The quick & the dead

POOCH modified

If you ever need evidence of how pooched Canadians are, consider what happened yesterday.

The feds gave you a gift, saying each year you can shelter $10,000 worth of investments from tax. Forever. If you have a main squeeze, it’s twenty grand between you. Do this annually for two decades at an average investment return, and you have a million dollars. This would be equivalent to $1.4 million in taxable RRSPs. Like I said, a gift.

Even before the budget, people were able to shelter $36,500 worth of investments in a tax-free account, and what’s been the result? Well, about one in three people have opened a TFSA – that’s 11,000,000 Canadians. Of those only 17% have contributed the max. More significantly, 70% of those people are over 55.

Finally, as I have told you before, 80% of all the money in TFSAs is in cash savings or brain-dead GICs generating less than 2%. In other words, the vast majority of contribution room in TFSAs is being squandered, and mostly by the people who need help the most – the young and pensionless.

What are they thinking? That this is a glorified bank account that will ‘save’ them $35 a year on a $10,000 balance? Incredibly, most are using this as a way of saving for (a) a vacation, (b) renovations, (c) a house down payment or (d) an emergency. In so doing they are wasting the most flexible and effective investment vehicle of their lifetime.

As I said. Pooched. By their own ignorance. So let’s change that.

Can I put $10,000 in my account today? Is it legal?

Yes, go for it. Tax measures contained in federal budgets routinely take effect the moment they are announced. If that were not the case, people would have time to restructure their affairs to thwart the government’s intentions. So while the budget has not passed Parliament nor received Royal Assent, it’s a done deal as far as the CRA is concerned

So why is this important enough to write a whole blog post about?

Because not only does it give me a chance to avoid the word ‘horny’ (oops), but because TFSAs will soon become the most important tax shelter in the land. RRSPs are so yesterday. Traditional strategies are changing. For example, you might now benefit from collapsing some RRSPs and moving funds to TFSAs, thus averaging out the tax hit on RRSPs over a longer time frame. Certainly everybody with taxable assets in a non-registered account should be sliding those over to soak up TFSA room. You might trigger some capital gains tax doing so, but if you plan on holding these things for a long time the sooner you get them into a taxless vehicle, the better

Are you saying not to have RRSPs, but only tax-free accounts?

Not exactly. At least, not for everyone. RRSPs are still great for tax-shifting – for example, to invest in when you’re working (and get a refund) then cash in when you take time off (and pay less tax). Or to fund a maternity leave. Or income-split with a less-taxed spouse. But as time goes by and TFSA room grows, this is the vehicle of choice because all distributions will be free of tax and will not reduce government benefits, as they are non-reportable. So imagine today’s 30-year-olds ending up with a million in TFSA accounts which can churn out $70,000 a year in income – not even included on the tax return. Sweet.

But if the feds can hand this over, can’t they take it away?

Sure. They are unregulated gods. Can do anything. But the odds are the TFSA is here to stay – with a wrinkle or two. One of them came yesterday when the government eliminated indexing of TFSA contributions, so they will not automatically increase. Any jumps will have to be legislated, the way this one was. It’s also possible, because the wrinklies are clearly benefitting the most, that pressure will mount for a cap to be put on TFSAs, maybe of $250,000 or so, in years to come. That would suck, but in no way does it mean you shouldn’t fill yours up now, as fast as possible. Actually, the opposite. Get the money in there. Get it growing. No matter how big the gains, they will always be yours.

Gains? What gains. My TFSA is in the marmalade dude’s shorts.

Well, you lose then. Interest rates will be rising, but in a glacial way and consistently below cost of living increases. In other words, you’ll never earn enough, even inside a TFSA, to build net worth sufficiently to keep you from off the KD and Alpo several decades from now. Especially women, who live longer and seem more conservative. The risk they must fight is running out of money, and the best weapon is now the TFSA. Get growth assets in there, preferable equity-based exchange-traded funds, and forget about them for years.

Or you can empty your TFSA account and vacation in Cuba. Then plan on staying there.

218 comments ↓

#1 First on 04.22.15 at 5:38 pm

FIRST!!!!!

#2 Bob on 04.22.15 at 5:39 pm

First-past-the-post must be reformed.

#3 Beef Jerky on 04.22.15 at 5:40 pm

With the TFSA limit expanded, I am looking for some equities to stash the cash. Any individual stocks anyone has their eye on? I’m avoiding etfs/indexes because I find them boring.

#4 Tim on 04.22.15 at 5:42 pm

Your last comment refers to the marmalade dude. What if I have all my TFSA money in their TFSA investment funds. A step up – right?

Too expensive. — Garth

#5 Sheila on 04.22.15 at 5:44 pm

Thanks for prodding us, Garth. The TFSA is a great investment vehicle for all of us.

#6 Glengarry Glenn Ross on 04.22.15 at 5:45 pm

Good stuff.
Just getting use to the idea after having lost a chunk of money in regular stock trading.
Got my tfsa maxed out but sitting in dead cash earning a laughable 2%.
Could you please once more give example of a proper weighting with capital preservation in mind, most importantly.
Thanks.

In an account where all gains are non-taxed, capital preservation is not the goal. Man up. — Garth

#7 John on 04.22.15 at 5:48 pm

“About a third of Canadians have a tfsa account”

The other 2/3 have a government pension.

#8 Retired Boomer - WI on 04.22.15 at 5:50 pm

Canadians are not the only incredibly financially illiterate people. So are Americans. How can an American making average wages build, and pay off a home, own three paid for cars, and have more than 3/4 of a million in investible assets, and retire at 60?

Because the idiot ignored the doomers, killed the debts as fast as possible, stuffed those tax free vessels as full as he could, along with a wife who now understands how money works. Life is great, Thanks Garth, for the free good advice!

His kid, not so much. Sucks to be him, nothing says I owe him a dam thing. I will ‘match’ his savings but, no Trust Fund Baby. I earned mine, suggest you start doing the smart stuff, I can help, but nothing says I ‘owe’ it to you.

#9 bob on 04.22.15 at 5:55 pm

Garth, you are brilliant
not for the financial acumen, but excellent writing.

“marmalade dude’s shorts”… best line.

#10 Glengarry Glenn Ross on 04.22.15 at 5:56 pm

#6 Glengarry Glenn Ross on 04.22.15 at 5:45 pm
Good stuff.
Just getting use to the idea after having lost a chunk of money in regular stock trading.
Got my tfsa maxed out but sitting in dead cash earning a laughable 2%.
Could you please once more give example of a proper weighting with capital preservation in mind, most importantly.
Thanks.

In an account where all gains are non-taxed, capital preservation is not the goal. Man up. — Garth

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

Im sorry, I don’t understand.
I was meaning to ask about the proper allocation of funds in my tfsa,like a percentage of growth vs income with some specific names of those securities….thanks

#11 gladiator on 04.22.15 at 5:58 pm

Of come on people, stop whining about the “no more indexing” thing. If they kept TFSA unchanged and just indexed its room – with the artificially low official inflation numbers – how long would it have taken you to get to the 10k contribution room?
Be thankful and invest now, so that your holdings start growing as soon as possible.

#12 Diversified in Oakville on 04.22.15 at 5:59 pm

Thank-you Mr. Harper for trying to buy my vote. Maxed out both of our TFSA’s today in ETF’s churning out non-taxable gains. LOVE IT!
Still not sure he deserves my vote, but what is the alternative?

#13 Paul on 04.22.15 at 6:01 pm

Normally what would a fee based adviser want a client to have to invest before taking her on as a client?

Trust and confidence. — Garth

#14 David on 04.22.15 at 6:05 pm

Woo-hoo, I am the 1.7%!

#15 powder_hound86 on 04.22.15 at 6:06 pm

Can anyone shed some light on the tax implications of a US expatriate opening a TFSA?

Would love to jump on this.. but I’ve got uncle Sam picking my pockets.

#16 Mike S on 04.22.15 at 6:09 pm

“In an account where all gains are non-taxed, capital preservation is not the goal. Man up. — Garth”

Isn’t it still better for some to use the the balanced portfolio in the TFSA, if this would be the only investment account they use (because of no more than 10K per year)?

I mean, if this guy only has 10K of savings per year won’t it be better if he don’t just put everything into emerging market index?

#17 mclatch on 04.22.15 at 6:11 pm

Thank you very much Mr Turner you always have the best information here it’s awesome! I feel like I have a little portal to a view behind the curtain. The commentary is great.

I was wondering about the tax implications about holding american stuff in a tfsa as opposed to holding in an rrsp? Tax treaties and all, aren’t withholding taxes applied to a tfsa but not rrsp? Is it better to have yank stuff in the rrsp then?

Thanks again for all you have provided here I was completely stupid about this stuff before I found your site.

#18 Trust and confidence on 04.22.15 at 6:12 pm

# 13 Paul on 04.22.15 at 6:01 pm

Normally what would a fee based adviser want a client to have to invest before taking her on as a client?

Trust and confidence. — Garth

—–

Sorry for the repetition: how is the 1% fee calculated,
1% of what? Total assets or value of investment portfolio?

Thanks.

Book value is the fairest measure. Typically one-twelfth of one per cent comes out of the account monthly, presumably from growth. Fees are tax-deductible on non-registered accounts and come out of RRSPs etc. tax-free. — Garth

#19 dangeresque2 on 04.22.15 at 6:13 pm

#10 Glengarry Glenn Ross

Yes – I’m also interested in the recommendations of “what” to invest in, in a TFSA.

Not looking for specifics – but what types of investments belong here? Bonds/Preferred’s/ETF’s/etc.?

#20 earthboundmisfit on 04.22.15 at 6:14 pm

Grab it now folks, because Prime Minister Mulcair intends to roll it back.

#21 West Coast on 04.22.15 at 6:14 pm

Done – TFSA stuffed to the gills – thanks yet again Garth!

#22 maya on 04.22.15 at 6:15 pm

have a question.
What should I do?
I have 10,000 to put for tfsa this year which I will do-after this contribution, tfsa will be maxed out.

I also have rrsp worth of 10000 and was thinking of adding 5,000 towards my rrsp this year.
Should I contribut towards my rrsp. if not where should i put my extra 5000 and my 1500 monthly saving.

your suggestion will be appreciate.
kanchan

#23 Josh in Calgary on 04.22.15 at 6:17 pm

Glengarry Glenn Ross,
First of all your allocation depends on your risk tolerance and age. Garth will tell you 60 (equities) and 40 (fixed income). But if you’re more conservative then just dial it back to 50/50 or even 40/60. Also keep in mind this applies to your total portfolio. No need to be balanced in the tfsa on its own if you have fixed income stashed in an RRSP. Ideally you will get the greatest return on equities, so those should fill up your TFSA first. The fixed income will be taxed at your marginal tax rate, as will anything you withdraw from an RRSP so you should use those to fill up your RRSP (you haven’t avoided tax, just shifted it to a time when you may be in a lower bracket).

TFSA ETFS:
Canada
ZLB.TO – Non volatile Canadian stocks
XIU.TO – TSX top 60 (heavy on banks and big energy).
US
VUN.TO – US total market
VGG.TO – US dividend
International
XEF.TO – Emerging Markets (heavy Euro weighting)

Fixed Income
XBB.TO – boring Canadian and provincial bonds
RBO.TO – Corporate bonds
XRE.TO – REITs.
XPF.TO – Preferred Shares

These are all just examples. Feel free to find your own. I don’t recommend them, but probably own them, blah blah blah.

#24 seeing it from both sides on 04.22.15 at 6:19 pm

Vancouver condo is the new gold. I love Van but this is a tad hyperbolic.

“Forget gold, buy a Vancouver condo if you want to stash your wealth, says world’s top money manager”

http://business.financialpost.com/personal-finance/mortgages-real-estate/forget-gold-buy-a-vancouver-condo-if-you-want-to-hoard-your-wealth-says-worlds-biggest-money-manager

#25 maya on 04.22.15 at 6:20 pm

have a question.
I am maxingout my tfsa with 10,000 dollars this week.
I will have 5,000 more in saving and was thinking of contributing towards resp.
Is this a good idea. after maxing out my tfsa where should i put 5000 and contribute 1500 monthly saving every month,
Any suggestion will be appreciated.

#26 FormerSaskie on 04.22.15 at 6:20 pm

Great doggy picture, today. Thanks, Garth for the investing information you have provided over the years, which is why I can dump $s into my TFSA :)

#27 maya on 04.22.15 at 6:21 pm

sorry not resp. i am contibuting 210 every month to my daughters resp. I am taking about rrsp. should i contribute remaining 5000 to rrsp?
what should i do.
thanks,
K

#28 Sponge on 04.22.15 at 6:21 pm

Retired…a house and no mortgage… Should i get a Heloc and invest it into the TFSA room ?? I know the interest isn’t tax deductable but pay 3.5% to gain about 7% in TFSA??

#29 Wooba on 04.22.15 at 6:26 pm

A few people talking about bank fees yesterday. Check out the accounts with presidents choice financial and tangerine (formally ing direct). I’ve been with PC for almost 15 years and have recommended them to many people, all happy to have switched. Tangerine is also very good and I use it almost as much as PC. Each has advantages over the other but they are almost identical. Best of all everything is free. Unless you MUST have a teller, these accounts are no brainers.

#30 maya on 04.22.15 at 6:29 pm

Garth,
I read your post about how to find a good adviser. I opened qestrade account but could not muster a courage to trade myself. I hav 12000 sitting in my questrade account not being invested. So i am still with CDSPI. It is okay but I dont like paying about 2.5 percent.
how should I start learingin about etfs in questrade. what should i look for, how do i find which etf is preferreds, or wihch gives drip. I need to educate myself better before feeling comfortable to do it myself. I want to but feel I need to educate my self more. where and how should start doing it myself Thanks,
k

#31 Jordan on 04.22.15 at 6:30 pm

The TFSA is the best thing that ever happened to my finances.

