The haters

Five years ago the man who would be prime minister promised a balanced budget by 2019, fairer elections and a modest deficit for three years. He also promised to soak the rich and gut the TFSA. Being prudent and democratic was hard. Gutting and soaking was easy. So here we are.

The tax-free contribution limit tumbled from ten grand to just five, and has inched up to $6,000 a year. Trudeau dissed the Tories in 2015, arguing because only wealthy people could afford to invest $10,000 a year, the TFSA was a sop to the rich. Now the hate continues.

This weekend the Lib-friendly Toronto Star carried an article by Montreal academic Amir Barnea which may be a prelude to the next T2 assault on our most democratic tax shelter. (There’s a federal budget coming in a few weeks.) The arguments are familiar: because most Canadians are (a) too financially illiterate, (b) too poor, (c) too dumb or (d) too house lusty to find $6,000 a year to max their TFSAs, they should be frozen and capped.

Says the prof: tax-free accounts cost Ottawa money in forgone tax revenue. If they didn’t exist the feds would be collecting $1 billion more this year from people. Second, they’re unfair, since only 10% of people have maxed their plans. Third, they’re elitist, as people in the top tax bracket have more in their TFSAs than regular schmucks. “Based on this we have to conclude that TFSAs are effectively a regressive tax measure, offering the greatest tax breaks to those with the most money.”

His solution (and this may become Liberal policy) is (1) a lifetime cap on contributions. “To make things simple,” he says, “the current contribution room of $69,500 can be used…” And (2) a cap on the overall amount a TFSA could ever contain. “This could be set at $250,000 per individual. If an account reaches a higher value, the difference would be taxed like regular investment income.”

Well, let’s hope Barnea is not being a Trudeau/Morneau mouthpiece. Not everybody teaches university and has a DB pension, after all, so maybe you can excuse an academic for being an out-of-touch tool. But let’s use the next few paragraphs to state the obvious.

TFSAs were invented to be the most democratic vehicle possible, giving everyone a chance to save and invest for their futures. I know. I was there. Regardless of income or resources, we all get the same contribution limit. If you can’t afford to use it this year, it rolls over into the future – always giving you the chance to get ahead.

This is in stark contrast to RRSPs, which favour big money-earners by increasing the contribution limit as income grows – right up to $26,000 a year, or 18% of annual pay. Why the Libs would choose to gut and attack the one universal, accessible option everyone has while being silent on the 1%er RRSP gift is beyond me.

Let’s also not forget TFSA contributions are made with after-tax dollars – what’s left after people’s incomes have been hoovered by taxes and decimated by living costs. So is it really unfair that a family making $300,000 or more a year and forking over up to 50% of that in tax, while 40% of all families pay no net tax, should lose a modest way to save? Why do Liberals hate and punish success?

Then there’s the issue of independence. Given an aging population, governments that cannot live within their means and a health care/retirement bomb on the horizon, shouldn’t politicians encourage self-reliance? The TFSA was intended by F (and me) to be a supplement to the RRSP and inadequate, crappy corporate pension plans. Open, accessible, effective and democratic, it held out the promise of providing a meaningful income boost in old age. Let’s face the fact CPP/OAS will never provide enough to live on.

Moreover, why the war on responsibility? Ottawa gives tax-free money to people for breeding, which has removed hundreds of thousands from the tax rolls. But it’s ‘regressive’ that others manage to make their TFSA contributions? Meanwhile, 14 million Canadians opened TFSAs and contributed $280 billion precisely because of the rules put in place. To change them now because ‘the government needs money’ when it’s been Ottawa’s fiscal incompetence leading to structural deficits and higher taxes, is a sham. The problem lies not with people being responsible. It’s with the feds’ irresponsibility.

Wealthier people usually get that way for a reason. They pursue higher-paying careers, take risk and open businesses, budget, invest, save and plan. The fact most people want houses they cannot afford, borrow their way to oblivion and make appalling financial decisions is not the fault of anyone else. Get over it.

Gutting this tax shelter was bad public policy. Capping contributions or account balances would be a giant step backwards – unless you believe socialism works.

It doesn’t. Write your MP.

 

189 comments ↓

#1 Blair on 02.02.20 at 1:55 pm

Because the TFSA came from the Conservatives, it is bound to be changed by the Libs. Pure politics.

The lack of financial education in this country is mind blowing.

#2 BC Renovator on 02.02.20 at 1:59 pm

Well said! As someone who earns high 5 figures and owns a Business I have built my TFSA into the 6 figures. Not by being rich and greedy, but by being educated and like you said- taking risk and open businesses, budget, invest, save and plan.
I don’t have a Pension and I never want to rely on my Gov financially.
Thanks for the education garth

#3 Commie Alert on 02.02.20 at 2:03 pm

Dude’s a hack. hasn’t published anything in 6 years.. zippo real world experience

https://scholar.google.com/citations?user=mTr9ZzkAAAAJ&hl=en

#4 Smoking Man on 02.02.20 at 2:04 pm

As much as I won’t KC to win.
I think SF is going to win…..

#5 The real Kip (Ret) on 02.02.20 at 2:08 pm

Wow, that’s one pissed off blog post. Enjoy the Superbowl.

#6 Ben Sharpton on 02.02.20 at 2:22 pm

DELETED

#7 joblo on 02.02.20 at 2:24 pm

$12 mill to the Westons for fridges, now 50 mill to mastercard for what?
freedom of info access shows C. Freeland Deputy PM (the Bike rider), rock star, flies to Montreal etc. has her empty Limo drive up then drive her around, then she flies back and her driver drives back empty.
Carbon footprint, climate emergency, What?
https://youtu.be/phAWRXvRGyc
Jokes on you Kanadians

#8 mark on 02.02.20 at 2:25 pm

We all new this day was coming ………bummer.

#9 crowdedelevatorfartz on 02.02.20 at 2:26 pm

Wow!

Well I think you hit the nail on the head when you stated…
“most Canadians are (a) too financially illiterate, (b) too poor, (c) too dumb….”

The sheeple will get what they deserve.
A financially broken govt that will take from the rich and give to the poor until everyone is “equal” ie poor”

Idiocracy at it’s finest.

#10 Niagara Region on 02.02.20 at 2:27 pm

I agree with Garth about the TFSA, and I agree that many people have unwisely bought houses they couldn’t afford. However, regarding “wealthier people usually get that way for a reason,” one reason that should be mentioned is being born into a solidly middle-class (or higher) family. The socioeconomic status of the family into which a person is born is the largest determinant of his or her socioeconomic status as an adult. See, for example, this report on the stalling of social mobility since the 1990s in Canada and in many other wealthy nations:
https://www.theguardian.com/society/2018/jun/15/social-mobility-in-richest-countries-has-stalled-since-1990s

#11 Lefty on 02.02.20 at 2:28 pm

Thought we all kindof knew (the TFSA) thing was coming, it saddens me.

I’m guessing by the time my grandkids are ready to open an account, those 69.5k and 250k numbers won’t have been inflation adjusted.

#12 Bezengy on 02.02.20 at 2:28 pm

Write your MP?

My MP (Timmins) is a big business hating, tree hugging, wannabe rock star Dipper, although I do admit he’s a nice guy. I doubt writing him will do any good. Actually, I think I’m part of the the reason he doesn’t list his email address anymore on his website. Any other ideas?

#13 FreeBird on 02.02.20 at 2:34 pm

“…low-income families don’t benefit from tax breaks because they don’t pay taxes.” -Justin Trudeau

https://www.google.ca/amp/s/business.financialpost.com/personal-finance/taxes/trudeau-is-right-40-of-canadians-dont-pay-income-taxes-which-means-someone-else-is-picking-up-the-bill/amp

#14 Shirl Clarts on 02.02.20 at 2:36 pm

this post is why i recommend everyone should read this blog. Smart. shines a light on crooked politics.

#15 crazyfox on 02.02.20 at 2:38 pm

Listen… personally I like TSFA’s. What’s not to like, its a shelter against gains but here’s the rub. This is the perspective of a winner. Not everyone wins with investments in TSFA’s unless it’s low risk and that’s not really what TSFA’s are designed to do, they are there for high risk investments since they encourage investments in equity’s or markets.

We’ve said it ourselves countless times, people by enlarge are financially illiterate and when financially illiterate investors crap out on TSFA’s, put yourselves int their shoes, can they at least write off losses? No! It’s all a dead loss school of hard knocks. TSFA’s are great for winners. For losers… not so much and there unfortunately is the argument for caps and freezes, the plausible need to protect people from themselves.

#16 Sold Out on 02.02.20 at 2:40 pm

While I don’t agree with capping or limiting TFSA contributions, not counting the income towards OAS clawbacks or subsidized home care/long term care costs is wrong. Means testing for any social benefits should include TFSA income.

#17 Gino from Saint-Leonard on 02.02.20 at 2:47 pm

On the subject of appalling financial decisions….

“A Montreal man and his son are suing a luxury dealership for more than $416,000, claiming the white Lamborghini it sold them turned yellow almost immediately after they drove it off the lot…

The suit claims that Calogero Caruso had even re-mortgaged his house in order to buy the Lamborghini for his son, saying it was “his dream to own such a luxury vehicle.”

https://montreal.ctvnews.ca/mobile/a-total-nightmare-men-sue-montreal-dealership-over-white-lamborghini-they-claim-quickly-turned-yellow-1.4790610

#18 oh bouy on 02.02.20 at 2:49 pm

@#6 Ben Sharpton on 02.02.20 at 2:22 pm
_____________________________________

hey Garth, I think missed one here.

