also can decrease your loses as “income” and not as capital gains

But if same thing is applicable for TFSA, it should go both ways as well, and those who lose income by day trading should be able to claim it as such.

BTW Garth,
Condo flippers gains are taxed on their marginal rates on their gains, and this is as it should be

However, the next few years we are going to witness loses for such flippers, and thus it would be only fair for such loses to be treated in a similar manner by the CRA

#177 jess on 12.02.14 at 7:27 pm

PCAOB is looking into tax advice
http://retheauditors.com/2014/11/18/piling-up-for-pwc/

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tax abatements to the lux developers

Full Show: The Long, Dark Shadows of Plutocracy
November 28, 2014

http://billmoyers.com/episode/full-show-long-dark-shadows-plutocracy/

#178 For those about to flop... on 12.02.14 at 7:41 pm

Hi Garth,a while ago you did the millennial portfolio do you recommend doing this in a TFSA or just pick one fund which is going o.k such as small cap growth fund.

#179 devore on 12.02.14 at 7:58 pm

#134 JL

The claw-back issue is ridiculous: people who have that much income/many assets (i hope that will include me) SHOULD HAVE THE EXTRA CLAWED BACK! they simply do NOT need it.

How so? The vast majority of people who save money are not wealthy. They are able to save, because they have made a CHOICE. People who can save $10k a year do not make more money than someone who saves $0. They just save more money. Where does this money come from? It comes from the recognition that you need to save for your non-productive years, and must sacrifice consumption and spending TODAY to have that money TOMORROW.

Yes, of course there those who can barely make end of month, paying for little else besides necessities, live very modestly, and cannot put much money away.

But on this blog we are talking people who make average or above wages, and buy $300-500k-$1M houses and condos, who CHOSE to spend twice or more to own the same place they could rent instead, and SAVE the difference. Why should the one who lives within their means and saves for old age be punished with heavy taxes, and the one who makes the EXACT SAME money be rewarded with praise and subsidies?

let’s encourage savings but not further benefit those who do not need it. let’s help those who REALLY need it.

Yes, lets. Start by not punishing savers and investors.

#180 devore on 12.02.14 at 8:07 pm

#169 young & foolish

mortgage is not debt definition:

you pay the bank, or you pay your landlord …. either way, you pay to live somewhere

Housing is an expense. Some people choose to finance that expense. That is debt.

Sheesh, where do you people come from, it’s like turning on the light, suddenly there’s sounds of little feet scampering all around.

#181 Daisy Mae on 12.02.14 at 8:22 pm

#34 rwm: “Bah, not til 2016? Booo ;)”

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A political promise being implemented only after the federal election in 2015…..take it for what it’s worth.

#182 jean on 12.02.14 at 8:31 pm

Garth, I can’t believe you are defending the CRA here.

Is it an investment account or is it not? You are allowed to invest in options among other things, which have significant leverage, but if you have a really good trade, the CRA might decide you are in business? And how can you argues that dozens of trades is running a business. What sort of lame business would that be. If the traders at your firm did only dozens of trades they would not be employed long.

The UK has a similar vehicle, it’s called an ISA and the limit is £15,000 per year. So nearly $30k. Per year. You can invest in leveraged instruments like warrants, turbos, and so on. There are many ISA millionaires in the UK. Inland Revenue is not hunting them down.

But here in Canada, if someone has 100k, the CRA gets their knickers in a twist and decides you are not following the rules. Too much success must be punished.

Banana republic indeed. Shameful.

#183 Retired Boomer - WI on 12.02.14 at 8:32 pm

Who buys $350-$500,000 homes? Only the VERY well heeled or the very young with lots of earning power ahead of them!

Sorry, but this guy built his place for $109,000 back in 1996
of course from here, things look cheap. Back then, it was not so much.

Mortgage at 7.5% with 20% down. Try THAT on your calculator today, you will puke! Cars in 1996 were a mere $19,000 for a new Oldsmobile, a dead nameplate now.

Costs and prices of yore mean nothing, it is the ratio’s that tend to hold constant. They hold both for success, as well as failure later in life should you get older.

That IS the fun of it all, learning to ride the wave.

#184 jean on 12.02.14 at 8:44 pm

Garth, rather than the CRA hunting down successful TFSA investors, why don’t they just specify the maximum percent per year they think you should be able to earn tax free and the tax above it (say 10% above the stock market, for example)? Or put a maximum dollar amount that may be in the account and then it won’t grow tax free anymore? Because obviously it is not the CRA’s intention that this vehicle should really be genuinely tax free, so they should just tell everyone what the actual rules are so we know and can plan accordingly.

#185 Daisy Mae on 12.02.14 at 8:46 pm

#104 ryan: “What’s the point of having an RRsp then if it’s taxable? Why not just use TFSA then?”

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I think Garth mentioned earlier that the RRSP will eventually fall by the wayside.

#186 Daisy Mae on 12.02.14 at 8:51 pm

#113: “The move to $10K was promised in the last federal election. — Garth”

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There ya go! It was promised once before…and it never happened. Ya believe the cons this time around?

#187 Daisy Mae on 12.02.14 at 8:56 pm

#134 JL: “I’ll take the TFSA room, but never vote for the man. The claw-back issue is ridiculous: people who have that much income/many assets (i hope that will include me) SHOULD HAVE THE EXTRA CLAWED BACK! they simply do NOT need it. let’s encourage savings but not further benefit those who do not need it. let’s help those who REALLY need it.”

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That would be nice. But this is a ‘dog eat dog’ world. We must remember that. LOL

#188 Daisy Mae on 12.02.14 at 9:08 pm

#144: “The lord givith and the lord taketh!”

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Let’s leave your religious beliefs out of it. Okay? This is the second time…