I sincerely hope, though that it is capped well below $250k. The lifetime limit should move as quickly as possible to 50k and then be indexed to inflation.

The TFSA is for teaching people to invest, not for sheltering significant income from the government.

#32 Acorn88 on 04.22.15 at 6:30 pm

I am the 1%!

Did the maths. Maxing out TFSA with husband year over year and under 55 years old. In fact, our combined age is 59. We’re super jazzed for the bump to TFSAs contribution limit, already earning double digits. Boom. #DINKlife.

#33 MSM-free Zone on 04.22.15 at 6:32 pm

“….about one in three people have opened a TFSA……Of those only 17% have contributed the max”…
__________________________

Excellent advice today, unless of course, you belong to the bottom two thirds of the Canadian population for whom this TFSA increase was never meant to help anyways.

To quote another famous politician south of our border, “”My job is is not to worry about those people”.

As far only the 17% who can afford the max contribution, not much more can be said about that.

#34 Brian Ripley on 04.22.15 at 6:32 pm

re: “If you ever need evidence of how pooched Canadians are, consider what happened yesterday.” Garth

For nerds everywhere, my post today on the budget:

http://www.chpc.biz/history-readings/myth-making

Net Public Sector+Net Private Sector+Net Foreign Trade Sector = 0

The result of this accounting reality is that:

If society wants more private sector savings, then either the Federal government must run a bigger deficit or exports must increase.

When the government runs a surplus, then the private sector must run a deficit unless exports are booming and make up the difference.

And if nerd exhaustion sets in, I have included Jack Bruce’s “Politician” live.

#35 Surfside Boomer from Parksville on 04.22.15 at 6:35 pm

Just maxed out my TFSA with ETF “VUN”. Never let it be said it is just the rich who can afford to invest. I manage a simple and satisfying lifestyle on $20,000.00 income a year in retirement. House is fully paid for and substantial investments. My wants and needs are simple and I live in the best part of Canada. And no, Mr. Harper does not get my vote. Garth, you have been my guiding light in all financial matters. Keep up the good work.

#36 MSM-free Zone on 04.22.15 at 6:38 pm

#13 Paul on 04.22.15 at 6:01 pm
Normally what would a fee based adviser want a client to have to invest before taking her on as a client?
Trust and confidence. — Garth
_________________________

Cute (but probably the most important) answer from Garth.

However, to bring things into perspective for the bottom two thirds of the country, a Raymond James acquaintance of mine in Vancouver won’t touch anyone with less than $500,000.

Not sure what other advisors publish for minimums.

As I have sad before, a full-service, fee-based advisor charging 1% is most economical for someone with $150,000 or more to invest. Your friend is a financial snob. — Garth

#37 Dee on 04.22.15 at 6:39 pm

Please correct me if I’m wrong — but I kind of see the place of the RRSP as ‘where to put everything else’. Like, I max out my $5,500 every year, and will easily max out $10k this year. I simply can’t put more in the TFSA. So I put the rest in the RRSP. (…then use the tax refund to make most of my annual TFSA contribution.)

#13 – Everyone’s different, but the last time I called around I generally found most wanted in the $100k-$150k range minimum. They’ll take you on, but usually the fee is 1%-ish of your portfolio but with a minimum fee–so if you’ve only got, say, $25k, you’d still be paying the $1500/year, which is now 6% of your portfolio (and a very bad deal).

#38 Josh on 04.22.15 at 6:39 pm

Hey Garth,

I was planning on transferring the extra amount that was announced yesterday to my TFSA last night but was afraid of the consequences of over contribution. I checked the CRA website regarding the TFSA and they mention the “Royal Ascent” thing.

If I did top up my account today what would be the consequences if the CRA had problems with this “over contribution” at this time?

Thanks

None. — Garth

#39 Sucks to be me on 04.22.15 at 6:44 pm

I was hoping the herd quickly forgets (as they tend to do) but it seems this is being played as “only for the rich” which buys a lot of hate with brick lickers only strategy crowd . Maybe, just maybe, they could actual learn??? No wonder my life sucks…sigh

#40 there are no savers on 04.22.15 at 6:50 pm

You summarized it quite well.

Even before the increase, only 17% of all TFSA holders maxed out the limit. I wonder how much or how little the vast majority of those account holders had put in.

Raising the limit is attractive to 17% of roughly 11,000,000 Canadians and of that 70% are over 55.

Clearly Harper’s conservatives have done the math on this and identified who their voters are.

Not sure what the hype is about now as everyone knows full well that Canadians would rather die than give up their entitlement to granite countertops.

Ploughing every cent into real estate even when prices are going down. How many will stand first in line to try and catch that falling knife as markets correct?

You will soon find out.

#41 Shawn Allen on 04.22.15 at 7:03 pm

Rationalise Much?

Vanomos Pest yesterday said:

the long term is the only place the TFSA is even a loss to federal revenues.

**************************************
So it saves you tax but does not cost the treasury anything? good show.

So all the money now in TFSAs is not sheltering dividends, interest and realized capital gains that otherwise would have resulted in tax to the treasury? Magical.

I thought every dollar of tax break for one person had to be made up by another taxpayer, assuming federal spending is unchanged. But I guess TFSA and RRSP are magic, like the old Income Trusts, they save us money but cost the treasury nothing? Magic, or rationalization?

#42 [email protected] on 04.22.15 at 7:04 pm

Thanks however I found this,

https://www.thestar.com/news/canada/2015/04/22/justin-trudeau-promises-to-balance-federal-budget-scrap-tfsa-increase.html

#43 BG on 04.22.15 at 7:04 pm

It seems that when the government eliminated indexing of TFSA , they effectively sent the message: “You will only get more if you vote for us”.

And the NDP and Liberals fell for it by bashing the TFSA.

#44 Suede on 04.22.15 at 7:05 pm

no such thing as “capital preservation”

if you put money in a bank savings account, you lose to inflation. Hidden tax.

These banks have to pay my dividends somehow. Better to get it from those who refuse to learn.

How about China rocking! FXI did a moonshot for a massive ETF.

Almost like it originated on Howe Street.

TFSA’s rock

#45 Cici on 04.22.15 at 7:07 pm

#11 gladiator

Well said. “Glad” someone gets it!

#46 Llewelyn on 04.22.15 at 7:08 pm

If the stock market will yield a net average return of 7.0% per annum over the next 25 years as suggested 1,000,000 times in your blog it is difficult to see why any pension fund or individual investor would purchase any other form of investment instrument.

Obviously the stock market exposes investors, particularly those who cannot dump their shares when stocks begins to slide. The good news being yelled from the rooftops over the last seven years was fuelled by credit at historically low interest rates. Lets face it the capacity of Canadians to borrow is reaching its limit and once reached our economy will be affected.

You keep harping on the fact that a majority of Canadians have not taken full advantage of the TFSA. There is a very simple reason for this Garth. They do not have any surplus cash. In fact they have incurred substantial debt just to tread water. Our real unemployment rate exceeds 10% and average wages when adjusted for inflation are declining not increasing. 50% of all Government of Canada revenues in 2014 were obtained through personal income taxes and if our economy does not improve this source of easy revenue will shrink. When students attending post secondary institutions graduate they must devote a significant portion of their income to repay sizable student loans.

Your blog is becoming a soapbox for those with the resources to follow your investment advice. I am rich I am smart Thank you Thank you.

There is a real world out there Garth. The majority of Canadians need a government that is interested in their long-term future and the future for their kids. Sucking up to the wealthy, or those who would like to become wealthy just doesn’t cut it these days. We need economic growth in Canada and advising Canadians to invest anywhere but Canada is not what I expected from a former member of Parliament. Just Saying!!!!

First, I do not advocate ‘investing in the stock market.’ Some equity exposure is fine, but the idea of a balanced portfolio is to mitigate risk. Second, this is not a social justice blog. Dumb people who lust after houses, put their money in GICs and feast on debt deserve the future they create. — Garth

#47 Shawn Allen on 04.22.15 at 7:11 pm

Never (Ever) Satisfied

.#11 gladiator on 04.22.15 at 5:58 pm
Of come on people, stop whining about the “no more indexing” thing. If they kept TFSA unchanged and just indexed its room – with the artificially low official inflation numbers – how long would it have taken you to get to the 10k contribution room?

Be thankful and invest now, so that your holdings start growing as soon as possible.

***************************************
Good post, last $500 increase took about five years so. We would have got to $10,000 in about 45 more years.

People got almost double the room and they want to talk (whine) about indexing?

People see the world always from the view point that has themselves literally at the center of the world. We are in fact each physically the centers of the perceived universe as we walk around and so our attitudes are no surprise.

#48 H on 04.22.15 at 7:13 pm

wow millions and millions of dollars! $70 grand tax free!!

And yet no mention about the lifetime cap.

Garth, you honestly believe you can invest $20,000 K per couple for the next 20 years without the government stepping it.

Were you on vacation during the income trust decisions?

Actually I mentioned the possibility of a cap. However, I think that is unlikely, and still no reason not to embrace the TFSA. But thanks for being unnecessarily negative. — Garth

#49 I'm stupid on 04.22.15 at 7:16 pm

Going to Cuba isn’t a vacation. It’s the tropical equivalent of fat camp. No thank you, starving for a week because of terrible food is not my idea of a vacation.

#50 omg the original on 04.22.15 at 7:17 pm

#3 Beef Jerky on 04.22.15 at 5:40 pm
With the TFSA limit expanded, I am looking for some equities to stash the cash. Any individual stocks anyone has their eye on? I’m avoiding etfs/indexes because I find them boring.
————————————–
Seriously???

Getting investment advice from the comments section of a blog is pure financial suicide.

Invest your money in boring ETFs and get your excitement from trips to your local casino.

#51 omg the original on 04.22.15 at 7:29 pm

TRUDEAU TO ROLL BACK TFSA INCREASE?

Not to worry the TFSA is likely safe from Justine.

Most of you may be too young to recall that in the early 1990s federal campaign Chrietien promised to replace the GST.

After getting elected the Chrietien replaced the GST with ….wait for it…..the GST pretty much exactly as it was before.

The take away is that Justine if elected will likely just make a couple of window dressing changes to the TFSA and “presto” – tick the TFSA election promise box as complete.

After all the people that vote Liberal are all those $100K/yr , nuses, teachers and civil servants with big TFSAs at their local [email protected]

The voting public is sooooo stupid.

#52 CREIT on 04.22.15 at 7:34 pm

I got an e-mail from my property manager earlier today telling me both of my tenants lost their jobs, both worked for oil companies, and have moved out. Property is 10 minutes south of Edmonton.

I knew this day was coming.

#53 R on 04.22.15 at 7:41 pm

Oh Garth, the humanity.

The sheer ignorance being peddled by the leaders of the opposition about TFSAs is too much. These are the people who claim to champion the middle class!

I’ll have to shut off the news until the election is over, only coming out for supplies and to vote for the Conservatives… something I’ve never done before.

Until then, I’ll be living under a pile of blankets in the closet with my laptop.

#54 vanport on 04.22.15 at 7:42 pm

Just to clarify, If I have USD I want to transfer into my TFSA, I should calculate the limit in CAD right? I have $4,500 left (Thanks Harper!) So I should only deposit around $3,600USD?

Correct. — Garth

#55 Freedom First on 04.22.15 at 7:44 pm

I remember decades ago when I started putting in RRSP’s and getting 40+% back on every dollar I put in. People back then were saying it was too good to be true and the Government would end it/screw with it. Never happened. And I used it like Garth advises to use it. It was/is sweet to get 40+% back, plus the untaxed growth, and when I wanted to withdraw money for various reasons, my tax rate on it was a total 25%. It was planned. For decades.

Now some people are giving dire warnings about the TFSA. I maxed it out on the 1st day it was available. The TFSA is a gift. RRSP’s and TFSA’s, used wisely, go together like ham and eggs. I like assets, income streams, and no debt.

#56 Boomer buster on 04.22.15 at 7:54 pm

All these things are done for the boomers

No one cares about creating a younger middle class

I’m 29, make between 60-70k a year… Not bad, but everything is expensive. Hard to save 10k a year.

I have 25k in my TFSA, invested properly.

But even still, all these breaks go to the boomers
Boomers watching boomers

I’m not an entitled brat, I do my thing, pay my bills, earn everything I have.

I feel as if most of my generation feels entitled due to the opportunities their parents have/get

#57 Linda on 04.22.15 at 7:57 pm

Hallelujah TFSA increase – going to switch over additional non-registered to shelter it asap – already ‘did’ the $5,500 for this year & can now add another $4,500.

Garth, you are not alone in speculating that eventually a cap on TFSA contributions may be put in place. However, if the vast majority can’t or won’t start up a TFSA in the first place, don’t know whether a cap will ever become necessary. If it does occur however hope those whose TFSA exceed the limit are grandfathered in.

#46 – life is hard, money is tight etc. But frankly most who ‘can’t’ put away ‘could’ but ‘don’t’ because there is always something else they ‘prefer’ to do with that extra cash. Like dining out (including daily coffee), vacations to warmer climes, newest stuff of the week etc. Can’t think of the number of times I’ve heard someone saying they have no money yet they are smoking, drinking, eating takeout, talking about their recent trip to wherever, the great time they had at the game/bar last night etc. All of which costs mucho moolah.

Fact: I have a good job, pays well. Ditto the husband, though he does contract work so his income may fluctuate. In the 30 plus years we’ve been married, we have both of us taken our lunch to work pretty much every day. I like to cook & our brown bag lunches are usually high end food. In 30 plus years I can count the number of times I’ve brought a sandwich to lunch on one hand & have a finger or two left over. My point?