Yeah. Our neighbourhood lobotomized racist. Now deleted. – Garth

#19 Sold Out on 02.02.20 at 2:55 pm

#10 Niagara Region on 02.02.20 at 2:27 pm
I agree with Garth about the TFSA, and I agree that many people have unwisely bought houses they couldn’t afford. However, regarding “wealthier people usually get that way for a reason,” one reason that should be mentioned is being born into a solidly middle-class (or higher) family. The socioeconomic status of the family into which a person is born is the largest determinant of his or her socioeconomic status as an adult. See, for example, this report on the stalling of social mobility since the 1990s in Canada and in many other wealthy nations:
https://www.theguardian.com/society/2018/jun/15/social-mobility-in-richest-countries-has-stalled-since-1990s

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This^. This why people are hot for real estate. Relatively few people can expect to get richer by working; the best that most can hope for is treading water.

If you’re not born into the upper middle class, or higher, your children have a limited future. You don’t have the financial or social capital needed to push them up the food chain, unless you leverage RE to afford an education, internships, and the right sports/recreational activities to mingle with the well off and acquire the patina of wealth and breeding.

Ridiculous comment. I am sure the majority of today’s successful people did not suck off mom & dad. That is a recent phenom. – Garth

#20 Calgary Cowboy on 02.02.20 at 3:07 pm

Great post Garth.

I wrote to the local MLA for the Calgary-Currie area.

We need to protect our valuable TFSA in it’s current form!

#21 Linda on 02.02.20 at 3:09 pm

Garth, your post clearly states why TFSA’s are in the government cross hairs while RRSP’s are not. Tax revenues. RRSP funds defer taxes, but the current rules ensure that come December 31st of the year one has their 71st birthday that RRSP funds become RRIF funds & a mandated by the government percentage must be withdrawn every year. Hallelujah says our tax squad, money! However, the TFSA is tax free growth & tax free withdrawals. No tax revenues to be had so one can see why the government regrets ever having granted this option to the tax payer in the first place.

RRSPs hand out tax deductions which those taxes on withdrawals recoup. No such relief when making a TFSA contribution. Suck and blow. – Garth

#22 Niagara Region on 02.02.20 at 3:10 pm

Here’s an interesting news report on money laundering spiking in Ontario since 2017:

https://globalnews.ca/news/6484117/ontario-calls-to-investigate-money-laundering-casinos/

#23 Damifino on 02.02.20 at 3:12 pm

Trust funds set up by wealthy, influential parents for their surviving children will be the next thing to feel heat from the taxman. The PM will jump on it soon.

They are rare. TFSAs are held by 14.1 million people. – Garth

#24 BS on 02.02.20 at 3:20 pm

#15 crazyfox on 02.02.20 at 2:38 pm

Not everyone wins with investments in TSFA’s unless it’s low risk and that’s not really what TSFA’s are designed to do, they are there for high risk investments since they encourage investments in equity’s or markets.

Typical false narrative by those who are clueless about investing. Equities are not high risk. They have produced consistent returns above inflation for a century. But even if you choose to buy a GIC which have produced returns below inflation for a century you are still better off not paying tax. Beats having the government waste the money on progressive pet projects with the money.

#25 Millennial Realist on 02.02.20 at 3:23 pm

It’s a bit funny to hear the surprise and sense of outrage in these comments today.

Boomers getting run over by the change, I guess. Bound to be some squealing and screaming as that happens, and it has started.

Facts first –

Boomer Con governments have been by far the biggest cause of “Ottawa’s fiscal incompetence leading to structural deficits and higher taxes”. From Mulroney to Harper,(and now Ford in Ontario, provincially, same as Harris before who wrecked the balance sheet and gave away the 407.) If you vote for Boomer Cons, this is exactly what you get. Liberals always have to come in, like Martin did so well, and try to clean it up while speaking to Canadians like adults, not ignorant children – that’s the political game Boomer Cons play.

The “health care/retirement bomb on the horizon” will be about Millennials being asked, yet again, to transfer their meagre wealth to Boomers. We will have little left to invest in TFSA’s Boomers, while we pay for your health care.

And more is coming, Boomers –

Inheritance taxes.

RRSP clawbacks.

Property sale profit inclusion.

Environmental levies.

Guaranteed basic income (since you’ve outsourced so many of our jobs and let the 1% get richer while average Canadian workers despair in the ‘gig’ economy.)

We are now in charge, demographically and politically. Trying to deal with the mess that Boomer Cons have created is our burden.

Thanks so much.

The ballot box is now speaking. Listen.

Ok Boomers!?

Boomers, be part of the change.

Or be run over by it.

#26 Nat on 02.02.20 at 3:23 pm

Thanks for all you do Garth. The TFSA is an excellent program as it stands – I have written to my MP to express how this program has helped me as a young professional (not a rich one).

Still think we need you in office in some way, shape or form. You have the only ideas that make sense to me, everything else getting pitched these days is depressing.

#27 SmarterSquirrel on 02.02.20 at 3:26 pm

Through a combination of luck being born in Canada to a hard working immigrant family that came here with nothing but my father’s teacher qualifications and my mother’s entrepreneurial spirit, and through my own hard work after being told to pursue higher and higher education by my loving and supporting family, I’ve managed to get to the 1% income earning level. Despite that I bought a used car for $18,800. Friends who make about a third of what I make have bought the same brand of car, brand new for about $45,000. So if I choose to buy a cheaper used car and put the money I don’t spend on a new car into my RRSP and TFSA why does the government feel I should be capped in doing so. My friend could also have bought a used car and had the extra cash to put in their RRSP and TFSA, but they chose not to.

What happened to encouraging a financially sound aging population rather than incentivizing fiscal irresponsibility. What happened to personal responsibility?

I really don’t get it anymore. What is the government doing?? I miss Chrétien.

#28 Steve on 02.02.20 at 3:27 pm

Mess with TFSA and I will do my best to educate people for future elections. RRSP sucks plain and simple, since it’s tax deferral there should be no limits what so ever.
Just raise the GST,

#29 Paddy on 02.02.20 at 3:27 pm

Perhaps the incompetent Red leader will be voted out next election by a somewhat competent Blue leader and all with be good in the TFSA hood???…
Great point about the RRSP deduction/contribution limit increasing the more money you make, but yeah they don’t seem to be concerned about this favouring the wealthy

#30 Camille on 02.02.20 at 3:36 pm

There’s something about the TFSA and the liberals.
Could they be targeting the TFSA because, working people, with their employer, often have RSP contributions from their employer. In some ways its passive on their part. While TFSA contributions takes action.
Government is afraid to touch RSPs, but uses TFSAs as whipping post.

#31 FreeBird on 02.02.20 at 3:37 pm

23 Damifino on 02.02.20 at 3:12 pm
Trust funds set up by wealthy, influential parents for their surviving children will be the next thing to feel heat from the taxman. The PM will jump on it soon.
———————————
They’re also used in smaller more modest situations where heirs are disabled or otherwise unable to manage inherited funds on their own. Capital is usually preserved to allow the longest benefit with approved expenses such as medical.

#32 Sail Away on 02.02.20 at 3:41 pm

The TFSA is nearly identical to the US Roth IRA, established there in 1997. You can’t contribute to a Roth if income is over $210k per couple or $140 solo.

Canada gov’t might want to get rid of it since it’s originally a US invention.

#33 Sail Away on 02.02.20 at 3:44 pm

#23 Damifino on 02.02.20 at 3:12 pm

Trust funds set up by wealthy, influential parents for their surviving children will be the next thing to feel heat from the taxman. The PM will jump on it soon.

———————————–

Never happen. Trudeau will never resort to taxing himself.

#34 Stan Brooks on 02.02.20 at 3:49 pm

Nothin’ lasts forever
And we both know hearts can change
And it’s hard to hold a candle
In the cold November rain

If I wrote what is in the today’s blog post I would have been shredded to pieces:

1. Cost of living is killing people. How come when inflation is sub 2 %?

2. Is is the feds policies that are bad and irresponsible, people are just victims.

3. The sheeple will not be allowed/or severely capped tax sheltered investments.

It is amazing how people tend to laugh when somebody else is crashed by the steamroller but when they are the one suffering, things suddenly change. Whatever was comic is now tragic.

Enjoy the opportunities in this G7 country while they last folks. And the wise virtue signaling leadership.

I think I just developed hemorrhoids from laughter. It hurts.

It is amazing and scary at the same time how even my biggest fears are far surpassed by the reality and that very quick.

Cheers,

#35 SunShowers on 02.02.20 at 3:50 pm

“TFSAs were invented to be the most democratic vehicle possible, giving everyone a chance to save and invest for their futures. I know. I was there. Regardless of income or resources, we all get the same contribution limit.”

“The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread.” ― Anatole France

#36 less is more on 02.02.20 at 3:50 pm

https://www.thestar.com/business/opinion/2020/02/02/tax-free-savings-accounts-help-make-the-rich-richer-they-need-to-be-fixed.html

#37 crowdedelevatorfartz on 02.02.20 at 3:50 pm

@#12 Berzengy

I believe Snail Mail to your MP’s office is free.
No postage required.

#38 SunShowers on 02.02.20 at 3:52 pm

“Ridiculous comment. I am sure the majority of today’s successful people did not suck off mom & dad. That is a recent phenom. – Garth”

60% of all US wealth is inherited (Alvaredo, Garbinti, Piketty 2015). Can’t imagine the numbers for Canada being much different.

This is not the US. Try harder. – Garth

#39 Devil Anse on 02.02.20 at 3:54 pm

#23 Damifino on 02.02.20 at 3:12 pm
Trust funds set up by wealthy, influential parents for their surviving children will be the next thing to feel heat from the taxman. The PM will jump on it soon.

—————————

The feds already attacked testamentary trusts in 2016 when they changed them from being taxable at the marginal rate to the highest applicable rate. What more can they do?

#40 Mike on 02.02.20 at 3:58 pm

‘Rich people own stocks. Poor people own houses’

Apparently the MSM is starting to tune in to your decades long bleating Garth.