Figure an average of $10 per day, per person (including the coffee/pop/tea) per working day. Say 48 weeks of work per year, 5 days per week or 240 working days. At $10 per day, that takeout lunch with coffee is $2,400 per year, per person. Multiply that by 25 years (I’m being very conservative here, most people work longer than that). $60,000 at a bare minimum, presuming you ‘never’ spend more than $10 a day, ever. So a couple would suddenly have at least $120,000 over 25 years if they brought their own lunch. As for that must have fancy coffee, make a thermos of your special bean french press grind every morning & fill your boots. Easy enough to have a container of cinnamon or chocolate to sprinkle on top & bring your own add in of choice to boot.

‘But I can’t cook/don’t have time to do that’ you say. Your choice, but cooking can be learned. I figure $60,000 in my pocket is worth a few minutes of my time & since I’m buying groceries anyway, may as well use what I buy. Apparently a lot of food is thrown away because it goes bad before people can eat it. I figure the reason it goes bad is because those people ate something else, over & over again while ignoring the food they purchased which is slowing rotting in their fridge.

#58 Dave in Sylvan Lake on 04.22.15 at 7:57 pm

It’s all about how you set up your TFSA(s)…yes you can have more than one.

If you have a financial IQ above room temperature and are an active investor, a self-directed TFSA gives a person the freedom to buy and sell securities within a brokerage account. Not all securities qualify though.

Many people make the mistake of putting mutual funds in their TFSA(s) due to their lack of understanding the capability of their TFSA. Like Garth said, a TFSA is for gains, “man up”. It’s the one vehicle Canucks can use to amass wealth quicker than any other vehicle. Filling a TFSA with GICs, mutual funds, treasuries, and long term bonds is like putting gasoline in a diesel engine. Good job by the neo-Cons on this one I must say.

#59 Shawn Allen on 04.22.15 at 7:58 pm

The 1% Fee

Fees are tax-deductible on non-registered accounts and come out of RRSPs etc. tax-free. — Garth

***********************************
How does it work to get a fee out of the RRSP tax free? Did not know that an advisor could make a withdrawal from a client’s RRSP much less that there would be no tax on the withdrawal.

Advisory fees taken from an RRSP or RRIF are not classified as taxable withdrawals. In this way the government subsidizes the cost of advice and management, as it does with non-registered accounts by allowing fees to be deducted from taxable income. — Garth

#60 Retired Boomer - WI on 04.22.15 at 7:59 pm

Yesterday’s posts dealt with bank fees, the increasing prices on bank services.

Nobody ever mentioned a Credit Union.

I will assume Canada has credit unions, as does the US.
Our Credit Unions are not guaranteed by the FDIC but, are guaranteed by a different Federal Agency.

Many offer FREE Checking services, lower loan rates, and usually a slightly higher interest rate on deposits.

It pays to shop around.

#61 Alex G. on 04.22.15 at 8:00 pm

@ #10 Glengarry Glenn Ross on 04.22.15 at 5:56 pm
——————-

Read Garth’s post from January 26th 2014 for an example of distributions: http://www.greaterfool.ca/2014/01/26/loaves-and-fishies/

Garth has been kind enough to post that info on many other occasions since but I found that one a useful example. Lately he has advised a lower percentage for REITs (8-10%).

As for specific ETFs, Garth seldom mentions them by name (and rightfully so, everyone’s situation is different – and some investments may not be great for you personally but keeping it balanced and diversified usually works well).

To help you narrow down some specific ETFs, have a look at that article and then go to http://www.ishares.ca and see which ETFs are similar in content to what Garth usually recommends.

To be safe though, you should have a licensed professional look it over first.

Hope this helps.

#62 Alex G. on 04.22.15 at 8:08 pm

@ #19 dangeresque2 on 04.22.15 at 6:13 pm
———————–

Garth gave some great examples of what types of investments to hold in which accounts. Check his post from earlier this month: http://www.greaterfool.ca/2015/04/06/diversity/

You’re welcome :)

#63 Dominoes Lining Up on 04.22.15 at 8:13 pm

Just heard Joe Owe on CBC radio, after panel discussions etc. pointing out today how few people will really be able to take advantage of the larger TFSA room.

His response?

“Older people may want to sell their homes and put the proceeds into a TFSA to use that room”

And so the countdown to real estate implosion gets kicked into a higher gear…….

#64 Lorne on 04.22.15 at 8:13 pm

#12 Diversified in Oakville
Thank-you Mr. Harper for trying to buy my vote. Maxed out both of our TFSA’s today in ETF’s churning out non-taxable gains. LOVE IT!
Still not sure he deserves my vote, but what is the alternative?
…………
So, your vote can be bought?? Any alternative is better for the entire country than manipulator, Dictator Steve!

#65 young & foolish on 04.22.15 at 8:15 pm

“I do not advocate ‘investing in the stock market.’ ”

So, equity ETFs are not investing in the stock market?

Now quote the rest of my sentence. — Garth

#66 4 AM Sunrise on 04.22.15 at 8:16 pm

#60 Retired Boomer – WI on 04.22.15 at 7:59 pm

We’ve already discussed how deposits at credit unions are guaranteed by…well, credit unions:

http://www.greaterfool.ca/2015/03/12/the-scent-of-a-fall/

#67 Baz on 04.22.15 at 8:18 pm

Garth,
It will be a good idea to remind us from time to time what a balanced portfolio should like ..I guess u like those : XIU, XSP CPD,XRE and XCB ..

At the end of the day, we can here to be Reminded and Enlightened :)

#68 Alex G. on 04.22.15 at 8:19 pm

@ #15 powder_hound86 on 04.22.15 at 6:06 pm
——————-

To open TFSA you need:
– be at least the age of majority in your current province.
– be a Canadien resident.
– have a Canadian social insurance number.
– live in Canada for at least 6 months + 1 day per year of eligibility (this last point I’m not 100% sure of thought).

#69 april on 04.22.15 at 8:19 pm

#56 Boomer buster. Blame the leader. Also read the book, Harperism

#70 BlackDog on 04.22.15 at 8:22 pm

Ok. Be kind.

I know I am obsessed with FATCA hiding myself, but for some reason my eyes glaze over whenever people say ETF …or…Preferreds…and growth and stuff…..while my squirrel self can barely remember where I hide my nuts from the IRS.

So why I am here then? Please help.

#71 Mark on 04.22.15 at 8:31 pm

“I will assume Canada has credit unions, as does the US.
Our Credit Unions are not guaranteed by the FDIC but, are guaranteed by a different Federal Agency.”

Canada has credit unions. They are generally self-insured through a coalition with other credit unions. Therefore the “deposit insurance” available within the Canadian credit unions is generally limited to that of one-off failures of institutions, not systemic failures.

As Garth has posted on a few occasions, certain credit unions in some of the most bubbly markets have been promoting outrageous subprime lending products to the public and through mortgage brokering channels.

Therefore, act accordingly! Some people perceive Credit Unions to be less risky because they only “invest locally” — but that may actually be more risky as they do not have the benefit of broad diversification amongst regions and amongst asset classes.

If the stock market will yield a net average return of 7.0% per annum over the next 25 years as suggested 1,000,000 times in your blog it is difficult to see why any pension fund or individual investor would purchase any other form of investment instrument.

Volatility. Sure, equities are priced to return, assuming a zero growth environment, 7% nominal per year (ie: P/E = 15), and somewhere north of that if there is nominal economic growth. However, there can be some pretty extreme swings in valuation.

Having said that, folks like Warren Buffet have done very well investing long-term funds (in Buffett’s case, insurance company reserves) into equities and doing well. There’s no reason why someone can’t do well with a 100% equities portfolio, appropriately diversified. But lots of people can’t stomach such, and it may not lead to an optimal Sharpe Ratio.

“Canadians are not the only incredibly financially illiterate people. So are Americans. How can an American making average wages build, and pay off a home, own three paid for cars, and have more than 3/4 of a million in investible assets, and retire at 60? “

A heck of a lot easier in the US where stock market returns have been considerably better for most of the boomers’ investing lifetimes.

The Dow average was 1000 back in 1980. Today its 18k. The TSX was 2000 back in 1980. Today its only 15k. Canada’s publicly traded small cap universe basically hasn’t amounted to much more than a hill of beans. While US small-caps have outperformed even the Dow average.

Its easy to blame Canadians broadly for not saving and investing, which is certainly part of the problem, but the return side of the equation has not treated Canadians as kindly as those south of the border.

#72 Smoking Man on 04.22.15 at 8:32 pm

Black Dog, love the way you write. That’s why your here. I’m sure others like your style. Story, within a story.

Anyway my central theam is catching on.

http://www.theburningplatform.com/2015/04/21/they-said-go-to-college/

#73 Financial Freedom at 40 on 04.22.15 at 8:37 pm

#3 Beef Jerky
Any individual stocks anyone has their eye on? I’m avoiding etfs/indexes because I find them boring.
—–
Music to my ears, often fighting the boredom of passive index and mutual fund balanced investing. It’s a character quirk.

Recommend http://www.stockhouse.com, and their bullboard comments. Also the “Find Opinions>Recent Opinions” drop-down section daily at http://www.stockchase.com for analysts quoted in the news.

I only bet with money I can afford to lose (I cap self-directed equity picking at 10% of my total investments), but the wins feel especially great. Keeps me learning about individual companies, industries, trends, seasonality, technical analysis etc. Provides a point of comparison to the funds my advisor manages, and makes for livelier debate.

#74 tnarG on 04.22.15 at 8:40 pm

I am planning on opening a tfsa account and dumping 10k into it. I did the math on a napkin today on my break and the numbers don’t lie. Freedom 53 !

#75 Shawn Allen on 04.22.15 at 8:40 pm

Deductibility of the 1% Fee

Advisory fees taken from an RRSP or RRIF are not classified as taxable withdrawals. In this way the government subsidizes the cost of advice and management, as it does with non-registered accounts by allowing fees to be deducted from taxable income. — Garth

**************************************
Good to know, especially convenient that the fee can come out like that and that is fair and good.

Darest one point out that this is mathematically the same as a 1% fee charged by a mutual fund (if they were that low). In that case the fee effectively is tax deductible since it reduces the return by 1%. To the extent the return would have been taxed eventually the tax is lower because the return is lower due to the 1% mutual fund fee.

In other words the advantage of the 1% advisor fee is due to the fact that mutual are high at say 1%. There is no additional tax benefit related to tax deductibility of advisor fees, since the mutual fund fee also reduces return and therefore taxes?

Mark, Ralph, I suspect I may need backup here. What sayeth the math?

A mutual fund does not give you advice, tax minimization strategies, financial planning help or talk to you kindly when wonks on the Internet try to bedazzle. — Garth

#76 Maya(n) Calendar on 04.22.15 at 8:43 pm

Maya,

If you look through Garth’s previous posts, you’ll find all the answers you need.
Or, you can do basically what I have done and copy one of this guy’s recommended portfolios(option 3). There are more good days than bad days with a balanced portfolio. History would suggest that the sooner you invest, the better.
When my TFSA’s are maxed out, I invest my extra $ into a non registered account through questrade. The same website has suggestions as to which accounts to hold your different etfs in.
Good luck to you and I hope it all works out.

http://canadiancouchpotato.com/model-portfolios-2/

#77 Three Parts Tequila, Two Parts Triple Sec and One Part Lime on 04.22.15 at 8:50 pm

With regards to the 17% of people who contributed the max to their TFSA’s. Does that account for people who were non-resident in Canada when the TFSA came into law? My wife and I are maxed but we became residents two years late so we might show up in the stats as not being maxed out. Maybe it would be statistically insignificant but my math fails me right now…cheers.

#78 Andrew Woburn on 04.22.15 at 8:51 pm

The MSM is convinced that millennials are different. They want to live in a downtown condo forever. They will never own a car.

The problem with this theory is that, just like the boomers, they can’t stay young forever. The leading edges are now facing the cruel fact that you can be cool or you can be a parent, but you can’t be both. The consequences for the condo glut may be harsh.

“New census data show that for the first time since 2010, the outermost suburban counties are growing faster than urban counties and close-in suburbs, according to analysis by the Brookings Institution. People are moving back to the exurbs, some for jobs, others for bigger and more affordable homes in a more wide-open space.”

http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2015/4/15/returning-to-the-exurb-rural-counties-are-fastest-growing

“Millennials have since begun purchasing cars as if it were their job—likely because they can now get real jobs. They now account for nearly 30 percent of new vehicle sales, having surpassed Gen X in 2012. This development led The Atlantic’s Senior Editor Derek Thompson to rethink his theory that owning a car was so Boomer. It turns out that the majority of this generation isn’t as fixated on urban living, renting and public transportation as the pundits thought.”

http://wire.kapitall.com/investment-idea/millennials-buy-cars/

A lot of crap was written in the day about boomers being different. Most of it was written by boomer journalists.

I suspect most of these articles are written by millennials or by people not much older than them. Many similar stories were written about how boomers were different from their parents

#79 Julia on 04.22.15 at 8:54 pm

Lots of great information to think about.
I only recently opened a TFSA. After accelerated mortgage payments and household/family expenses, I was maxing out my RRSP and really had not much left.
Now thinking that, with a defined benefit pension available, maybe i should slow down mortgage payments and focus more on the TFSA even before RRSP.

#80 Karma on 04.22.15 at 8:56 pm

#52 CREIT on 04.22.15 at 7:34 pm
“I got an e-mail from my property manager earlier today telling me both of my tenants lost their jobs, both worked for oil companies, and have moved out. Property is 10 minutes south of Edmonton.

I knew this day was coming.”

That sucks. Best of luck. Ask the property manager what their strategy to fill it will be?

#81 Washed Up Lawyer on 04.22.15 at 8:58 pm

#72 Smoking Man on 04.22.15 at 8:32 pm

Smokey:

This is old news but law school grads all over the U.S. are launching class action suits against their universities alleging fraud and false advertising about employment prospects and anticipated income levels.

Coincidentally, my daughter phoned me today nearly in tears about achieving only a B in one of her undergrad classes and how her prospects of getting into law school are doomed.

Can’t she see how miserable her mom and dad are in the practice of law.

I am celebrating. She can be a rivet bucker or a tin door salesperson and then create her own job.

“Parker said he found it “galling” that the schools gathered data that showed graduates were ending up in non-legal jobs but omitted that information from what they disclosed to the public — a contention that is in dispute. Job data are a highly influential factor in law school rankings. The suits allege the schools also inflated their graduate earnings, reporting the results of only a carefully selected sample.”

#82 Glen on 04.22.15 at 9:01 pm

Garth,

Have you any thoughts on Sunlife’s milestone investment platform as a TFSA option?

Essentially guarantee’s no lose if locked in for a certain amount of time. Rate of returns tend to be around 5-7% in a mixture of assets.

To me…might be a decent option for those who cannot stomach a lose on their TFSA (thus stuffing it into the orange guy’s shorts).

I am considering that investment vehicle….thoughts?

Did you note the fees? Guarantees are not free. — Garth

#83 MSM-free Zone on 04.22.15 at 9:02 pm

As I have sad before, a full-service, fee-based advisor charging 1% is most economical for someone with $150,000 or more to invest. Your friend is a financial snob. — Garth
_____________________________

Thanks for the benchmark for making a fee-based advisor cost-effective.

For those with less than $150k to invest, I’m assuming self-directed is the way to go?

If you have the skill, time and knowledge. Otherwise just divide what you have between four or five of the ETFs I have suggested. — Garth

#84 Karma on 04.22.15 at 9:05 pm

#63 Dominoes Lining Up on 04.22.15 at 8:13 pm
“Just heard Joe Owe on CBC radio, after panel discussions etc. pointing out today how few people will really be able to take advantage of the larger TFSA room.

His response?

“Older people may want to sell their homes and put the proceeds into a TFSA to use that room”

And so the countdown to real estate implosion gets kicked into a higher gear…….”

Hopefully, old people were paying attention to this old person.

#85 Mark on 04.22.15 at 9:05 pm

“Mark, Ralph, I suspect I may need backup here. What sayeth the math?”

I believe you’re right on the “math”, but Garth’s point is well taken — embedded fees tend to reduce advisor accountability, may not represent good value for money. Many of the “advisors” that market themselves towards ‘retail’ investors may trend towards outsized compensation relative to services rendered.

“It turns out that the majority of this generation isn’t as fixated on urban living, renting and public transportation as the pundits thought.””

There’s basically 2 classes of Millennial right now. Working in the public sector and employed at a good wage. Or maybe working in the private sector (if they can even find a job), and just struggling to make ends meet.

The former, of course, are buying the cars and the houses, taking on debt with no abandon. The latter are just hanging on for dear life and have seen incredibly little ability to form investment capital over the past decade.

So whichever ‘group’ a researcher/reporter happens to talk to, inevitably will colour their research or their reporting one way or another.

#86 BlackDog on 04.22.15 at 9:10 pm

SM. #72. Crap. I appreciate your honest response. It explains a lot. Please feed the squirrles.

#87 Alex G. on 04.22.15 at 9:11 pm

A quick observation: No matter which way you plan on voting this coming election, the opposition’s statements about the “TFSA increase only being for the rich” seems counter factual if the graph on page 235 of yesterday’s budget is correctly representing the department of Finance information it supposedly shows. It actually seems to suggest that people making 20-40K represent the largest cohort to max out their TFSAs (I’m sure it’s in part due to the fact that it’s in large part the retired boomers on lower income – Chart 4.1.3 on page 234).

The 2015 budget (scroll down to Chart 4.1.4): http://www.budget.gc.ca/2015/docs/plan/budget2015-eng.pdf

Any thoughts anyone?

#88 Mach on 04.22.15 at 9:13 pm

First off all Garth, I truly appreciate your blog. I recently discovered it, and it has been a godsend; so incredibly informative.

What are your thoughts re: incorporated individuals? More specifically, is it overall better to invest within the corporation and pay oneself less, or keep a fairly high salary in order to generate RRSP contribution room?

Why not take a high salary to earn RRSP room and provide tax relief to your corp, then lend money beak as a repayable shareholder loan? — Garth

#89 Dre on 04.22.15 at 9:23 pm

Question about TFSAs I can’t seem to find a clear answer for online – let’s say I put in the maximum contribution I’m allowed to date, $36,500. I win big on the roulette wheel that is penny stocks and turn it into $100k overnight, which I instantly withdraw and spend on bubble gum and granite counters. How much contribution room do I actually get back the following year – the normal $36,500, or the $100k representing the value of the account at the time it was withdrawn?

#90 Karma on 04.22.15 at 9:25 pm

#85 Mark on 04.22.15 at 9:05 pm
“There’s basically 2 classes of Millennial right now. Working in the public sector and employed at a good wage. Or maybe working in the private sector (if they can even find a job), and just struggling to make ends meet.”

Not true at all, at least from my vantage point.

Almost all of my millennial friends across the world work in the private sector. I know some that are nurses and some attempted to be teachers, but didn’t get enough days so moved onto other careers, and some scientists working at universities. Maybe 10% of my known working friends/acquaintances work for the public sector.

Of my 15 friends I talk to the most, they all make +$60k per year. At at least 5 of them make +$100k (2 of which make +$200k inclusive of bonuses).

So unless you have data to back up this assertion of “2 classes of Millennial”, you should change that assumption.

#91 4 AM Sunrise on 04.22.15 at 9:30 pm

#46 Llewelyn on 04.22.15 at 7:08 pm
#57 Linda on 04.22.15 at 7:57 pm

When I was [email protected], I’ve met customers who literally had no surplus funds after paying for rent, food, and transportation. One of them had to put emergency dental work on a credit line. These people live modestly and count every penny because they have to. From what I’ve seen, they’re not “the majority”, but they are out there. And my job was to be chirpy-cheerful and talk to them about investments.

As for #46…

When students attending post secondary institutions graduate they must devote a significant portion of their income to repay sizable student loans.

I think this is the problem: post-secondary education is not the meal ticket it used to be. The average starting salary of a liberal arts graduate (I’m doing an anecdote-based weighted average of all starting salaries from “sweet government policy analyst gig” to “miserable part-time barista”) does not justify the cost of said education. Like Tim Ferriss wrote, “there is always an alternative”. Getting a good job after graduation should not feel like a lottery.

It’s probably better for STEM graduates. If they’re making $50,000+/year, and student loans are $1000/month, they can probably live modestly, pay the debt, and feed the RRSP and TFSA. Hopefully there was a paid co-op work term in that STEM degree, too.

Boomers also need to open their eyes and see the job market for what it is and not push their kids into university just so that they can put their graduation pictures on the mantel. When I messed up my STEM degree, my parents suggested that I go back to school for another degree. Uhhhh NO. More education was not the answer; rolling up my sleeves to learn about money was.

#92 Glen on 04.22.15 at 9:32 pm

Did you note the fees? Guarantees are not free. — Garth

Thanks Garth,

Indeed I know the fee’s are high…but if I can get a return of between 5-7% (and sleep at night)….might be worthwhile perhaps?

I invest in RRSP’s as well and indeed the return has been great the past 2-3 years…but I also know it could go down and hard.

One’s a gamble…the other is a safety net.

Not sure if that makes sense.

#93 UnWrinkledBoomer on 04.22.15 at 9:32 pm

Got good safe dividend paying securities in my TFSA and return last year was 32% now at 78,000$ and these ones are easy to find even in the the Globe&Mail. the wife is not far behind. It is not going to make much of a difference in taxes for someone already retired.
I feel sad that it comes to this give away but wrinklies are not that dumb to support Harper as Danny Williams of Newfoundland called him a mean man to deal with.

#94 The quick & the dead | Realties.ca on 04.22.15 at 9:38 pm

[…] Source: http://www.greaterfool.ca/2015/04/22/the-quick-the-dead-2/ […]

#95 John Mc on 04.22.15 at 9:41 pm

Hi Garth

So back on Feb 14th I emailed your personal email re talking to you about being our financial advisor but have never heard back? Is it something I said…?

No record you did so. My email is [email protected]. I am always happy to talk to anyone twisted enough to read this blog. — Garth

#96 not 1st on 04.22.15 at 9:46 pm

The papers are reporting a rumor of a $250,000 cap. So all your hard working money will eventually spin off about $1000 per month. Yippee. Maybe should start another retirement investment vehicle just in case.

Highly unlikely. Rank speculation. Ignore it. — Garth

#97 4 AM Sunrise on 04.22.15 at 9:55 pm

#87 Alex G. on 04.22.15 at 9:11 pm

I call these retired Boomers “poor on paper”. Their pension income may be low, but the ones who’ve built significant savings over their working life are maxing out their TFSA’s by shuffling in money from their non-registered accounts.

Tax planners tell Boomers to give their kids/grandkids early inheritances in the form of TFSA contributions, but we can see from that graph that most either can’t or won’t.

These charts don’t account for the diligent savers who put in 70-99% of the limit. That graph might include more people from the under 50 crowd.

#98 John Mc on 04.22.15 at 10:05 pm

#95

No record you did so. My email is [email protected]. I am always happy to talk to anyone twisted enough to read this blog. — Garth

resent it…

Got it. Thanks. — Garth

#99 Victor V on 04.22.15 at 10:10 pm

Could that fat, new $10,000 TFSA ever attract a lifetime cap?

http://business.financialpost.com/personal-finance/tfsa/could-that-fat-10000-tfsa-ever-attract-a-lifetime-cap?__lsa=faf6-455c

#100 slick on 04.22.15 at 10:13 pm

#89 DRE
Question about TFSAs I can’t seem to find a clear answer for online – let’s say I put in the maximum contribution I’m allowed to date, $36,500. I win big on the roulette wheel that is penny stocks and turn it into $100k overnight, which I instantly withdraw and spend on bubble gum and granite counters. How much contribution room do I actually get back the following year – the normal $36,500, or the $100k representing the value of the account at the time it was withdrawn?
________________
you can contribute the full $100 K NEXT YEAR.
plus the $10,000 Joe Owe just provided.

#101 4 AM Sunrise on 04.22.15 at 10:17 pm

#90 Karma on 04.22.15 at 9:25 pm

Instead of talking about “two classes of Millennials”, let’s talk about proportions.

Just for fun, let’s use chart 4.1.3 from this: http://www.budget.gc.ca/2015/docs/plan/budget2015-eng.pdf

It says that only eight freaking percent of Millennials are maxing out their TFSA’s.

The ones in your cohort who are not maxing out their TFSA’s are either not making enough money to do so (which supports the “bad job market” thesis), or they’re spending their paycheques on mortgage payments, materialism, or child rearing (which I hear costs an arm and a leg these days even for the basics. I am appalled by the way schools today shake down parents for things that my own parents never had to pay for.)

#102 Hot Albertan Money on 04.22.15 at 10:18 pm

So if I don’t meet any of your RRSP criteria (done having kids, wife and I make the same amount, not planning on taking unpaid time off) should I abandon my RRSP altogether and shove as much horny cash into my TFSA as possible??

#103 Alex G. on 04.22.15 at 10:19 pm

@ #89 Dre on 04.22.15 at 9:23 pm
——————-

First of all, the contribution limit is now $41,000.
As for taking out more than the limit (be it $41,001 or $500,000) if you managed to get that type of return… overnight or since 2009 when TFSAs first came to be, your new contribution room for next year will be $10,000 (provided liberals or NDP don’t roll it back if elected) + the previous maximum contribution room of $41,000 that you took out. The excess doesn’t unfortunately enable you to increase your own future contribution limits unless mandated by law (as it was yesterday or as it will be on Jan. 1st 2016).

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

@ #97 4 AM Sunrise on 04.22.15 at 9:55 pm
——————

Thanks for the response; I figured as much (regarding the poor on paper bit). Fair point about the close to maximum contributions part; hadn’t thought about it.

#104 slick on 04.22.15 at 10:26 pm

All this poo-pooing about the higher limit only benefitting the wealthy.
2 things; what else can the gov’t do to be fair?
If they raised the RSP limit, same complaint.
The overlooked issue is the cumulative feature.
A couple goes 15 years raising kids, paying a mortgage etc, then BANG mom and dad drop dead and the estate drops $300 K in their laps. Voila! there is room in the TFSA.
Who laughs then??

#105 Mike T. on 04.22.15 at 10:27 pm

I think we should change how elections work

We should vote against candidates

Bet you lots more people would show up

#106 Sheane Wallace on 04.22.15 at 10:30 pm

Or you can empty your TFSA account and vacation in Cuba. Then plan on staying there.

—————————–
Just retire in Cuba with your CPP and Olg Age Pension.
Live like a king with 1 k /month. Buy the house now. 2 % of the prices in Toronto.

#107 mrmomar on 04.22.15 at 10:31 pm

As a late 30s dude who aims to max out TFSA every year – I can attest to the power of untaxed growth. Nothing more rewarding than watching your hard earned after tax income swell your contribution room.

#108 Sheane Wallace on 04.22.15 at 10:35 pm

TFSA is tricky in taxing dividends of non-Canadian companies. So it is practically limited to TSX traded securities.

Diversification is better in RRSP. But withdrawal is trickier.

There is always catch and the most difficult part that one can’t predict government actions.

Registered plans imply some control by government. Non-registered don’t.

#109 Retired Boomer - WI on 04.22.15 at 10:41 pm

#71 Mark

My comments about the financial illiteracy of Canadians AND Americans was directed at those who bought the ‘bigger better houses, or cars” and did not take advantage of their employers defined contribution plans (pretax set aside savings) or their TAX FREE programs (Roth or TFSA) respectively.