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-rich-people-own-stocks-poor-people-own-houses/

#41 Big Bucks on 02.02.20 at 3:58 pm

Don’t laugh but there will be so many house poor seniors(with upwards of $250,000.00 each)in their TFSA that will still qualify for the $1600.00 a month in OAS/GIS because the TFSA doesn’t count in any way as a clawback.Gov’t will have to tighten up on that.

#42 crowdedelevatorfartz on 02.02.20 at 4:03 pm

@#7 joblo
One wonders when the chip on Chrystia’s shoulder will get big enough for her to think she can push Trudeau out of top spot….

https://www.ctvnews.ca/mobile/politics/i-did-not-take-on-this-job-to-be-a-spokesmodel-freeland-on-deputy-pm-role-1.4696269

#43 DAV on 02.02.20 at 4:05 pm

Trudeau needs more tax so he can continue tweeting $50M donations, paying terrorists $10M, paying for Harry and Meghan’s security and ensuring his Mr Dressup wardrobe is kept up to date. He has no interest in normal run of the mill Canadians.

#44 Ray on 02.02.20 at 4:12 pm

I think messing with the TFSAs is an admission of failure by the Libs. What is the financial strategy for the retail investor if this happens ? Use open accounts and try to protect the gains through capital gains being taxed less ? Then the Libs will increase the Cap Gain rate to 80 % , 90 % or what- ever. They will soon make it so there is no reason to even try to be financially responsible. And that’s how they measure a win.

#45 Slim on 02.02.20 at 4:18 pm

Could someone please wake up the Minister of Middle Class Prosperity! She should be all over this.

TFSA is one of the best retirement vehicles for middle to lower income earners they could use. Maybe government could do a better job of promoting it as such. While RRSPs usually favour higher income earners.

#46 crowdedelevatorfartz on 02.02.20 at 4:22 pm

@#39 Dav
“paying for Harry and Meghan’s security….”
++++
My god the whining.
Conservative estimates value Harry’s eventual inheritance at between $60 and $100 million dollars.
Public Relations companies estimate Harry and Megan’s “brand value” at $250 – 500 million per year.
I’m thinking the backwater known as Saanich wont be their life long location especially after January’s torrential monsoon.

Not to worry Dav.

If they choose to live here the $5- $10 million per year to look after their security ( if indeed they dont pay for it all themselves) will be peanuts to the tourism $$$$ raked in by the gullible rubes hoping to catch a glimpse of “Royalty”.

#47 Dejavu on 02.02.20 at 4:40 pm

Hello blog dogs,

I am new to investing and would like some insight on the best way to build a portfolio in my Tfsa. I have about 25k in a td direct investor tfsa. My aim is a 60/40 portfolio that Garth recommends with ETFs. I’m 33 years old and looking to max my tfsa over the next year. With that said, what would you recommend I do? I think td charges $9.95 per trade so that can get pricey. Would it be wise to create a tfsa account with quest trade for free ETF purchases?

Also, what ETFs should I be looking at buying? A lot of people seem to like the all in one approach like vgro or xgro. But I’m not so sure.
For my basket of ETFs would something like this work?
XSP-US exposure
ZLB-Canadian exposure
I would need a global markets ETF? As well as one for bonds?

Thanks for your help.

#48 Sold Out on 02.02.20 at 4:49 pm

https://www.theguardian.com/society/2018/jun/15/social-mobility-in-richest-countries-has-stalled-since-1990s

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This^. This why people are hot for real estate. Relatively few people can expect to get richer by working; the best that most can hope for is treading water.

If you’re not born into the upper middle class, or higher, your children have a limited future. You don’t have the financial or social capital needed to push them up the food chain, unless you leverage RE to afford an education, internships, and the right sports/recreational activities to mingle with the well off and acquire the patina of wealth and breeding.

Ridiculous comment. I am sure the majority of today’s successful people did not suck off mom & dad. That is a recent phenom. – Garth

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Um, yes it is a recent phenomenon that adult children require, and receive, ongoing financial help from their parents. The decreasing likelihood of children enjoying a higher standard of living than their parents is a recent phenomenon, too.

Funny, when rich people give their children money they call it “early inheritance”, but when Mary Middleclass does it you think it’s coddling ungrateful Millennial whelps.

To be blunt:

Garth, you occupy a social strata that is not currently attainable for great unwashed. Your understanding of their needs, wants, and desires, is understandably lacking. Harping on about Randian bootstrap nonsense doesn’t alter reality.

See below for the ability of renters to help their kids get ahead. Hard to do if your declaring bankruptcy.

https://www.hoyes.com/press/consumer-insolvency-statistics/

News flash: this is not a blog for bankrupt people. That one is here. – Garth

#49 useless on 02.02.20 at 4:51 pm

Great post Garth as always.

The only thing left to do is work for the Government or be a teacher…Or maybe the gig economy and not report any taxes…This Amir Barnea is a real tool.

“For example, Canadians who make $50,000-$55,000 in annual income, have on average $20,000 in their TFSA accounts and an unused contribution room of $32,000. In contrast, those who make $250,000 yearly or more, have an average balance of $43,000 and an unused contribution room of only $16,000.

Based on this, we have to conclude that TFSAs are effectively a regressive tax measure, offering the greatest tax breaks to those with the most money.

This needs to be fixed”

Wow a whole $16000 this must be fixed immediately

#50 Samuel on 02.02.20 at 4:56 pm

So under this scenario I suppose one would grown the TFSA to about $230k and then every time it got near $250k withdraw about $20,000. Using 6% growth per year you are essentially maxed at $14,000 year tax free income. Helps, but doesn’t come close to a good DB pension. The upside is they are unlikely to also add withdrawls to reportable income. Seems it could come down to either, not both. I hope.

#51 Andrew on 02.02.20 at 4:59 pm

#47 Dejavu

60% stock etfs
20% bonds
15% preferreds
5% reits

VFV for America
VEF for global developed excluding America
Vee for emerging markets
Vab for bonds
Cpd for preferreds
Vre for reits

Pick weighting’s and rebalance annually in the spring

#52 Rico on 02.02.20 at 5:04 pm

A bit misleading today. No one making $300K per year pays 50% in tax.
No confusing incremental tax rate with tax rate.
Tax rate for someone using their RRSP is sub 35% assuming they don’t have a pile of deductions (like car lease, writing off a portion of their home, etc).

And yes, I am willing to pay 33% in tax, lest we decide to live in a s-hole country like the US where a large portion of the population wallow in violent poverty.

Not my words. – Garth

#53 theoryAndPractice on 02.02.20 at 5:05 pm

Garth, I just read an article in the star, and first thing come to my mind is to post the link here FYI. I realised I was too late :) , but I’ll post it anyway:

https://www.thestar.com/business/opinion/2020/02/02/tax-free-savings-accounts-help-make-the-rich-richer-they-need-to-be-fixed.html

Two more related links, for the people with short memory :

https://torontosun.com/opinion/columnists/lilley-trudeaus-gift-of-your-money-to-mastercard

and this ;

https://globalnews.ca/news/5145773/catherine-mckenna-loblaw-new-fridges/

#54 yvr_lurker on 02.02.20 at 5:14 pm

#27 I really don’t get it anymore. What is the government doing?? I miss Chrétien.

——————–
I agree, Chretien was in my view the best PM that Canada had in my memory as a voting member of the public. Pragmatic fellow who had the audacity (sarcastic) to suggest that it would be very challenging for the First Nations people if they chose to stay in remote settlements. He refused to sign up for the foolish war in Iraq (where are you Mr. Tony Blair), and he got Canada (together with Martin) out of a severe financial pickle left by the hated Mulroney. He had a different sense about money, as in contrast to T2 had to actually make his own way in the world from rather humble beginnings. T2 is from a different class; they will not bring in taxes for the uber well off (like themselves), just for those who are trying hard to climb the ladder from their own efforts (i.e. 50+% marginals going up and up, TFSA limitations, etc…). I do support the idea of helping Canadian families with the increased tax credits and support. Maybe then we can rely less on the very high levels of immigration that the T2 regime seems to push for (we need some but not too much. Don’t want to end up like the UK or France).

#55 Charles-K on 02.02.20 at 5:30 pm

The article also mentions that the TFSA is being used for high risk investments allowing the wealthy to reap huge returns. Although there are certainly exceptions and I know of a few people with large TFSA balances, I doubt this is the general pattern of behavior…

Spouse and I max our RRSP and TFSA contributions every year – our unreg account significantly outweighs the value of RRSPs and TFSA. Basic advice we receive is for the TFSA to contain mostly fixed income parts of our portfolio because these returns get taxed at the highest rate. Equities (ETFs) all sit in our unregistered account.

#56 Hanson Fasthom on 02.02.20 at 5:30 pm

TFSAs are bad because you can’t tax loss sell. Do you invest risky for growth or safe for stability? It’s a weird vehicle that obviously most Canadians don’t understand or utilize properly. I bet more than a few canadians have some weird stuff in there they can never tax loss sell. Why not just make a universal program that isn’t so complicated. CPP does that. TFSAs is not a financial literacy issue, it’s poor in it’s design if people are not using it right. CPPs is a no brainer which actually helps Canadians.

#57 IHCTD9 on 02.02.20 at 5:38 pm

#19 Sold Out on 02.02.20 at 2:55 pm

If you’re not born into the upper middle class, or higher, your children have a limited future. You don’t have the financial or social capital needed to push them up the food chain, unless you leverage RE to afford an education, internships, and the right sports/recreational activities to mingle with the well off and acquire the patina of wealth and breeding.
——-

Bunk.

I was born to decidedly low income immigrant parents and am doing just fine, same with Ms. IH. Both of us got a post secondary education courtesy of OSAP loans (which are still available). We got ok jobs paid off the debt, and worked our way up the income ladder. Not rich, but don’t need to be (like most folks), bills get paid no problemo.