Now, many of these contemporaries who are on the verge of retirement 60-65 yrs old find they have inadequate savings, or none at all- AND DEBTS!! YIKES!

THAT, Mark is where the financial stupidity is on display.
Most Americans do not have high ticket priced homes unless they live in New York city, San Francisco etc that they can ‘sell’ to perhaps-fund their retirement.

Time is your friend when investing for retirement, but your cruel master when you have no time left. Yes, US markets have done slightly better than Canadian ones, but if you were not ‘in’ them what does it matter?

I invest in foreign markets, foreign bonds, as well as our US markets, you never know what is going to outperform in any given year. That’s called diversification, a simple insurance policy when investing.

I need never ‘outperform’ any market, but I do want my fair return of that market. Despite yearly modulation I say the overall direction is UP as it has been -relentlessly- for over 100 years of record keeping. Check the record.

You have to be in it to win, AND stay in it to win!

#110 TurnerNation on 04.22.15 at 10:42 pm

Then, I wonder could an advisory with 500k open account and 500k registered charge said client 1% x 2 only upon funds registered.

#111 Victor V on 04.22.15 at 10:49 pm

#89 Dre on 04.22.15 at 9:23 pm

Question about TFSAs I can’t seem to find a clear answer for online – let’s say I put in the maximum contribution I’m allowed to date, $36,500. I win big on the roulette wheel that is penny stocks and turn it into $100k overnight, which I instantly withdraw and spend on bubble gum and granite counters. How much contribution room do I actually get back the following year – the normal $36,500, or the $100k representing the value of the account at the time it was withdrawn?

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

$110K.

#112 Shawn Allen on 04.22.15 at 10:49 pm

No BUTs about it

Mark on 04.22.15 at 9:05 pm
“Mark, Ralph, I suspect I may need backup here. What sayeth the math?”

I believe you’re right on the “math”, but Garth’s point is well taken — embedded fees tend to reduce advisor accountability, may not represent good value for money.

**********************************
Thanks for the support BUT I never took any issue with fee-based being superior to mutual funds. You seemed to imply I did. I simply pointed out that any claim that tax deductibility of the fee was NOT among the advantages of fee-based over mutual funds.

When agreeing with someone it is always best to leave out any BUTs. Otherwise agreement turns into a thinly veiled attempt to show superior knowledge as opposed to agreement.

I acknowledge that this is not much of a thanks.

Here is a life hint, people will truly think you are smart when you say THEY are smart. Add that they are good looking and you may be perceived a genius.

I was actually saying you were smart when I asked for your support.

#113 Shawn Allen on 04.22.15 at 10:51 pm

I better try again

I simply pointed out that any claim that tax deductibility of the fee was among the advantages of fee-based over mutual funds was not correct.

You are incorrect. — Garth

#114 Leo Trollstoy on 04.22.15 at 10:57 pm

So unless you have data to back up this assertion of “2 classes of Millennial”, you should change that assumption.

Mark, aren’t you tired of passing off opinion as fact yet? Is it tiring to be shown up wrong repeatedly?

#115 Victor V on 04.22.15 at 10:57 pm

Online poll: Will a TFSA limit of $10,000 a year help you to save more?

Vote at: http://www.thestar.com/business/personal_finance/2015/04/22/as-canadians-live-longer-budget-offers-diy-financial-tools-to-cope-mayers.html

#116 Shawn Allen on 04.22.15 at 10:58 pm

Not Always Taking Ones Book

For those with less than $150k to invest, I’m assuming self-directed is the way to go?

If you have the skill, time and knowledge. Otherwise just divide what you have between four or five of the ETFs I have suggested. — Garth

****************************************
It’s good to see a fee-based advisor acknowledge that other options can also work for some people, and moreover to suggest a way to do it. It’s rare when honesty trumps self interest.

#117 Shawn Allen on 04.22.15 at 11:05 pm

Tax Advantage of deductible management fees?

I simply pointed out that any claim that tax deductibility of the fee was among the advantages of fee-based over mutual funds was not correct.

You are incorrect. — Garth

****************************************
Garth you are highly intelligent, hard working, altruistic and handsome.

Does this change your opinion? I thought I explained it well above at 75 and the math was confirmed by Mark at 85.

Mutual fund fees reduce returns, hence reduce taxes.

No argument that the fee-based system beats mutual funds overall, just pointing out that mutual fund fees clearly reduce taxes just as do deductible management fees.

If I am wrong someone can show me the math.

Ralph?

#118 Leo Trollstoy on 04.22.15 at 11:05 pm

“Older people may want to sell their homes and put the proceeds into a TFSA to use that room”

And so the countdown to real estate implosion gets kicked into a higher gear…….

Not gonna happen.

#119 Bailing in BC on 04.22.15 at 11:10 pm

#174 Sideshow Rob on 04.21.15 at 2:10 pm

“Ah generation envy. Everyone else had it easier. It would seem like some of us are too young to know what they don’t know.
The 1970’s and 80’s were very inflationary and paychecks lagged living costs in a large way. That’s why unions were so popular and militant then. You wonder where money went? Food cost a lot more relatively then. Same with music, travel, cable tv andstuff in general. The biggy was interest rates. As Garth has mentioned many times house prices and interest rates are negatively correlated. Mortgage rates ranged from 10% to 20%. That is not a typo. Back then interest costs were high and house prices weren’t. Now it’s the opposite. Either way you pay. It’s always been a challenge. Different era, same large hole in your wallet if you bought a house.
Also houses were a lot smaller then. 1200 foot bungs were considered huge.
Envy is never a productive thing.”

Thanks for your patronizing response. Where to begin? For a start it’s not “generation envy” it’s generation empathy, since I’m not a millennial. I’m not a boomer either although I have certainly benefited from many of the things that boomers have. I’m Gen-X.

I’m well aware of the mortgage rates from the 70’s and 80’s – not because I lived through it – but because I can read. Interest rates and house prices are indeed negatively correlated and while it might be the same large hole in your wallet at first glance – buying at high interest rate and low price is by far the preferable environment.

Someone earning $2.75 an hour in 1981, who was foolish enough to take out a 5 year mortgage of $24,000 at 21.75% would be paying $419 per month in mortgage payments or 88% of their income.

Someone earning $26.84 now and buying the cheapest house in North Vancouver, currently on the market for $770,000 (1300sqft) with 4.74% (posted) would be paying $4363.94 or 94% of their income.

The person in 1981 would however be renewing in 1986 at 9.7% bringing his mortgage payment down to 53% of his income.

Our 2015 purchaser would be renewing in 2020- the chances of renewing at a lower rate are slim to none (or slightly less ;-) ). If they renew at the posted 5 year historical average (1973-2015) they will be paying $5318.36 or 114% of their income.

Which would you rather be?

Furthermore, if our purchaser in 1981 has a year’s income saved, his down payment will reduce his mortgage by the equivalent of almost a week’s wages per month. Our 2015 buyer can save a year’s income as a down payment and reduce his monthly payment by the equivalent of just over a day’s work.

I don’t know about you but I certainly had it a lot easier when I first purchased in 1998 for less than 2 years income. I guess some people just remember everything as uphill both ways.

Now run along – and try not to be such a dick in the future.

#120 Lobster Man on 04.22.15 at 11:12 pm

RRSP to RRIF conversion

There are possible advantages of converting your RRSP (or at least part of it) to an RRIF way before you reach the ripe old age of 71.

Do the conversion just before you reach 65 IF you have no defined benefit pension plans in your books.

From age 65 onwards, CRA allows you to have $2,000/yr. tax free from your “qualified pension income” source. RRIF withdrawal is considered as a “qualified pension income”. Other incomes from the likes of CPP, OAS and RRSP withdrawals DO NOT qualify.

You should size your RRIF account to allow you to withdraw for a minimum of 6 years at $2,000 each. Of course you can have an account of a larger amount. But once you open an RRIF, the minimum withdrawal rule kicks in. Any amount in excess of $2,000 will be taxed as regular income.

If you are not sure, talk to your tax accountant/advisor.

So, blog dogs closing in onto this magic age of 65, jump on this opportunity, and get some extra “tax-free” cash for your TFSA.

#121 Shawn Allen on 04.22.15 at 11:12 pm

Pyric Victory

Sheane Wallace on 04.22.15 at 10:35 pm

TFSA is tricky in taxing dividends of non-Canadian companies. So it is practically limited to TSX traded securities.

************************************
3% is a good dividend and on that the withholding tax is 15% so a total of just under a half percent in this case (0.45% lost to withholding tax)

Did people let that stop them from buying U.S. stocks? If so they missed out on both bigger capital gains than Canada and the big currency move.

Don’t let tax planning drive the whole decision especially when the tax involved is piddly.

Or just choose non-dividend paying U.S. stocks and go for pure capital gains.

#122 45north on 04.22.15 at 11:13 pm

dominoes: And so the countdown to real estate implosion gets kicked into a higher gear

I’d say the stage is being set. The increase in the TFSA contribution does provide an alternative to real estate.

#123 Ontario's Left Coast on 04.22.15 at 11:18 pm

A big howdy to the Dogs on this chilly evening. I wanted to chime in on the minimum deposits for full-service, discretionary wealth managers… I’m with TD Private Investment Counsel and they’ve just moved from $500K to a $1M minimum to get on board. I’ve been with them since ’02 and have been very happy with their results, but I’m starting to think their fee’s a little rich (1.25%). I know it’s tax deductible but does it seem too high? Again, in my view they’ve done a great job of balancing growth with capital preservation, so I have no complaints on the performance end. Cheers!

#124 Smartalox on 04.22.15 at 11:32 pm

I guess that the idea of getting the TFSA recognized as the taxation equivalent to the US Roth IRA to keep dual citizens from being taxed on gains made on investments inside their TFSAs. With Roth IRA limits at $5500 per year, and TFSA limits now raised to $10k, the need has never been greater.

#125 Evan on 04.22.15 at 11:35 pm

TFSAs are pretty solid, but for people prepared to do a little extra legwork there are much better options when it comes to saving for retirement — even if you have to pay tax. The best is Ben Graham’s statistical approach to value investing for its simplicity and profit potential.

http://www.netnethunter.com/benjamin-graham-still-relevant-or-a-complete-waste-of-time

#126 Karma on 04.22.15 at 11:53 pm

#101 4 AM Sunrise on 04.22.15 at 10:17 pm
“#90 Karma on 04.22.15 at 9:25 pm

Instead of talking about “two classes of Millennials”, let’s talk about proportions.

Just for fun, let’s use chart 4.1.3 from this: http://www.budget.gc.ca/2015/docs/plan/budget2015-eng.pdf

It says that only eight freaking percent of Millennials are maxing out their TFSA’s.

The ones in your cohort who are not maxing out their TFSA’s are either not making enough money to do so (which supports the “bad job market” thesis), or they’re spending their paycheques on mortgage payments, materialism, or child rearing (which I hear costs an arm and a leg these days even for the basics. I am appalled by the way schools today shake down parents for things that my own parents never had to pay for.)”
—————————————————-

Thanks for this.

I can’t speak for the general population, but I can speak from what happened in my 15-person Whats App chat group yesterday after I mentioned TFSA contribution limits are going up.

Immediately, one of my friends said “TFSAs are stupid. It barely saves any taxes on such low interest income anyways. It’s a waste of time”. I, of course, called him stupid. Then other people jumped in saying it saves “peanuts” and “GICs suck”, etc. Then I rebutted saying it’s an investment account for the long-term rather than a regular saving account. And that future capital gains and dividends won’t be taxed again ever.

Within half an hour, 3 of my friends individually asked me to help them invest their cash sitting in TFSAs making <1%, and claiming that they have zero idea how anything in finance works. Truly pathetic. But they have savings. $10's of thousands' of savings that they don't know what to do with because they've always been too lazy to learn about the options provided by the gov't. 1 of the 3 has a work DCPP and ESOP, 1 has an RRSP account, and the last one doesn't have a registered accounts, but the most amount of cash. If it wasn't for me bringing it up, they wouldn't have given the TFSA increase a thought.

So, in my experience, not all millennials are scrapping by with crappy jobs, nor do they have cushy public sector jobs. But they also don't have the faintest clue about what TFSAs can do. And therefore, that only "eight freaking percent" of millennials are maxing out their TFSAs may be as much due to the lack of knowledge and interest as the lack of available capital…

#127 TRT on 04.23.15 at 12:02 am

TFSA

Here’s what needs to be done for Boomer’s granddaughters.

1. At age 60, anyone with a fully maxed TFSA cannot qualify for GIS (Guaranteed Income Supplement) at age 65.

2. At age 65, anyone with assets such as a home cannot qualify for GIS.

Lets see if the dumbed down under 40 generation gets this.

Also,

#128 BS on 04.23.15 at 12:19 am

TRUDEAU TO ROLL BACK TFSA INCREASE?

Not to worry the TFSA is likely safe from Justine.

Most of you may be too young to recall that in the early 1990s federal campaign Chrietien promised to replace the GST.

Rolling back the TSFA would be an easy change. The stroke of a pen and your TSFA account now has taxable returns or future increases are frozen. An easy promise to keep. Replacing the GST would have required a massive over hall of the tax system. The would have have to replace the GST with another tax. Not easy. Nothing like rolling back the TSFA tax shelter.

The big difference though is the GST, as a tax, was not popular where the TSFA, as a tax break, is popular with voters. Justin is a fool for taking this position. For that reason alone myself and many people will never vote Liberal. I suspect he will flip flop on this one prior to the election once they poll the issue. If he doesn’t the Liberals have no chance of winning.

#129 Legacy of Boomers on 04.23.15 at 12:22 am

The legacy Boomers will leave is a 2nd world Canada.