I understand the point you are making, but doom is not 100% assured if your parents were poor, and this has been proven time and time again. Sometimes growing up poor gives folks a leg up when it comes to earning. Plenty of rags to riches stories out there.

#58 Long-Time Lurker on 02.02.20 at 5:52 pm

This is late but welcome to The Thunderdome, Ryan L!

Smokey, how ya doing? Flop, are you still here?

#59 Ponzius Pilatus on 02.02.20 at 5:53 pm

#110 IHCTD9 on 02.02.20 at 12:38 pm
#7 Dave on 02.01.20 at 2:36 pm

Is China and communism on track to beat democracy and capitalism across the globe?
——

Nope, they haven’t reached the finish line yet.

China’s economy is still based on “making it cheaper”, as they progress as a society, they will eventually be forced to innovate as their costs of production and living standards rise.

They will need to start selling products that bring margin through brand respect, loyalty, quality, and other “free” sources of profit. In short they will need to succeed in building and selling quality, get recognition for it, AND get paid for it. They will also need to outgun all their global competition (who are way ahead of them) consistently.

The last thing China wants to do is hang their economic hat on selling to the bottom end of the market, as they will forever live and die based on price alone. Eventually, other countries will be cheaper (already happening).

Put a Swedish Sthil MS460 chainsaw in front of me with a price tag of 1000.00, and put China’s ultimate best saw beside it with a price tag of 750.00. Which one would I buy, and why?

I’d buy the 460 even though it’s 33% more money. Why? Because I and everyone else who uses chainsaws knows Sthil makes great stuff, we’ve all owned them before and had great experiences with them. Both 1k and .75k are not chump change, so if I’m going to spend either amount, I want something good. Sthil has my trust, they have proven themselves to me, and have built with me some loyalty, I have confidence in their products, so I will pay Sthil the premium they are asking for that saw.

China has DECADES and DECADES to go before they can even THINK about asking for a premium. In fact, their reputation is so bad, they may never be able to.
—————
1. STIHL is German not Swedish.
2. Of course, predictions are hard to make, especially about the future.
My better half is Chinese, and I am completely immersed in Chinese culture.
I’ve been to China numerous times during the last 20 years.
They probably are the hardest working people on earth.
And their education system is top notch, too.
They just built 2 turbo hospital with 2600 beds to house corona victims in just 14 days.
And, most of them love capitalism, after going through the Mao communism years.
An

#60 Long-Time Lurker on 02.02.20 at 5:53 pm

>Socialism fails yet again.

Venezuela’s Capital is Booming. Is This the End of the Revolution?
February 1, 2020 in News, World

…With the country’s economy derailed by years of mismanagement and corruption, then pushed to the brink of collapse by American sanctions, Mr. Maduro was forced to relax the economic restraints that once defined his socialist government and provided the foundation for his political legitimacy.

The changes have helped transform Venezuela in ways few in Washington or Caracas had envisioned, but that are reminiscent of how its allies, Cuba and Nicaragua, relaxed Communist policies and allowed some private investment when faced with economic collapse in previous decades.

After years of nationalizing businesses, determining the exchange rate and setting the price of basic goods — measures that have long contributed to chronic shortages — Mr. Maduro seems to have made peace with the private sector and let it loose. And while the country’s economy continues to contract overall, the declining regulations have encouraged companies serving the wealthy or the export market to invest again.

Dollars are now accepted everywhere, despite Mr. Maduro’s frequent denouncing of the United States as the root of all of Venezuela’s problems. The country’s currency, the bolívar, made worthless by hyperinflation, is hard to find…

…The post Venezuela’s Capital is Booming. Is This the End of the Revolution? appeared first on New York Times.

https://dnyuz.com/2020/02/01/venezuelas-capital-is-booming-is-this-the-end-of-the-revolution/

#61 Bill Grable on 02.02.20 at 5:56 pm

#48 Sold Out – PLEASE – sit down and shut up.

Excuse me, Mr. Turner, but I don’t like snarky clap trap littering this joint.

If I may be blunt.

When I grew up, it was “WE – WE – WE” – now it’s all “ME-ME-ME”.

Trust me, wait until you will find out how far you get with that ‘stinking thinking’.

‘Sold out’ – here’s the deal, as I see it – Mr. Turner puts a lot of effort (and so do his team) into this daily splash of intelligence. His devoted blog dogs, like me, appreciate open discourse – Pay attention, #48 Sold Out, you might learn something.

#62 Long-Time Lurker on 02.02.20 at 6:00 pm

>Timeline of an epidemic.

The Washington Post

Early missteps and state secrecy in China probably allowed the coronavirus to spread farther and faster

Gerry Shih, Emily Rauhala, Lena Sun

BEIJING — It was almost the Lunar New Year and Pan Chuntao was feeling festive…

…An analysis of those early weeks — from official statements, leaked accounts from Chinese medical professionals, newly released scientific data and interviews with public health officials and infectious disease experts — reveals potential missteps by China’s overburdened public health officials.

It also underscores how a bureaucratic culture that prioritizes political stability over all else probably allowed the virus to spread farther and faster.

“It’s clear that a much stronger public health system could save China lives and money,” said Tom Frieden, former director of the U.S. Centers for Disease Control and Prevention.

Medical professionals who tried to sound an alarm were seized by police. Key state media omitted mention of the outbreak for weeks. Cadres focused on maintaining stability — and praising party leader Xi Jinping — as the crisis worsened.

“China’s public health system has modernized, but China’s political system hasn’t,” said Jude Blanchette, head of China studies at the Center for Strategic and International Studies in Washington. “If anything, there’s been a regression.” ….

https://www.msn.com/en-us/news/world/early-missteps-and-state-secrecy-in-china-probably-allowed-the-coronavirus-to-spread-farther-and-faster/ar-BBZya9o

#63 Niagara Region on 02.02.20 at 6:05 pm

Hi, Sold Out (#48),
While I 100% agree with you that the intergenerational transfer of wealth is the largest determinant of a person’s socioeconomic outcome in life and that social mobility in Canada is extremely difficult, I do not think that Garth deserves a personal jibe from people lower on the socioeconomic scale (like you and me). I have witnessed Garth being extremely kind to a poor, elderly couple (whom he had never even met) when a shady corporation was preying upon them because they were seniors and had little understanding of investment. Garth saved that couple from a financial disaster. Hence, I can attest that Garth personally does help–in amazingly generous ways–folks from low socioeconomic strata.
By the way, I like your metaphor of people trying to acquire for their children a patina of wealth and breeding–insightful.

#64 G on 02.02.20 at 6:17 pm

Thanks Garth, I still have the box of meals I got through you in 2009. I just bugged out of city today stay with at my wife’s in here apartment 2-1/2 hours north of home. Be safe. Hope you all get through this.

Saw this MD DR at beginning of week. Please watch. Knowledge is power.

Chinese Coronavirus: What to Know & What to Do (2019-nCoV) 16min
https://www.youtube.com/watch?v=QA5AbqlCHuc&t=31s

This MD has good info on how SRSA killed people. and some of the latest numbers.
https://www.youtube.com/channel/UCG-iSMVtWbbwDDXgXXypARQ

This MD DR Paul Cottrell from Harvard analyzed the virus genome this week and it is engineered with some HIV genome added and more. It supresses the immune system response. It’s BAD!!!

Coronavirus and Q&A from viewers by Dr. Paul Cottrell 45min at 38:38 he gets visible emotional and tells it like it is starting at 38:38min. I thought you should know. Has other YouTubes he put out this week and keeps updating, hoping to help safe more lives.

The Government isn’t telling or worse they don’t now how bad this engineered virus actually is.

Coronavirus and Q&A from viewers by Dr. Paul Cottrell
https://www.youtube.com/watch?v=UeR9i4BNTTY&t=12s

#65 Justin Case on 02.02.20 at 6:20 pm

Some interesting numbers from CRA on how Canadians use TFSA accounts:
Total number of super rich with income of $250,000 and over: 290,260
Number of super rich who actually have TFSA: 197,550
Number of super rich who maxed up TFSA account: 66,390
Percentage of of super rich who maxed up TFSA: 22.9%

Number of people with income of $100,000: = 2,408,860.
Number of people with income of $100,000 and over who maxed up their TFSA: 308,180
Percentage of people with income of $100,000 and over who maxed up their TFSA: 12.8%

Number of people with the income from $20,000 to $24,999 who maxed up TFSA: 79,610

According to CRA 2016 stats, only 66,390 or 22.9% of wealthy Canadians (with income over $250,000) maxed out their TFSA accounts. Why don’t they use TFSA en masse if it so beneficial for them as you suggest? The answer is clear – the benefit is so insignificant for them – they don’t even bother. Compare it to 1,324,080 less affluent Canadians who have maximized their contributions and enjoy the savings in full.
The CRA stats show 267,000 Canadians who make less than $20,000 had contributed the maximum and 1.1 million Canadians making less than $60,000 were also contributing the maximum to their TFSA.
The picture is clear – TFSAs are primarily used by low and middle income Canadians.

#66 Sold Out on 02.02.20 at 6:28 pm

#61 Bill Grable on 02.02.20 at 5:56 pm
#48 Sold Out – PLEASE – sit down and shut up.

Excuse me, Mr. Turner, but I don’t like snarky clap trap littering this joint.

If I may be blunt.

When I grew up, it was “WE – WE – WE” – now it’s all “ME-ME-ME”.

Trust me, wait until you will find out how far you get with that ‘stinking thinking’.

‘Sold out’ – here’s the deal, as I see it – Mr. Turner puts a lot of effort (and so do his team) into this daily splash of intelligence. His devoted blog dogs, like me, appreciate open discourse – Pay attention, #48 Sold Out, you might learn something.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Dissonance alert, cognitive dissonance alert. You claim to appreciate open discourse, yet want me to shut up.