They have ‘stolen’ from the young to appease themselves. Look at the gov policies. In their final years in old age, they will realize what they have done and will get no sympathy as they will pass away in the midst of a meaner Canada.

Will this make it past the Great Boomer filter?

#130 BS on 04.23.15 at 12:24 am

56:

All these things are done for the boomers…

I’m 29, make between 60-70k a year…

I’m not an entitled brat…

Sorry but based on that rant you are an entitled brat.

#131 Legacy of Boomers on 04.23.15 at 12:25 am

@45 North

dominoes: And so the countdown to real estate implosion gets kicked into a higher gear

I’d say the stage is being set. The increase in the TFSA contribution does provide an alternative to real estate.
——————————————————————–

Not really. The Gov turns a blind eye currently on billions collected by landlords renting out condos, basement suites, etc. There is a source of tax free income right there. No person has ever been prosecuted by CRA for not declaring basement suite income!

#132 BS on 04.23.15 at 12:41 am

What are your thoughts re: incorporated individuals? More specifically, is it overall better to invest within the corporation and pay oneself less, or keep a fairly high salary in order to generate RRSP contribution room?

The problem with investing inside your cooperation in equities is the returns are taxed at the highest marginal rate. For example if you buy the TSX index in a corporation you will pay about double the tax rate on dividends and capital gains within the corporation as you would if you held the same in a personal account. Furthermore when you do withdraw those already double taxed returns you will pay personal income tax again on them. There are lots of tax breaks for those with a corporations but investing inside of them in equities is not one of them and should be avoided. There is not such a disadvantage for fixed income investing in a corporation so you could keep your fixed income portion of your portfolio in the corporation. But keep in mind money in a corporation is not well protected against creditors, law suites, etc, where once it is taken out it is pretty much protected and yours to keep. Pay yourself a salary and or dividend and invest in a personal account if you want to invest especially in equities.

#133 Frank on 04.23.15 at 12:51 am

#33: “Excellent advice today, unless of course, you belong to the bottom two thirds of the Canadian population for whom this TFSA increase was never meant to help anyways.”

How does my son who is on ODSP and makes $10k a year, who isn’t allowed to have any “assets” over $5000, no life insurance policies, or no liquidity suppose to live after their disability is terminated at 65? I’m going to leave him a nest egg worth roughly $300k when I ‘m gone, but after that inheritance, he will be automatically cut off. Has the government (on both levels) completely forgotten about these invisible members of society or does nobody really give a damn?

#134 cramar on 04.23.15 at 12:51 am

@#57 Linda

Well Linda, you are certainly in good company. Sam Walton and Warren Buffet use to take their lunches to work in a paper bag.

#135 Evangeline on 04.23.15 at 1:01 am

Ontario’s Left Coast

What are they doing for you in terms of annual rate of return?

Have they doubled that as well? :)

#136 Laurenda on 04.23.15 at 1:01 am

I am [email protected] and I would give love more than anything to put this article on my desk.

Financial illiteracy is shockingly rampant. I think the biggest part of the problem is that people don’t know what they don’t know, so there is no urgency to understand. I’m sure people in the dark ages didn’t know they were in the dark ages, either.

Garth does more good here than he knows. I even sometimes refer clients to this site.

Loyal disciple here, Garth.

#15 powder_hound86 on 04.22.15 at 6:06 pm

“Can anyone shed some light on the tax implications of a US expatriate opening a TFSA?

Would love to jump on this.. but I’ve got uncle Sam picking my pockets.”

>> As far as I know, uncle Sam taxes any return generated in Canadian registered accounts. One would also be legally required to report any such accounts on the US tax returns.

For example, I know that if an ex-pat has an RESP for their Canadian kids, they have to report any growth on it as their taxable income to the States.

http://youngandthrifty.ca/usa-citizens-and-the-resptfsa-battle/

#17 mclatch on 04.22.15 at 6:11 pm

“Thank you very much Mr Turner you always have the best information here it’s awesome! I feel like I have a little portal to a view behind the curtain. The commentary is great.

I was wondering about the tax implications about holding american stuff in a tfsa as opposed to holding in an rrsp? Tax treaties and all, aren’t withholding taxes applied to a tfsa but not rrsp? Is it better to have yank stuff in the rrsp then?”

>> This isn’t a case where a tax treaty would be applicable. Returns generated by TFSAs do not fall under the special treaty status. Think of it like other countries don’t care if Canada says we don’t need to pay tax… they do.

The implications of this are two fold;

1. If you are an ex-pat or file a US tax return, regardless of if you hold US or Canadian domiciled equities in your TFSA, you will need to report the returns to the IRS.

2. Let’s say you’ve never lived outside of Canada. Even if you only file Canadian tax returns, what you hold in your TFSA still matters for tax purposes, but in a different way.

For example, if you straight up purchased the Nasdaq index in your TFSA, any gains you saw on it would be after you were taxed as a foreign equity holder by the States. This diminishes any return and benefit of owning a foreign equity this way.

But! If you were to instead purchase the Nasdaq Index through a Canadian domiciled middle man, i.e. iShares, you would not be taxed on any gains.

An example of a fund like this would be XQQ.

It is a Canadian-dollar hedged EFT, meaning that while you will have the ability to mirror the returns of the Nasdaq without having to take a tax hit, you will not benefit from the fact that the US dollar has a greater value than the Canadian dollar.

(Drops the mic)

#137 Laurenda on 04.23.15 at 1:07 am

Gee whiz kids… time sure does fly when you’re writing a fun, yet informative for this alleged pathetic blog…

Now I understand how Smoking Man gets into his flow.

#138 Laurenda on 04.23.15 at 1:08 am

*fun yet informative post

…does this count as spam?

#139 dangeresque2 on 04.23.15 at 1:37 am

#62 Alex G.

You’re welcome :)

—————-

Hehe thanks!

#140 Winterpeg on 04.23.15 at 1:53 am

So if I don’t have the dough to max out, can I borrow to invest in a TFSA?. The conversation a few days ago suggested that I can’t. Can I borrow using my HELOC, for example? (I know I couldn’t claim the interest like with a non registered account, but what I want to know is if you can borrow to plunk $$$ into a TFSA?

Of course you can. — Garth

#141 palebird on 04.23.15 at 1:54 am

#123

Yeah I got 2.5 m wrapped up with them, they are really square guys..

#142 Love my Kia on 04.23.15 at 2:06 am

In the case of death of a family member who owned a TFSA, does the beneficiary have to pay tax on it through estate transfer? If estate tax comes into play, can a couple go joint on a TFSA where surviorship eliminates tax?

Also, if there is no survivorship, wouldn’t the TFSA come out of tax protection status through estate taxes, even if the beneficiary wants to put it in their own TFSA?

#143 Bailing in BC on 04.23.15 at 3:17 am

The exact same wicked thought danced through my mind.

#144 Bailing in BC on 04.23.15 at 3:18 am

Sorry the above comment was intended for #110 TurnerNation on 04.22.15 at 10:42 pm

#145 Nagraj on 04.23.15 at 5:09 am

#46 Llewlyn
“I am rich I am smart Thank you Thank you.”
Well, Llewelyn, fear not. Take it from me: truth to tell, they aint that rich, and they’re not that smart – but they are obnoxiously self-satisfied. Which is really rather funny. And unimportant.

As for “This is not a social justice blog” – the whole country, the world, your day, my day, every day is, indeed, a social justice blog.

Garth’s blog is a valuable public service – especially at a time when the Canadian economy is an international joke. Garth has pointed out, among other things, that over half of working Canadian families live paycheck to paycheck.

“Tomorrow and tomorrow and tomorrow creeps in this petty pace from day to day . . . ” and a little excitement never hurt anybody, eh? This totally stupid Lazarus budget has just fired up an exciting federal election campaign.

#146 Eaglebay on 04.23.15 at 6:46 am

#108 Sheane Wallace on 04.22.15 at 10:35 pm

“Registered plans imply some control by government. Non-registered don’t.”

Oh really! Ever heard of a T5?

#147 Aegal on 04.23.15 at 6:53 am

About risk of overcontribution…

Provicial levels have not yet agreed to upgrade the TFSA limit to 10k. They could decide to not follow Federal on this and keep theirs at 5k. With current provincial gouvernements trying to eliminate their deficit, it could happen.
It would be TAX hell but then, isin’t it already ?

Zero chance. — Garth

#148 saskatoon on 04.23.15 at 6:54 am

parody?

nope!

http://www.thestar.com/business/2015/04/22/how-four-buyers-found-a-toronto-house-for-under-500000.html

#149 Linda on 04.23.15 at 8:14 am

#91 Sunshine: I am not saying there are not people out there whose disposable income is the diddly of squat. There are & yes, it is difficult to save when your income is that low. Yet it can be done. Find less expensive digs if possible, definitely cook your meals & bring your lunch to work. Also, as a bank employee, I do not think you would necessarily be informed or have time to find out (except via your nose if they are smokers) if these cashless clients smoke, drink, eat out every day etc. Unless of course you were doing a full workup of their finances & they gave you a detailed spreadsheet which showed every single transaction, no matter how small, for the previous month’s expenses. Said s/s being full disclosure, no items omitted.

As for poor, my own mother lived on CPP/OAS/GIS to the tune of some $17,000 (gross) per year. She still managed to save enough to leave each of her children a small legacy & she had 7 children. To be fair, we helped her – she would not take cash from us but would allow us to gift her with clothing, trips, meals out, buy her a pass so she could enjoy her aqua size classes etc. Even so every penny counted & she could make them go round twice.

#150 mid on 04.23.15 at 8:39 am

#132 Frank

Frank:
When ODSP money stops, it is converted to the same amount of money but paid by the Federal govt in the form of a pension that combines OAS and something else.

So in other words he will get the same amount of money (actually a wee bit more) as he has been getting now but it comes from a different source. It comes off Ontario’s books (the “O” in ODSP) and goes on the Federal govt’s books.

Also since he will be off ODSP he can have more than 5K in assets. Everything changes when he hits 65.

Just went through this with my brother.

Mid

#151 gladiator on 04.23.15 at 8:50 am

With Justine threatening to reverse the TFSA room increase, I think I will squeeze my nose, put on a disgusted face and vote for the Cons. I will wash my hands, with soap, twice, right after doing so.
Hate them, but this looks like the only viable way to keep this little win in our hands.

#152 Ralph Cramdown on 04.23.15 at 8:51 am

#87 Alex G. — “TFSA increase only being for the rich” seems counter factual if the graph on page 235 of yesterday’s budget is correctly representing the department of Finance information it supposedly shows. It actually seems to suggest that people making 20-40K represent the largest cohort to max out their TFSAs (I’m sure it’s in part due to the fact that it’s in large part the retired boomers on lower income – Chart 4.1.3 on page 234).”

The TFSA is only a few years old, so it hasn’t reached ‘steady state,’ that is, there’s plenty of unregistered money sloshing around that would have originally been contributed to a TFSA, had it existed. It is moving there at the maximum contribution rate, and will until those people don’t have any more extra unregistered funds kicking around. Rich parents are gifting their in-school kids the maximum annual contribution, and people with high net worth but low taxable incomes are shovelling. Do not confuse net worth with annual taxable income, as much as the government and the easily confused press would have you believe otherwise.

Gawd, when did I become the ‘math guy’ on this blog? That’s sad. If there’s one thing every young-ish investor needs to understand, it’s exponential growth, a.k.a. compound interest. People who try to show you what a TFSA looks like after 20 years are doing you a great disservice. Look at what it looks like after fifty years. Probably the most honest advertising in the entire financial services industry is those posters on the bus that say you’ll end up with the same amount if you start saving $200/month in your 20s as if you save $1,000/month starting in your forties.

Jack Bogle’s whole schtick boiled down to two things: Most people are lousy at stock picking and market timing, and HIGH FEES WILL KILL YOU. People who don’t think there’s much difference between 1% and 2.5% annual fees just don’t understand compounding. You don’t need to know how to use a slide rule, or have memorized logarithm tables (as Napoleon apparently had) to see this effect. Just learn basic spreadsheet modelling, even with Google Sheets, and see how money grows in 30, 40, 50 years. See how much of a difference an extra 1% in fees makes. See how much of a difference taxation makes.

#153 not 1st on 04.23.15 at 9:01 am

#132 BS on 04.23.15 at 12:41 am

The problem with investing inside your cooperation in equities is the returns are taxed at the highest marginal rate.

A corporation can flow through eligible dividends to the shareholder just as through the shareholder owned the equities themselves, thus your company pays no tax and you pay whatever the personal rate on eligible dividends is which is 0% up to $50k with no other income.

This is the sweetest deal in Canada, not the TFSA. You earn income in a company, pay 10% on it, buy equities with the remainder and flow the eligible dividends out to yourself the owner.

#154 MGTOW on 04.23.15 at 9:22 am

>>Anyway my central theam is catching on.

Smokey, James Altucher has been preaching it for years.
(Took a lot of flak for it too.)

Example: Anyway my central theam is catching on.

#155 MGTOW on 04.23.15 at 9:22 am

http://www.jamesaltucher.com/2010/02/dont-send-your-kids-to-college/

#156 4 AM Sunrise on 04.23.15 at 9:27 am

#126 Karma on 04.22.15 at 11:53 pm

AHHH! My stats are wrong! (Maybe I should drink more before I post, like Smoking Man.)

Let me read that chart again:

1.9 million Canadians have maxed out their TFSA’s.

Millennials comprise eight freaking percent of these people.

That means that 152,000 Millennials have maxed out their TFSA’s.

I’ll use this to count how many Millennials are in this country: http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/demo10a-eng.htm

It comes to about 7.5 million people. But many are non-earning kidults in post-secondary education, so let’s reduce that number to…5 million?

That means that three freaking percent (or less) of earning-age Millennials are maxing out their TFSA’s.