What you appreciate is hearing views that align with your strongly held prejudices. Old, irrelevant dudes with dinosaur views, herding together for safety, lest they encounter a contrary opinion. No safe space for you, Mr. Garble.

#67 IHCTD9 on 02.02.20 at 6:32 pm

#59 Ponzius Pilatus on 02.02.20 at 5:53 pm

1. STIHL is German not Swedish.
2. Of course, predictions are hard to make, especially about the future.
My better half is Chinese, and I am completely immersed in Chinese culture.
I’ve been to China numerous times during the last 20 years.
They probably are the hardest working people on earth.
And their education system is top notch, too.
They just built 2 turbo hospital with 2600 beds to house corona victims in just 14 days.
And, most of them love capitalism, after going through the Mao communism years.
An
——

My bad, I always thought they were Swedish, I somehow got the idea that Husqvarna and Sthil were Swede competitors (husky is also a great saw).

I know the Chinese are hard workers etc.. and they’ve done amazing things in their country, and I’ve worked with enough of them to appreciate their world view, un-pc as it is.

BUT, they will not make it to Western standards via manufacturing the cheapest product on the shelf no matter how hard they work. They are already being out gunned by other weak currency/no rules developing nations on that front. It’s the easiest game to play, and every other 3rd world country on the planet wants to join the league. They need to go the same route as Japan did and eventually build expensive high value products of great quality. Stuff they can charge high prices for, and peeps will pay it. They are eventually 110% doomed to lose the “Cheap stuff” game, it’s just the nature of economic progress.

It takes decades to earn a reputation for quality, or prestige – and China is currently the antithesis of these. China is ultra synonymous with producing cheap ripped-off reverse engineered garbage the world over. It’ going to take a looong time to turn that perception around.

#68 HH on 02.02.20 at 6:34 pm

I’m not rich and I don’t have any trouble maxing out my TFSA. My income is just under $50,000 a year. I’m 72 years old. Live in BC. It’s just a matter of understanding finances. How could TFSA’s benefit the rich when there aren’t that many of them?

#69 Flop... on 02.02.20 at 6:41 pm

#58 Long-Time Lurker on 02.02.20 at 5:52 pm

Flop, are you still here?

/////////////////

Hey Lurker, yes still here.

Decided to take a break from commenting.

Came back nice and relaxed from Xmas break and Fake Flop decided to try and piss me off by posting under my name.

I know people have told me to take it as a compliment or just to let it go.

As a person who has spent hundreds of hours providing content for this blog I don’t like it when someone posts under my name, especially when they plagiarize the efforts of others off of Twitter.

It takes time and effort to compile this stuff, don’t disrespect the person by passing it off as your own.

I have warned that person eight or nine times now, the blog will hum along just fine without me but the more eyes and ears the better with the modern media asleep at the wheel.

What else?

There is another scuzzy person on here that was trying to troll me over the death of Boom by mocking him on the third anniversary of his death.

I foolishly wrote that person back a few times showing examples of how Boom was trying to mentor me through the hazards of life, maybe partly because I disclosed on here that I am estranged from my father.Who knows, but when Boom went I felt like I lost a friend and a safety net in life.

Garth gets pats on the back and punts up the backside daily.

Most appreciative readers have never met him, but tell him that he has made a huge difference in their lives.

Why can’t someone in the comments section make a difference to someone’s life?

Why are we bothering, if we don’t think our words can help someone out?

After Booms death, I tried to be less acidic on the blog and more understanding of people’s positions.

I know through the Boom tribute “Pink Snow Project” I made a small difference to a small amount of people as hundreds of people wrote me here and on my blog to thank me for doing such a thing.

I have time for the daily lessons and laughter.

I have no time for plagiarism, misrepresentation and scuzzy people…

M45BC

#70 Christopher Mewhort, EA on 02.02.20 at 6:46 pm

#32 The TFSA is nearly identical to the US Roth IRA, established there in 1997. You can’t contribute to a Roth if income is over $210k per couple or $140 solo.

Please Google “Backdoor Roth”. Routine strategy for my upper-income clients.
Christopher Mewhort, EA
Mewhorttax.com

#71 Treasure Island CEO - $143,547,343.88 Offshore on 02.02.20 at 6:55 pm

Government mandate is control.

Financial freedom through a TSFA creates a loss of control.

Government need to financially suppress their own to better control them. No better way to do that than to encourage breeding, breeding tax benefits, home buying debt leverage and home buying incentives to keep on loading up with debt.

In other news, 40% market crash coming from SARS 2.0 which some media is reporting has HIV1 genomes in it.

The Thai gov is reportedly using powerful AIDS drugs to fight the coronavirus of those infected with it. This breakout is man made. Anyone who believes it was from someone eating bat soup is wrong.

#72 Mike in Airdrie on 02.02.20 at 6:56 pm

Very well said Garth. Let’s hope the message changes in Ottawa eventually. The evil rich is getting really old. Socialism has never worked and never will because central planning doesn’t work.

#73 IHCTD9 on 02.02.20 at 7:03 pm

#115 TurnerNation on 02.02.20 at 1:37 pm
The reason your property taxes will be rising 5-10% yearly compounded is due to the socialist public unions
NO accountability; BLANK cheques (entire budget must be spent this year else you will lose it; and claim hardship for a budget increase next year.) NO accountability; NO performance metrics. A sick system which helps no one.
But people keep electing leftists and former teachers. T2, Wynn, Calgary mayor. LEading our destruction into a UN agenda.

Even the leftists at Reddit are getting it. Check the top comments. SO pooched, competing for the few living- wage jobs; rents skyrocketing with demand; transit is full up with no relief in site. Toronto is a Red city, a wash. Let them eat cake I say:

https://old.reddit.com/r/toronto/comments/ewmsiq/the_population_of_the_toronto_area_will_hit_8/

The population of the Toronto area will hit 8 million in the next 10 years. It’s make or break time — are we ready? thestar.com
———

No worries Fartz, Toronto has always been on the ball when it comes to dealing with their increasing population. City Hall is well funded, and well regarded for its efficient, timely decision making. Infrastructure projects are initiated quickly and are completed on time, and under budget. They’re always one step ahead of the game when it comes to public transportation too, as their current system well demonstrates.

8 million peeps will be no problem at all…

#74 crowdedelevatorfartz on 02.02.20 at 7:07 pm

Flop!
Good to see you’re not in Oz fighting fires!

Remember the “Pig Principle”.

When you and a pig get down to wrestle in the muck and shite.
You may win but the pig loves it!

#75 Keith on 02.02.20 at 7:08 pm

The TFSA contribution room for a couple has always been at least 10k. Put it away for 30 years at 7%, it’s throwing off over 70k per year in retirement tax free, in a Garth style balanced portfolio. Add in CPP and OAS X 2 and you’re pushing 100k with minimal income taxation.

It would have been smart to start the TFSA with a base of 50 – 100k contribution room. A good policy for those over fifty who can use the room and make up for lost time. Great way to get young people to finance their retirement fully, even with leverage at an early age and distract them from house horniness.

As for the few that can actually max out their TFSA, an unregistered account with tax effective investments, balanced by more conservative ones in the TFSA and RRSP. By keeping capital gains in the non registered account, and capital losses and using borrowed money for the interest deduction, the effective tax rate will be far less than most streams of income.

#76 Katherine on 02.02.20 at 7:25 pm

Taking a break from superbowl game….chiming in on likelihood of success if parents belong to low income group.

I do believe it helps if parents value education and children attend a school where other families also share same value. My parents did not attend high school but had decent paying blue collar jobs. They were also very good with money and never paid interest on anything unless it was a mortgage. I was taught the value of a dollar and my parents demonstrated a strong work ethic. I grew up in Leaside during 60s and 70s when there were blue collar families living along side professional well-to-do types. Most of my peers attended post secondary, so I was going to go too. I worked a part-time job all through high school and saved for this. Being able to live at home while attending university also helped so I graduated with zero debt.

Coming from money helps but is not necessary. I also had friends whose parents were well heeled, and they ended up abusing drugs and dropping out of school.

No one size fits all. Garth does a great job educating. We just need people to listen and follow his advice.

#77 akashic record on 02.02.20 at 7:27 pm

That what’s happen when the pie keeps shrinking.
It’s a symptom, not the cause.

Calling your MP is a waste of time, probably infected by socialism already.

Call on Capitalism to work again, but it is an uphill battle to fight against socialism, when even an investment chief never read Das Capital.

#78 akashic record on 02.02.20 at 7:36 pm

Das Kapitel, that is…

#79 akashic record on 02.02.20 at 7:41 pm

Speaking of the shrinking pie…

Baby Boomers Paid A 6.6x PE For The S&P In 1982. Millennials Have To Pay 31x

Baby Boomers are the wealthiest cohort in all human history. They’ve shifted the game’s rules to entrench their interests. Which has both limited competition for their companies and artificially shrunk the pool of investable equity assets.

“There’s too much capital in the world today relative to too few equity assets. 25-year-olds should not pay a 31.3x Shiller PE to buy their grandparent’s equities. They should play to their strengths and fight to build new companies that unseat established ones.”

https://www.zerohedge.com/markets/baby-boomers-paid-66x-pe-sp-1982-millennials-have-pay-31x

#80 Suhail Kapoor on 02.02.20 at 7:43 pm

My blood boils every time I see my tax money being used to support women carrying 3-4 kids while their men sit idle at home and driving lavish cars. I wish I could do the same, but my conscience won’t allow it. Damn!!!

#81 Black Swan on 02.02.20 at 7:51 pm

The financial markets at the center of corona virus will open on Monday with a massive capital injection.

By spending 1.2 trillion yuan to prop up the stock market, Chinese authorities hope to prevent a massive crash when trading resumes.

The government’s efforts will fail.

Expect Panic Selling on Monday.

This problem is long from over.