This is worse! But it confirms your anecdote about your friends. Sixty-plus years of combined university education amongst all of you and most them diss a vehicle that is designed to help high-earners like them. The conspiracy theorists are right: the goal of the Man who’s in charge of the System is to keep people ignorant.

#157 TorontoBull on 04.23.15 at 9:46 am

for novice investors Tangerine investment funds are a good and easy option. But don’t believe me. See Morning star rating:
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F000000S6A&region=can&culture=en-CA
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F000000S66&region=can&culture=en-CA

An MER of 1.07% – seriously? For that level of fee you can get an actual person to help you. — Garth

#158 Shawn Allen on 04.23.15 at 9:54 am

Integrity

Shawn Allen on 04.22.15 at 10:51 pm
I better try again

I simply pointed out that any claim that tax deductibility of the fee was among the advantages of fee-based over mutual funds was not correct.

You are incorrect. — Garth

****************************************
If Garth were to (miraculously) have a revelation and agree that mutual fund fees (while horrible and all that) do reduce taxes because they reduce return (even in an RRSP) then I am confident that he would no longer claim that the tax deductibility of advisor fees was on its own an advantage over a similar level mutual fund fee. Garth’s obvious integrity gives me that confidence.

#159 Rational Optimist on 04.23.15 at 10:08 am

56 Boomer buster on 04.22.15 at 7:54 pm

“I’m 29, make between 60-70k a year… Not bad, but everything is expensive. Hard to save 10k a year.”

But…

“I’m not an entitled brat.”

A few years into your career, you alone earn as much as the average household in Canada, and you complain about “everything” being expensive. And you find it “hard” to save ten thousand dollars a year. That’s less than a ten percent savings rate. Stop worrying about the boomers, or anyone else.

#160 Rational Optimist on 04.23.15 at 10:09 am

I meant to say “less than a twenty percent savings rate.” Note that neither are impressive savings rates for someone with no dependants.

#161 Realitybytes on 04.23.15 at 10:20 am

Can you give me any advice on how to stay in Cuba?

I’ve got my eye on a 57 Chevy and a tin shack from my last trip.

#162 editor on 04.23.15 at 10:26 am

James Altucher is awesome, some of his pieces are really amazing read. So is his life. But Smoking Man knows that, he reads businessinsider.com, where James is often featured.

The same way as Peter Thiel, who is even more vocal about it and puts his money where his mouth is:

http://www.thielfellowship.org/

But he is just following some earlier pioneers:

“I HAVE NEVER LET MY SCHOOLING INTERFERE WITH MY EDUCATION.”
– MARK TWAIN

I think the bottom line: as an entrepreneur you can get away without formal education in certain fields not so much as a wage slave.

#163 Moller on 04.23.15 at 10:33 am

What is “indexing of TFSA contributions” exactly?

I was always under the impression that any changes to the TFSA annual limit were legislated. The annual limit did not incrementally increase each year. It jumped from $5000 annually to $5500, and now $10,000.

#164 CJ on 04.23.15 at 10:41 am

I have a pension so will not follow Garth’s balanced approach. All equities all the time in my TFSA.

#165 Joe Schmoe on 04.23.15 at 10:42 am

#153/Garth

Reading above about dividend tax credits:

Is there still a tax advantage? I thought it disappeared in 2014…maybe I am missing the up to 50K part.

Thanks

#166 Rational Optimist on 04.23.15 at 10:45 am

147 Aegal on 04.23.15 at 6:53 am

“With current provincial gouvernements trying to eliminate their deficit, it could happen.”

Wait for this afternoon to see how hard Ontario’s provincial government is trying to eliminate its deficit.

#167 slick on 04.23.15 at 10:59 am

#133 Frank;
I can’t comment on your sons situation regarding a TFSA, but will suggest you look into setting up a HANSON trust.
slick

#168 S on 04.23.15 at 11:02 am

Quick scan of headlines over the last couple of years reveals the magnitude of Canadian household debt. Is it somewhere around 30K not including mortgage? I wonder where they will get the 10K a year.

#169 slick on 04.23.15 at 11:03 am

#142 Love my Kia;
In the case of death of a family member who owned a TFSA, does the beneficiary have to pay tax on it through estate transfer? If estate tax comes into play, can a couple go joint on a TFSA where surviorship eliminates tax?

Also, if there is no survivorship, wouldn’t the TFSA come out of tax protection status through estate taxes, even if the beneficiary wants to put it in their own TFSA?
——————————-
When someone dies the TFSA can be rolled tax free into their spouses plan. If there is no spouse, the money goes to the estate tax free. If the estate is large enuff, the TFSA money must be probated. [approx. 1.5 % I believe.] Don’t trust my numbers, do your own DD.
slick

#170 Marco on 04.23.15 at 11:10 am

After what Oliver said about the younger generation sorting out any problems with their tax cuts, I would be Leary of supporting their housing bubble.

A manufactured housing asset appreciation for votes and to prop up the economy. Oliver also mentions maybe it’s time for homeowners to cash out and use the new TFSA for a retirement plan instead of home ownership, oh.
Look out below.

Baby boomer bank of mom and dad. The conservatives voting base, go figure…

http://business.financialpost.com/personal-finance/mortgages-real-estate/over-40-of-first-time-home-buyers-in-canada-cant-afford-a-house-without-their-parents-help-report-suggests

Cheers.

#171 TakingResponsibility on 04.23.15 at 11:23 am

#56 Boomer buster on 04.22.15 at 7:54 pm

Re: “entitled”

Don’t worry about “entitled”; the meaning of “entitlement” is obfuscated when overused.

The true meaning of Entitlement is represented here:
http://www.macleans.ca/news/canada/the-cautionary-tale-of-the-mike-duffy-trial/

Just watch the Duffy trial. Like a Soap Opera called “The Entitled!”

Hehe!

PS. You could be right about the olders. Best to get involved politically. More and more young people in political office….

#172 expat_in_thailand on 04.23.15 at 11:41 am

@#68 Alex G. on 04.22.15 at 8:19 pm
RE: – live in Canada for at least 6 months + 1 day per year of eligibility

—-

If you maintain “resident status” while in Canada for tax purposes, you can still contribute to a TFSA. So keeping a CAD bank account open, DL valid, and renting a closet from your buddy in Canada while you’re sipping Mai Tai’s in Phuket for 9 months would qualify you as a “factual resident”.

For more info, see here: http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html

One can collect maternity/parental benefits too while out of Canada, which easily covers the $300/m for a live in nanny! Good times – unless the nanny turns out to be a ladyboy…

#173 GTA mayhem on 04.23.15 at 11:44 am

http://www.theglobeandmail.com/life/home-and-garden/real-estate/torontos-house-price-boom-spreads-to-suburbia/article24072842/

#174 Mr. Pink on 04.23.15 at 11:48 am

It’s going to be ugly.

http://yaleglobal.yale.edu/content/high-debt-and-low-oil-price-threaten-canada%E2%80%99s-globalized-economy

#175 Bottoms_Up on 04.23.15 at 11:55 am

#156 MGTOW on 04.23.15 at 9:22 am
———————————————–
He makes a lot of assumptions, and doesn’t account for certain variables, including missing that there would be a cost of living during the 4 years that one ‘doesn’t’ go to college. He rolls the entire amount that ‘college costs’, where he includes food and living expenses, and then uses that entire amount to justify total investment gains made over a lifetime.

The reality is that a 19 to 23 year old would barely be making ends meet, and would not be borrowing $104,000 to invest.

So the beginning premise of his whole argument is flawed. Next, he says that ‘non-college’ kids would quickly close the earnings gap, but he shows no evidence for this.

While I understand where he is coming from (there are lots of successful electricians and plumbers out there), he hasn’t strung together a very convincing argument. I almost feel sorry for his kids.

#176 And there it is.... on 04.23.15 at 12:01 pm

http://business.financialpost.com/personal-finance/mortgages-real-estate/over-40-of-first-time-home-buyers-in-canada-cant-afford-a-house-without-their-parents-help-report-suggests

#177 Bottoms_Up on 04.23.15 at 12:03 pm

#56 Boomer buster on 04.22.15 at 7:54 pm
————————————————-
Well, if you find a partner that earns 20k or 120k, you will benefit from income splitting.

If you choose to have a kid, you’ll benefit from a taxable $160/mo.

You’ll also benefit with tax credit (small savings) on athletic and arts fees.

So not everything has been designed for just boomers.

#178 Centurion on 04.23.15 at 12:04 pm

http://business.financialpost.com/personal-finance/mortgages-real-estate/over-40-of-first-time-home-buyers-in-canada-cant-afford-a-house-without-their-parents-help-report-suggests

I wonder how many millennials believe a starter home is 4 bedrooms, 3 baths, a 2 car garage, and granite and stainless.

#179 CalgaryRocks on 04.23.15 at 12:09 pm

#156 MGTOW on 04.23.15 at 9:22 am
http://www.jamesaltucher.com/2010/02/dont-send-your-kids-to-college/

Maybe Altucher’s kids don’t need college. I am sure that with his money and his contacts, his kids will do just fine in whatever business he sets them up.

#180 TorontoBull on 04.23.15 at 12:10 pm

“An MER of 1.07% – seriously? For that level of fee you can get an actual person to help you. — Garth”
key word is ‘novice’. if you start with 5G and 200 monthly intallments, its not worth the time of a decent financial advisor…

You are far better off with a self-directed ETF portfolio at a fraction of the cost. — Garth

#181 Mark on 04.23.15 at 12:20 pm

“That means that 152,000 Millennials have maxed out their TFSA’s.”

Sounds about right. And most of them are likely the kids of executives or otherwise high income individuals who didn’t save the TFSA money themselves.

Mark, aren’t you tired of passing off opinion as fact yet? Is it tiring to be shown up wrong repeatedly?

Aren’t you tired of trolling Trollstoy? Go find a new hobby. You haven’t shown me to be wrong at all.

#182 Panhead on 04.23.15 at 12:41 pm

#164 Realitybytes on 04.23.15 at 10:20 am
Can you give me any advice on how to stay in Cuba?

I’ve got my eye on a 57 Chevy and a tin shack from my last trip.
———————————————————

Just make sure that ’57 doesn’t have a 3 cylinder Russian smoking diesel in it … still remember the ’57 Nomad taxi I saw down there .

#183 Pre-Retiree on 04.23.15 at 12:53 pm

#167 I have a pension so will not follow Garth’s balanced approach. All equities all the time in my TFSA.
__________________

I am in a similar situation and have taken the 70 equity/30 safe stuff approach. But there was an interesting analysis (on Couch Potato I think) that showed that a higher equity weighting did not result in significantly higher returns in the long term because the losses are more profound. I thought that was interesting. Maybe if the equities are really diversifed in terms of value/growth, and geographical location, it could be better than a typical 60/40 portfolio. I am not sure exactly what is the best approach.

#184 Lorne on 04.23.15 at 12:55 pm

#151 gladiator on 04.23.15 at 8:50 am
With Justine threatening to reverse the TFSA room increase, I think I will squeeze my nose, put on a disgusted face and vote for the Cons. I will wash my hands, with soap, twice, right after doing so.
Hate them, but this looks like the only viable way to keep this little win in our hands.
…….
Honestly??? $5000 a year more in TFSA is enough for you to disregard all the other negative things Steve has done and is planning to do to the citizens of this country?? You might want to take a look at the slightly bigger picture!

#185 Smoking Man on 04.23.15 at 1:07 pm

165 editor on 04.23.15 at 10:26 am
James Altucher is awesome, some of his pieces are really amazing read. So is his life. But Smoking Man knows that, he reads businessinsider.com, where James is often featured…
………

Just discovered him today, above post suggestion. agreed absolutely awesome. To boot, I’ve contacted the editor of his best seller, waiting for a reply.

Greater Fool comment section is best in the world, put it out there, and great advice from blog dogs.

Garth should be charging us.

#186 Josh in Calgary on 04.23.15 at 1:07 pm

“An MER of 1.07% – seriously? For that level of fee you can get an actual person to help you. — Garth”
key word is ‘novice’. if you start with 5G and 200 monthly intallments, its not worth the time of a decent financial advisor…

You are far better off with a self-directed ETF portfolio at a fraction of the cost. — Garth

Garth,
For people starting out with small somes of money, or wishing to do monthly installments in low amounts, they are FAR better off with a self directed mutual fund than an ETF. If they want to do the $200 monthly installment the entrance fee of $10 equals a 5% MER on top of the MER the ETF charges (likely around 0.5%). You can find decent self directed mutual funds with MERs in the 1% range. Your total fee for the year on $5000 is $50. Compare that to buying a balanced portfolio of five ETFs and your trade fees alone add up to $50, on top of the MER of $25 a year.

The other way to do it is to save the $200 a month and then do all of your trades at one time, but you’re still dealing with multiple trade fees not to mention that some people just do better with the Set-it and forget-it approach where the money is automatically withdrawn.

I fully agree that when you get into higher investment amounts that ETFs are the better way to go because the $10 per trade becomes insignificant in terms of MER.

#187 Holy Crap Wheres The Tylenol on 04.23.15 at 1:12 pm

#164 Realitybytes on 04.23.15 at 10:20 am
Can you give me any advice on how to stay in Cuba?
I’ve got my eye on a 57 Chevy and a tin shack from my last trip.
_____________________________________________
Sure just take the Avenida Carlos Manuel de Cespeded to Plaza de la Revolución in Havana, stand in the plaza and yell libertad de discurso y la libertad para todos!
You will get to stay for the rest of your life.

#188 CHERRY BLOSSOM on 04.23.15 at 1:25 pm

Garth I am wondering if we can put in an additional $10,000 right now or if we have already put in the $5,500 do we just get to top it up and put in an additional $4,500?


$10K max in 2015. — Garth

#189 CHERRY BLOSSOM on 04.23.15 at 1:26 pm

I am wondering feverishly why there is a photo of a Chinese Family on the cover of the Fed Budget document???

Are they from China? If not, they’re Canadians. Now bug off. — Garth

#190 kastis on 04.23.15 at 1:39 pm

Who is marmalade dude ?

#191 Franco on 04.23.15 at 2:06 pm

What about us poor Shlubs in Quebec

#192 Paul on 04.23.15 at 2:18 pm

Did you ever feel used, Cherry Blossom you are the PITTS??

#193 Nagraj on 04.23.15 at 2:24 pm

Big picture of a stupid-lookin’ Poloz with this caption: ” – the new bubble blower at the helm of the Bank of Canada. He does look a bit loopy actually.” This at the “Pater Tenebrarum” website. The piece “Canada’s Central Bank Is Headed By A Comedian” has nuthin in it we didn’t already know. [Poloz’s remarks in NY on Monday were dryly reported by the G&M, and wonderfully positioned next to a photo of a struggling Canadian family in The Star.]

But it got me thinkin’ how supernaturally UGLY and STUPID-LOOKIN’ our leading pols are. Except Justin Trudeau.
All the WIMMIN is gonna vote for him. Your mother, certainly your wife, your mistress (you prolly don’t got one of those even tho yer wife wishes you did for obvious reasons) yer sister, yer nieces, ALL the wimmin is gonna vote for Justin.
Oh, but you say, he’s effeminate. The wimmin’s response: “SO WHAT!”
Oh, but you say, he’s a Quebecker. Well why do you think all those schoolmarms visit Paris and Rome on the holidays, eh?
Everybody on the continent knows God put the English on an island cuz it was the only way he coud get that non-Quebecker race to reproduce. Still he had to invent fog!

Forget it. Justin Trudeau WINS. Kiss yer TFSA limits good-bye. And all yer mllenals is gonna vote for him too. Like who in their right mind would stand in line for an autographed photo of Harper or Owe or Poloz or Prentice or Couillard or, omg, Wynne. These are DON MESSER’S JUBILEE freaks, and OUR PET JULIETTE fans.

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

#194 Daisy Mae on 04.23.15 at 2:40 pm

$57 Linda: “However, if the vast majority can’t or won’t start up a TFSA in the first place, don’t know whether a cap will ever become necessary…”

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

A cap would be necessary…for the wealthy 1%.

#195 cramar on 04.23.15 at 2:56 pm

#193 kastis on 04.23.15 at 1:39 pm
Who is marmalade dude ?

—————-

Ah, Grasshopper…you are obviously new here! There is much insider lingo on this blog since the Host waxes eloquent using metaphors and other pithy euphemisms. It can be real confusing for new blog dogs (or is that dawg?).

There was a guy who use to track, and post every once in a while, a cheat sheet of what all the terms mean. Yup, this blog needs a cheat sheet! Perhaps it is time for an update.

Anyhow, “Marmalade Dude” is the guy in the commercial who represents the Tangerine Bank (cannot believe a bank would name themselves after a fruit, Apple wannabes no doubt)—aka “The Orange Guy” back when it used to be ING Direct. Putting your money in the “Orange Guy’s Shorts,” now Marmalade Man or Dude is Garth’s way of saying putting your money in a low-interest savings account at the fruit bank.

#196 Frank Blood on 04.23.15 at 3:01 pm

@196 Nagraj- “These are DON MESSER’S JUBILEE freaks, and OUR PET JULIETTE fans.” Ha ha ha, funniest comment in months.

#197 Bottoms_Up on 04.23.15 at 3:02 pm

#189 Josh in Calgary on 04.23.15 at 1:07 pm
——————————————————
Questrade allows you to buy ETFs for FREE.

But do keep in mind there are still small MERs for each ETF.

#198 Smoking Man on 04.23.15 at 3:20 pm

Editor, who are you…

Amazing links. Your not the average bear are you.

#199 Mike S on 04.23.15 at 3:30 pm

“First, I do not advocate ‘investing in the stock market.’ Some equity exposure is fine, but the idea of a balanced portfolio is to mitigate risk. Second, this is not a social justice blog. Dumb people who lust after houses, put their money in GICs and feast on debt deserve the future they create. — Garth”

But what about the rest of us Garth?
Don’t we need to share the future they create?

#200 Leo Trollstoy on 04.23.15 at 3:36 pm

A cap would be necessary…for the wealthy

No means testing ever.

#201 jess on 04.23.15 at 3:41 pm

Australian property seen as hot destination for money laundering

Date April 22
Australia needs to tighten safeguards against money laundering in its booming property market, which has attracted Chinese funds with likely links to corruption, an international anti-money laundering body said in a report released late on Tuesday.
The intergovernmental Financial Action Task Force said real estate agents and lawyers have been identified as a high money laundering risk in Australia, where regulations do not require them to report suspicious transactions.
The Paris-based group recommended that Australia widen its efforts, instead of only focusing on drugs, fraud and tax evasion.
The report comes a month after Australia ordered the Chinese owner of a $39 million Sydney mansion(Villa del mare in Sydney ) to sell up within 90 days, saying it was purchased illegally although it did not suggest it was linked to corrupt funds.
Immediately following the high-profile incident, Treasurer Joe Hockey said Australia would beef up its investigations into foreigners buying residential properties.
Hockey announced his decision today under the Foreign Acquisitions and Takeovers Act. Under the law non-resident foreign nationals cannot buy established dwellings as homes or investments and all foreigners require approval to buy residential real estate.

http://www.smh.com.au/business/australian-property-seen-as-hot-destination-for-money-laundering-20150422-1mqpdn.html
http://www.businessinsider.com.au/joe-hockey-forces-sale-of-39-million-sydney-mansion-under-foreign-ownership-laws-2015-3

#202 Love my Kia on 04.23.15 at 3:45 pm

#172 – slick
Thanks for that slick…I appreciate the feedback!

#203 Nerf Herder on 04.23.15 at 3:52 pm

Australia living in a parallel universe…

http://www.fool.com.au/2015/04/22/this-is-how-the-property-bubble-bursts/

#204 bdy sktrn on 04.23.15 at 4:00 pm

Ack!

The Shiny Pony has taken to the airwaves!

“I’m justin-time, and i will knife the new tfsa!!!”. or something like that , heard on a lib ad in bc.

did this election just become a referendum?

#205 jess on 04.23.15 at 4:02 pm

ROgues
NEWS ANALYSIS: Security researchers find new malware that exploits legitimate advertising channels to attack and compromise computers.

http://www.eweek.com/security/new-advertising-malware-spreads-through-web-advertising-channels-2.html
Financial Botnets Go Beyond Banking to Hit Payroll, HR Portals

…”online ads are automated through Bidable, a self-service real-time bidding platform.

“What happened was a malware producer presented a falsified ad through a legitimate ad network, bid for placement and then sent the ad through. To make sure that the advertisement was accepted, the initial content for the ad was free of any malware.Then, when it was time for the ad to be distributed, it was replaced with a “minor update” in the ad network, which then sent the advertisement through to end users just as it would a legitimate ad.”

====================================
TD has hired an American consulting firm to advise on its cost-cutting strategy.

#206 editor on 04.23.15 at 4:05 pm

#201 Smoking Man
Editor, who are you…

Amazing links. Your not the average bear are you.

——

Thanks Smoking Man.

Just an other dyslexic, who used to rely on and editor at the other side of the world, before I traded my life to chase the end tail of the North American Dream for serving life time in the golden cage of ESL.

Sometimes this trade would also call for JD.

Had I been more careful when I was too foolish, too young, I might not be limited now to tolerate only the smell of vodka and gin.

#207 Mike S on 04.23.15 at 4:12 pm

“TFSAs are pretty solid, but for people prepared to do a little extra legwork there are much better options when it comes to saving for retirement — even if you have to pay tax. The best is Ben Graham’s statistical approach to value investing for its simplicity and profit potential.”

little extra legwork? Just reading Intelligent Investor/Security Analysis by Graham will take months to years for most people

#208 Josh in Calgary on 04.23.15 at 4:33 pm

#200 Bottoms Up,
If they let you buy ETFs for free then that changes the equation. What’s the catch though? If I set up an account and only buy ETFs then the make zero money. They gotta be making their money some how or they won’t be in business long. Do they get a cut of the MER? Is the MER slightly higher as a result? Or do they charge a monthly fee?

#209 Obvious Truth on 04.23.15 at 4:42 pm

#183. Toronto Bull

Why would would anyone buy those when you can get etfs for just .07%. Last time I looked for a friend they were just vanguard or ishares products charging you 15x more.

Not to mention you can purchase many etfs at no cost on some platforms.

Gotta keep it simple, cheap and diverse when saving. And have maneuverability as you progress.

Having said that I saw a wealtfront robo advisor portfolio that actually looked ok. But again all ishares and vanguard products and .25%. If the Orange guy did something like that you could make an arguement for smaller accounts and those just starting.

The problem I have with any of this is that it forgoes the learning aspect. I would want everyone to be involved and knowledgable about their savings and investments. Not relying on expensive and inadequate products or advice.

#210 45north on 04.23.15 at 5:31 pm

Legacy of Boomers: Not really. The Gov turns a blind eye currently on billions collected by landlords renting out condos, basement suites, etc. There is a source of tax free income right there. No person has ever been prosecuted by CRA for not declaring basement suite income!

you just made that up

#211 Derek R on 04.23.15 at 5:31 pm

#198 cramar on 04.23.15 at 2:56 pm wrote:
There was a guy who use to track, and post every once in a while, a cheat sheet of what all the terms mean. Yup, this blog needs a cheat sheet! Perhaps it is time for an update.

Yeah, okay. I’ll wait until Garth puts up tonight’s posting and then put up the GarthFAQ. “Marmalade dude” is a new one though. I’ll have to add it.

#212 SWL1976 on 04.23.15 at 6:03 pm

I’m liking all this chat in Incorporated Individuals today

Thanks guys :-)

#213 reasonfirst on 04.23.15 at 6:06 pm

How much time a month would you expect to put into managing your own self directed EFT based portfolio?

Time is money afterall.

#214 earthboundmisfit on 04.24.15 at 5:40 am

Someone wanted advice on how to stay in Cuba.
Spark a doobie in the airport.

#215 Josh in Calgary on 04.24.15 at 3:48 pm

Not that Garth needed my back up, but the CRA and Joe Oliver have confirmed that there is no need to wait to top up your TFSA to the new $10,000 limit.

http://www.cbc.ca/news/business/tfsa-limit-change-takes-effect-immediately-ottawa-clarifies-1.3047776

#216 Nagraj on 04.24.15 at 5:05 pm

“Just imagine what happens when mortgage rates creep.” And creep and creep. And churchyards yawn and hell itself breathes out contagion to Canada. I dreamt of money-bags! The owl sits in the marketplace at noon hooting and shrieking. Thin-faced prophets whisper – such a tale as to make your eyes pop out.

Feel free to brush up my Shakesbeer.

What, a God’s name, makes people think that a collapse of the great Canadian housing bubble will be an event that can be politically “contained”?

“Just imagine what happens when mortgage rates creep.”

I bet you wear black eyeliner and tame crows. — Garth

#217 jacob556 on 04.25.15 at 7:33 am

Here are the latest TFSA statistics from GOC that indicate the number of opened TFSA accounts by income range (2014 Tax Year, 2012 Data for TFSA Holdings). The data suggests that the largest number of accounts have been opened by citizens with income ranges between $20-$50k accounting for 36.5% of all account holders. Based on this we can conclude that the middle class do in fact take advantage of the TFSA more than the upper and lower income earners do, however exact dollar amounts are not available for comment.

TOT_INC_CALC count2012 percent2012
n/a 376,950 3.93%
loss and nil 33,810 0.35%
$1 – $4,999 416,210 4.34%
$5,000 – $9,999 361,070 3.76%
$10,000 – $14,999 536,940 5.59%
$15,000 – $19,999 692,280 7.21%
$20,000 – $24,999 671,280 6.99%
$25,000 – $29,999 579,280 6.04%
$30,000 – $34,999 590,160 6.15%
$35,000 – $39,999 584,380 6.09%
$40,000 – $44,999 579,740 6.04%
$45,000 – $49,999 494,640 5.15%
$50,000 – $54,999 433,710 4.52%
$55,000 – $59,999 382,300 3.98%
$60,000 – $69,999 641,740 6.69%
$70,000 – $79,999 502,820 5.24%
$80,000 – $89,999 382,890 3.99%
$90,000 – $99,999 297,090 3.10%
$100,000 – $149,999 624,990 6.51%
$150,000 – $249,999 268,750 2.80%
$250,000 and over 145,800 1.52%
Total 9,596,830 100%

#218 jacob556 on 04.25.15 at 7:44 am

In relation to my comment above 38% of Canadians currently have TFSA’s, it is interesting to note that only 20% of Canadians have contributed to this account with only 7% that have maximized their contributions (based on the fiscal year 2012).

desc val2012 %
Canada population (2013 data) 31,160,000 100%
Total number of TFSA Holders 9,596,830 31%
Total number of TFSAs 11,854,760 38%
Average number of TFSAs per holder 1

Total number of TFSA Holders
who contributed to a TFSA 6,174,590 20%

Total number of TFSA Holders who
did not contribute to a TFSA 3,422,240 11%

Total number of TFSA Holders
who maximized contributions 2,254,030 7%

Total number of TFSA Holders
with withdrawals from a TFSA 2,505,840 8%

Total number of open TFSAs with
no transactions during the year 4,430,510 14%

Total number of TFSAs opened
during the year 2,394,330 8%

Total number of TFSAs closed
during the year 757,380 2%

Total number of TFSAs with
deceased holders 59,350 0%