#82 7.5% Drop Monday on 02.02.20 at 7:59 pm

Monday morning is going to be chaotic, as the mainland doesn’t have circuit breakers to limit index losses or gains…

#83 Tony on 02.02.20 at 8:13 pm

If Garth legislated the TFSA who legislated the first $1,000 of interest income is tax free before the TFSA ever existed?

#84 Nonplused on 02.02.20 at 8:15 pm

The TFSA is much more of a gift to low income earners who want to save for retirement than the RRSP is. A person making $30,000 a year only pays about $3,100 a year (Alberta) against which to claim RRSP contributions and the average tax rate is only 10% (not counting CPP/EI which can’t be deducted with RRSP contributions). So even if said person were able to save $3,000 a year for retirement, it is better to use the TFSA and not have to pay taxes upon retirement or have your CPP/OAS clawed back.

A quicky calc shows that if $3,000/y were placed in a Garth ™ portfolio for 30 years it would grow to about 300,000 (at 7%). This is with a total investment of just $90,000 over that 30 year period, $210,000 of the money is profit. Wouldn’t it be nice to have access to that money tax free? Whereas if that same person used RRSP’s, sure they save tax on the $3,000 invested every year at about 10%, so $300/year, but then they face a tax bill on the $210,000 in retirement.

With the TFSA, this same person could then retire and withdraw $8,900 a year for 36 years and still have the same disposable income (I am assuming CPP/OAS of $12,000 per year, $3,100 a year in tax you don’t have to pay, and $3,000 a year you don’t have to save any longer). We can see that this person has probably over-funded their retirement. (Don’t forget that balances that stay in the TFSA even after withdrawals have started still accumulate 7%/y tax free).

Now of course many people will argue “How on earth can you expect a person making only $30,000 a year to save 10% every year??? Completely unrealistic!”. Sure, it probably is. But grandma always said you should save 10% no matter how much you earn. And this is a hypothetical example example to show how much a low income worker could benefit from a TFSA even if they can’t max it out. It is, as Garth rightly claims, a program for everyone. And it is the rich, who have to use dollars taxed at 50% and can’t put in more than the limit who benefit the least as a percent of income from the TFSA, even if they are the only ones who can max it out. For them the RRSP is a better way to go because of the tax credit on RRSP contributions.

I’ve argued here many times (if anyone read any of my comments) that whenever the government says they are going to “tax the rich”, they are coming after everybody. We all pay the same effective tax rate. The rich pay their taxes on their income. But they pass the bill to you through the price you have to pay for their services. The main point of a progressive tax system is to reduce the number of people who have to be audited, not any sort of social justice sort of thing. The social justice sort of thing cannot survive the effects of the “invisible hand”. If you tax Bill Gates more, the price of Windows goes up. It is a simple as that. The tax must be embedded in the price.

But this new attack on the TFSA just shows the government for what it has become. They need more and more money, and they need it now! They will not go after just the rich. They are going for everybody. And the real money is in the lower income brackets, because taxing the 1% at 50% does not bring in nearly as much money as bumping the minimum wage to $15 bucks an hour (so about $30,000 a year) and then taxing the 99%. There are so many more people in the 99% and that is where the real economy actually is.

Here is another thought example to prove the point. Why do we have to pay teachers (or any government worker) $85,000 a year and then tax them $22,000 a year (Alberta)? Why not just pay them $63,000 and no tax and save all the paperwork? The $22,000 tax is really just going in a circle. Pay the teachers, tax the teacher. Well, the reason is that if they did that (made government workers tax free and lowered their salaries), property taxes would be going down by a lot. How can you justify such extortionate property taxes if you can’t blame the teacher’s union? So can you see now how we all pay the same tax rate? Every dollar my son’s teacher pays in taxes appears on my property tax bill. She didn’t pay it, I did. Don’t get me wrong I love my son’s teachers and I think they are all worth every penny of the $63,000 they earn after tax per year. But that other $22,000 is going to the government for some other purpose. And it comes out of my pocket. And I have already paid a lot of taxes. It is a tax on a tax on a tax on a tax.

The government has become a plague of locusts so big no prophet could have called them down from heaven. Even Dog and the prophets realize there are limits to all things and each thing can only be counted once.

#85 Smartalox on 02.02.20 at 8:25 pm

So the government should place a lifetime limit of $250k on the balance of a tax-free savings account (TFSA)? Is that gross? Or just profits?

Sure. In the interest of EQUALITY though, the government should place a $250k lifetime limit on the tax-free profits from selling one’s principal residence.
All profits over and beyond $250k get taxed as if they were investments.

let’s see how THAT goes down with Liberal constituents.

Attention CONNSERVATIVE party of Canada. You’re looking for radical platform ideas beyond marching in pride parades? Saving the party’s legacy of the TFSA is a good first step.

#86 C8.R on 02.02.20 at 8:33 pm

#47 Dejavu on 02.02.20 at 4:40 pm

You are at TD. Invest your lump sum now. Then You could invest monthly into low cost TD eSeries mutual funds, which are free to buy and sell. Then sell when they are worth $2000-3000 and buy 1 ETF for $9.95 gradually build up your portfolio bit by bit. Go 60/40 unless you are young and can except more risk. If you are the DIY type, Start with 4-6 funds, short bonds, Canadian equity, US large cap and Intl Large cap. As your portfolio grows add more funds and asset classes like Prefs and REITs. When you have $100k you could have 8-10 positions and likely max out at 12-14. If you are the hands off type, look up target retirement date funds or Vanguard/iShares asset allocation ETFs for 1 fund solutions.

Turner Investment’s 60/40 model portfolio is discussed here by Ryan, You can scale this proportionally to achieve 70/30, 80/20 or 50/50.
https://www.investmentexecutive.com/newspaper_/strategies/a-balancing-act/

#87 NoName on 02.02.20 at 8:43 pm

#82 7.5% Drop Monday on 02.02.20 at 7:59 pm
Monday morning is going to be chaotic, as the mainland doesn’t have circuit breakers to limit index losses or gains…

yes they do they already paused short selling.

https://www.zerohedge.com/markets/containment-pboc-plans-massive-liquidity-injection-halt-china-market-collapse-re-open

#88 meslippery on 02.02.20 at 8:45 pm

#76 Katherine
My parents did not attend high school but had decent paying blue collar jobs.////////////////////////

Living in Toronto.

I love the TFSA, but if you need tax money Free trade and globalization means the pay and hours needed to get that life are no longer available.

Someone let the middle class die in the race to the bottom. Must have been the rich it seems they made the call to out source the middle class jobs, tax paying jobs
full time with benefits.
Now we have part time low pay.
Only people with money can pay all the tax the middle class use to pay.
Poor don’t pay, the middle class are gone so the rich will have to pay. The new normal is if you have to pay income tax your rich.

#89 Arto on 02.02.20 at 8:49 pm

Can’t believe today’s post talks about such mundane subject as TFSA and RRSP while there is a global pandemic on the loose. Here are four reasons we are heading for a SEVERE correction.

1) We are at all-time highs led by irrational exuberance
2) With all the money printing, the curve justinverted again
3) Coronavirus
4) And last but not least, no one is talking about Bernie winning Iowa. Wall street will just about pee in their pants tomorrow night.

Worry about what you can control. The rest is noise. – Garth

#90 GB on 02.02.20 at 8:51 pm

My goodness Garth, the bank of mom and dad has been a phenomenon now for years (like going back 50 years probably).

Capital begets capital. Wealth is less about hard work and diligence (although these things are helpful) and typically more about opportunity and assistance bequeathed by the previous generation.

And yes, maximizing the TFSA and RRSP is a game played by the wealthy….who then set up their progeny to do the same.

Nothing wrong with hard work and I’m sure it pays off monetarily for some but does not come close to the generational wealth trickle down effect.

#91 CEW9 on 02.02.20 at 9:03 pm

#10 Niagara Region on 02.02.20 at 2:27 pm

The socioeconomic status of the family into which a person is born is the largest determinant of his or her socioeconomic status as an adult.

Glib and oversimplified. I would venture to say, those people that have learned the sound principles of finance that tend to create wealth, also tend to pass those principles on to their offspring.

Therefore I put forward that financial education is the key determining factor in socioeconomic status. It does not have to come from families, it just so happens it doesn’t really come from many other sources. In this, secondary schools and public education systems in general hold the majority of the blame.

#92 fishman on 02.02.20 at 9:15 pm

Might want to save your time & effort writing that letter to your MP. Read the article in the WSJ by Chicago Mayor Rahm Emmanuel. He’s calling for Democrats to establish a “Metropolitan Majority” & then rule for years. Increased urban diversity is on their side. Democrats can share in the mission of using government tools to serve those who have been left behind.
Canada is in the highest tier of urbanized countries in the world. 1939 Canada was 40% urban 60% rural. Now its north of 80% urban. Vast majority of close to 400,000 new citizens/year settling in the big cities. LPC is way ahead of the curve as far as Rahm’s agenda. Couple that with a lockdown on any hope of change with our “new & improved” constitution, choice of Supremes, standing joke Senate. All overseen by a governing elite that doesn’t let you into the “club’ unless you got good french.
LPC got a lock on power, looking like forever. As much as it hurts; Millennial Realist is bowling the strikes.

#93 Stoph on 02.02.20 at 9:15 pm

Garth – thanks for all you did in getting the TFSA set-up. It’s a tool I as a Millennial use to get ahead financially.

Not all Millennials are Doomers and Gloomers… I’d argue that most Millennials reading your blog see the glass half full and are read your blog to help position themselves for financial success and don’t use it as a platform to complain about how unfair things are.

#94 Herb on 02.02.20 at 9:22 pm

Garth, would you mind revealing where the 40% of families that don’t net enough to pay tax would get $6,000 per adult to build RRSPs?

Actually we’re discussing TFSAs today. And the CCB sure helps. – Garth

#95 Waz on 02.02.20 at 9:26 pm

Garth, thank you so much for address this absolutely repulsive opinion piece. It actually compelled me to send it your way to bring it to your attention before I read GF and you had already addressed it. What kind of ignoramus, put of touch, communist dolt would write that mouth piece — and an economist professor no less. Just more evidence of the continuing push towards big government, zero self reliance and responsibility, and punishing those who forgo the immediate to plan for their futures instead of relying on the many state to care for their poor decisions into the wrinklie years.

This really follows up from the article on communism vs capitalism. Such narrow minded fools to wish for big G to oversee their sovereignty and next meal instead of having the guts and self respect to take care of their own futures. I’m disgusted.

#96 Phylis on 02.02.20 at 9:30 pm

#86 C8.R on 02.02.20 at 8:33 pm. Did you get your monthly numbers in?

#97 crowdedelevatorfartz on 02.02.20 at 9:33 pm

Gee, a communist dictatorship trying to control its stock market……

Ironic and amusing…..

#98 1% Prepper on 02.02.20 at 9:36 pm

I have slowly come to the conclusion that I’m an idiot.

I delayed enjoying life, so I can build a career, even joining the 1%ers for a few years. Then kids came along and I started to downshift. Still enough to be middle class comfortable, although Justin would still think I’m rich enough to pay my fair share.

But no longer, plans in place to achieve FIRE before I turn 50. My investments will be in tax efficient structures, VERY tax efficient. So much so, that I’ll pay zero income tax for the foreseeable future, while “earning” more than the Canadian median salary. Top it off with some cash jobs every now and then for extra spending money. (I got the idea from the professional bottle picker on my street. He drives a $35,000 car while picking bottles every week)

I look very much forward to joining the bottom 40% that pay no taxes. Thanks Justin, you’ve shown me the way. Someone else can do the heavy lifting in this country. Your socialist policies have made me go from paying about $50,000 a year in income tax to ZERO. Go squeeze some other chump to pay for your ill-fated socialist spending

#99 ShawnG in TO on 02.02.20 at 9:37 pm

how about we cap pulic servants’ db pensions to $250k and return any excess to the tax payers?

#100 jsto on 02.02.20 at 9:41 pm

Incentivizing Owners of Real Estate vs Renters is the same by-product of failed public policy as the ones Garth talks about here.
Renters are consistently made to feel “second class” citizens…

#101 Fortune500 on 02.02.20 at 9:57 pm

There is a lot of jealousy and hate for competence with the far-leftest types, trust me. It often masquerades as social justice and ‘fairness’ but has deep roots in an attempt to take down others due to an inability to compete.

Equality of Opportunity is a must. Equality of Outcome is destructive. Unless we reach a point where we no longer need competent people running complex institutions and carrying out difficult occupations …

This is all the result of your participation medals Boomers. JK JK

#102 Kothar on 02.02.20 at 10:00 pm

I saw his article my blood is boiling! Only the rich? What about all the unionized DB pension teachers? They are essentially millionaires with their pension hoard and endless guaranteed wage increases! And those that have killed it in Tfsa returns are being audited by CRA as carrying on a business in them.

#103 IHCTD9 on 02.02.20 at 10:10 pm

#92 fishman on 02.02.20 at 9:15 pm
——-

MR, ain’t bowling strikes, because MR ain’t anywhere near the bowling alley. Most of MR’s gripes aimed at Boomers are actually a result of the effects of Globalization. These will continue unabated (better embrace that, or get run over) Thinking that getting “X” party into power will fix things indicates a certain youthful naivety.

H/She likes to think big change is coming, and boomers must adapt, but the reality is that the die is already cast for the Boomers – they will be fine or not in accordance with their choices earlier in life. Just like anyone else.

Canadian Governments at all levels are weak. Hog tied by too many ropes. Can’t get anything done. Can’t make anything stick. Broke. Not too smart. Taxes are coming, and the middle class will pay them. It won’t be enough however, and from there it’s only a matter of time before the bond market shuts the door on more cheap debt – then what?

I know what, and you Fishman also know what, but MR does not seem to know what. If it comes to this, the “boomercon” conspiracy is going straight out the window because it’ll be the least of Buddy’s problems.

#104 Keswicken on 02.02.20 at 10:12 pm

#98 1% prepper

I have realized the same. I worked 3 jobs, crazy hours from the age 20-36. Made a high income paid crazy tax but sacrificed saved in order invest. I have realized now I want to enjoy life. I now work 1 job part time and I am on paternity leave to spend with my wife and kids.

#105 kommykim on 02.02.20 at 10:13 pm

RE:#21 Linda on 02.02.20 at 3:09 pm
Garth, your post clearly states why TFSA’s are in the government cross hairs while RRSP’s are not. Tax revenues. RRSP funds defer taxes, but the current rules ensure that come December 31st of the year one has their 71st birthday that RRSP funds become RRIF funds

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

Which is why you’d think that a tax starved government would be attacking RRSPs before they attack TFSAs. RRSP contributions take tax revenue away from the government/party in power and give some of it back later to another future government/party…. But TFSAs, since they are funded with already taxed money, don’t really cut into the revenues of the present government like an RRSP does. Both take tax money (on gains) away from the government for as long as it stays in there.

#106 Capt. Serious on 02.02.20 at 10:16 pm

If the Liberals plan to skim off those of us responsible enough to plan our financial lives, I may just pick up and move to the states. There will come a point where people with that option will take it.

#107 Niagara Region on 02.02.20 at 10:16 pm

#10 Niagara Region on 02.02.20 at 2:27 pm

The socioeconomic status of the family into which a person is born is the largest determinant of his or her socioeconomic status as an adult.
________________________________________
CEW9 #91
Glib and oversimplified. I would venture to say, those people that have learned the sound principles of finance that tend to create wealth, also tend to pass those principles on to their offspring.

Therefore I put forward that financial education is the key determining factor in socioeconomic status. It does not have to come from families, it just so happens it doesn’t really come from many other sources. In this, secondary schools and public education systems in general hold the majority of the blame.
__________________________________________
While I agree that financial education is important, financial education is only one factor in an elaborate, complex web of factors that make it so that children’s socioeconomic status (SES) typically replicates the SES of their parents.

For reports on the relative dearth of socioeconomic mobility, see, for example, the following:
https://www.russellsage.org/sites/default/files/RSFissuebriefs_0.pdf
https://pressprogress.ca/oecd-report-canadas-poorest-10-could-take-four-generations-just-to-earn-a-middle-income/

For insights into what might constitute part of this elaborate, complex web of economic, social, educational, and linguistic factors that make it extremely likely that children will remain in the same socioeconomic class as their parents, I recommend reading some sociologists who write on class, such as Pierre Bourdieu or Ann L. Mullen.

#108 kommykim on 02.02.20 at 10:17 pm

RE:#99 ShawnG in TO on 02.02.20 at 9:37 pm
how about we cap pulic servants’ db pensions to $250k and return any excess to the tax payers?

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

As a public servant, I paid over $6000 into my db pension last year. How much did you contribute to your pension? Maybe we should cap yours also and put the excess into general revenue just for kicks.

#109 Boris Corbyn on 02.02.20 at 10:19 pm

#25 or maybe I’ll move the business I started from nothing and that generates jobs and income away from age difference baiting cretins in this country. Ok commie?

See, anyone can write incendiary prose. The difference being is that I can shut down and move in a few weeks. You can’t.

#110 Boris Corbyn on 02.02.20 at 10:19 pm

#25 or maybe I’ll move the business I started from nothing and that generates jobs and income away from age difference baiting cretins in this country. Ok commie?

See, anyone can write incendiary prose. The difference being is that I can shut down and move in a few weeks.

#111 Al on 02.02.20 at 10:29 pm

Is there anyone with a full time job that CANT get financing for a WRX…eh..sorry. Save the plate for when you’re being driven in your phantom..

#112 Boris Corbyn on 02.02.20 at 10:36 pm

#88 “Free trade and globalization means the pay and hours needed to get that life are no longer available.”

Adapt, retrain get your own business instead of working for someone else. Free trade and globalization pay my bills and more day in day out. There’s more to the world than Canada. Or the US. Loads of opportunities. The days of GM in Oshawa and that ilk are long gone, never coming back. You can complain, strike. Or choose to be free.

#113 Dr Talc on 02.02.20 at 10:38 pm

MPs don’t like being bothered by the little people.
Better paint a protest sign on a stick and march around in circles with your friends.

#114 IHCTD9 on 02.02.20 at 10:47 pm

#94 Herb on 02.02.20 at 9:22 pm
Garth, would you mind revealing where the 40% of families that don’t net enough to pay tax would get $6,000 per adult to build RRSPs?

Actually we’re discussing TFSAs today. And the CCB sure helps. – Garth

———

Herbie, top CCB is $6,639 per kid.

Good for maxing out the TFSA.

Or, for buying new Grizzly 700’s in the case of those who made sure they could afford kids before they had ‘em.

BTW, the 40% is not “those who don’t net enough to pay tax”, it’s “those who do not pay any net tax”. This can include folks grossing over 6 figures. Our household nets 6 figures and we still get thousands every year in CCB handouts from Trudeau.

I save it all for a future trip to the GMC dealership.

#115 BS on 02.02.20 at 11:15 pm

#65 Justin Case on 02.02.20 at 6:20 pm

Some interesting numbers from CRA on how Canadians use TFSA accounts:

Anytime the government talks about increasing taxes whether it is reducing a tax shelter like the TFSA, increasing income taxes or cutting capital gains exemptions it is always about increasing taxes on the middle class not the wealthy. There just is not enough wealthy people to make an impact on government tax revenue to make targeting them worth while. Besides most wealthy have the ability to move their money outside the reaches of CRA. The CRA ends of getting zero if they target the wealthy in many cases.

Whenever you hear about tax changes to “tax the rich” in reality it is about taxing the middle income earners and not the rich. The numbers don’t lie. The TFSA is a tax shelter for the middle class. For the rich the TFSA is irrelevant like it is to government tax revenues. Taxes are always about the middle class. They are the tax base.

#116 IHCTD9 on 02.02.20 at 11:16 pm

#98 1% Prepper on 02.02.20 at 9:36 pm
————

^ This is why taxing income even more won’t bring in enough at this point. Those days are gone. We’re at that level where folks are taking action. Anyone with something to lose will not just roll over, and is probably smart enough to avoid/offset the taxes sufficiently. They may just hop off the hamster wheel entirely via a little creativity.

I avoid consumption taxes like crazy, while the Trudeau handouts and giant tax returns ensure my income tax bill is peanuts.

Taxing income higher won’t work. Neither will higher consumption taxes (too easy to avoid these days). That leaves all things RE and wealth. If they go after these last two things as much as they’ll need to, they’ll kill that cash cow too, maybe in a decade or two.

Ottawa is &$#@*&, and I think they may be figuring that out.

#117 Arto on 02.02.20 at 11:17 pm

Garth, I control when I buy, what I buy and when I sell.

#118 Copy and Paste on 02.02.20 at 11:25 pm

Dear MP,
I am a resident of ( My Province). I am contacting you with this email to express my concern about the Federal Liberal Party’s fiscal incompetence.
I believe that this current federal government is leading our country down a path of ruin with the choices they are making.

I am a Canadian who is saving for retirement. The TSFA is an important component in my retirement savings plan. Why should people who are disciplined to live within a budget, and successfully save for retirement be financially punished because of people who choose to live and spend with fiscal incompetence?

It is my hope that the future federal government will be the Conservative Party, and they will manage the finances of our country responsibly, and competently. It should be mandatory to have a balanced budget. Set an example for Canadians to manage their personal finances competently. The debt has to stop.

I have attached the link to Garth Turner’s daily blog. He talks about the TSFA. Please do what you can to preserve the TSFA, and possibly increase contribution amount allowed to encourage savings.

Book and Weblog – Authored by Garth Turner — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate
https://www.greaterfool.ca/

Thank you for your time to consider what I have written.

#119 Dr V on 02.02.20 at 11:29 pm

25 MR

“And more is coming, Boomers –

Inheritance taxes.”

I’m fine with that. After all, it’s your inheritance.

“RRSP clawbacks.”

Not sure what that means, but if my RRSP outlives me,
my estate gets dinged by including all the RRSP in my last years income. Oh and then see above re your
inheritance…..

“Property sale profit inclusion.”

Only if some mill pays me a bundle for my house!

“Environmental levies.”

already here, and we all pay them. You’ll pay them for
longer.

But I do see TFSAs going the way of income trusts. But who will that hurt more? I’ve only been able to use
TFSAs since I was 50. You’ve got 30 years more to
contribute. Be careful who/what you vote for. Good luck!

#120 Annick Dotal on 02.02.20 at 11:37 pm

I absolutely agree with Sold Out #19. My offspring entered a competitive program for university. The kids with the rich parents got the prestigious internships thru their parents connections. Also, it didn’t matter that the internships didn’t pay or that they were in another country – room and board and other expenses were taken care by parents. Experience that would allow a candidate to stand out were mostly bought by parents. It had nothing to do with ability as those “chosen” students were mediocre by academic standards.

#121 BC_Doc on 02.02.20 at 11:38 pm

Hi Garth,

Your column today is a well thought out response to the piece in Star. Please consider editing it up and submitting it to the Star op-ed page as a rebuttal.

Thanks,

BC Doc

#122 Scott on 02.02.20 at 11:41 pm

Ridiculous comment. I am sure the majority of today’s successful people did not suck off mom & dad. That is a recent phenom. – Garth

Lol good smack down!
The guy has a bit of a point. You’re still more likely to succeed as a mediocre slacker rich kid than a clever hard working poor kid. That being said we are one of the better countries on the planet for upward mobility. A lot of metrics have shown that you’ve got a far fairer chance at rising to a higher standard of living than your parents compared to our neighbors down South. That was essentially the American dream and Canada along with many other countries have surpassed the US in being able to provide that dream.

#123 Millennial on 02.03.20 at 12:04 am

My MP is a liberal schmuck.

#124 Ronaldo on 02.03.20 at 12:06 am

With private company pensions going the way of the dinosaur, the TFSA is more important now than at anytime. Persons working in the gov’t have it made with their defined benefit plans so this is an attack on people trying to make a go of it in small business which makes up a huge percentage of the employment in this country. Then you have the doctors and other professionals who don’t have these gold plated pensions as the individuals have who are behind the gutting of the TFSA.

I totally agree that people cannot retire on just OAS and CPP and for those persons who don’t/didn’t have a pension like the people governing us, the RRSP’s was/is a great vehicle for that group and the TFSA makes it that much better.

I was under the impression that the TFSA was a result of the inequities that resulted from RRSP’s whereby those individuals who didn’t have pension plans and who deligently saved each year by investing in RSP’s discovered that their GIS (supplement to the OAS) would be clawed back up to 70% or more when they started drawing from their RSP’s when they reached 65.

This resulted in many elderly individuals postponing drawing from their RSP’s until they were required to by law once they reached 71 years. For many, the RSP’s turned into a major tax trap. For others in the mid to upper range of the income scale, no effect to speak of.

For this group of people, the TFSA is absolutely a game changer especially because unlike the RSP, the amount you can contribute accumulates and at some point in the future if they were to sell their home to move into retirement homes, they could stash a large amount into their TFSA and have it grow tax free.

Even for the younger people, this is an awesome way to develop a retirement fund for themselves should they end up in a situation where they are not part of private or government pension scheme.

Just because people are not able to contribute at this time whether they be elderly or otherwise, is no reason for the government to mess with it. At some point they
will be able to.

I know of an individual age 70 whose husband left 20 years before and she burned through the funds that were left to her and found herself trying to survive on OAS, a bit of CPP and GIS. She recently came into an inheritance and as she had no TFSAs, she was able to put a large part of that inheritance ($69,500 to Jan. 2020). The remainder invested in a very good balanced fund and she will be able to contribute the maximum allowed each year into her TFSA for several years and it may end up that she will once again be able to obtain most of the GIS she was originally entitled to and top that up with TFSA withdrawals (tax free). For this person, the TFSA is a wonderful thing. She will pay no tax as the income from OAS and CPP is too low to trigger the tax.

Time to review Garths post below:

https://www.greaterfool.ca/2014/04/24/denial-3/

#125 Bobby on 02.03.20 at 12:08 am

What this country needs is a tax on idiots. Given the numbers that voted this bumbling government into office, the dollars that are collected will be staggering. Imagine, there could even be enough so that the middle class would finally be recognized by the fools in Ottawa.

Where do we get these clowns.

#126 Karlhungus on 02.03.20 at 1:09 am

Hey sunshowers,
It’s a myth that most wealth is inherited. Over 90% of millionaires are self made. See Everyday millionaires and the millionaire next door.

Everyday millionaires – they did a study of over 10,000 of them and found that 95% of them inherited 0.

#127 Exurban on 02.03.20 at 1:51 am

#59 Ponzius and ITCHD9

Stihl saws are made in USA.

https://www.stihlusa.com/stihl-built-in-america/

#128 Hamish Carrigle on 02.03.20 at 5:37 am

Trudeau is going to demand you apply for a license to defame him. Get yer digs in now. Free speech and saving is dead in Canada. Trudeau wants slavish reliance on government handouts.

#129 Sail Away on 02.03.20 at 6:38 am

#104 Keswicken on 02.02.20 at 10:12 pm

I have realized the same. I worked 3 jobs, crazy hours from the age 20-36. Made a high income paid crazy tax but sacrificed saved in order invest. I have realized now I want to enjoy life. I now work 1 job part time and I am on paternity leave to spend with my wife and kids.

-–————————-

Pah- paternity leave:

Sure, take it if you have something you want to get done or if you have older kids but don’t take it just for a baby. There’s not much that’s more mind-numbingly boring than most kids under four.

#130 Sail Away on 02.03.20 at 6:48 am

#89 Arto on 02.02.20 at 8:49 pm

Can’t believe today’s post talks about such mundane subject as TFSA and RRSP while there is a global pandemic on the loose. Here are four reasons we are heading for a SEVERE correction.

1) We are at all-time highs led by irrational exuberance
2) With all the money printing, the curve justinverted again
3) Coronavirus
4) And last but not least, no one is talking about Bernie winning Iowa. Wall street will just about pee in their pants tomorrow night.

Worry about what you can control. The rest is noise. – Garth

—————————

Bernie? Iowa?

Who is that and where in Canada is Iowa?

Looks like you’ve been sucked into ImaginaryTVland. Apparently there’s also some scripted drama between Biff and Fabio’s wife Roxanne.

#131 NRI13 on 02.03.20 at 7:49 am

TFSA is not a form of regressive taxation on Canadian Citizens. The DB pensions of ever increasing number of civil servants, MP’s in cabinet and government bureaucracy are the regressive taxation on Canadian citizens. Would this professor care to calculate the amount of compensation packages and the increase in pension liabilities of civil servants that the citizens would be responsible to pay for the bloated government at all levels?

#132 crowdedelevatorfartz on 02.03.20 at 7:56 am

@#125 Bobby.
“What this country needs is a tax on idiots.”

+++++

That should take care of the Debt.

#133 crowdedelevatorfartz on 02.03.20 at 7:58 am

@#130 sail Away
“We are at all-time highs led by irrational exuberance”

+++++

Get ready for the “irrational pessimism” selling phase…….

#134 crowdedelevatorfartz on 02.03.20 at 8:00 am

@#129 sail Away
“There’s not much that’s more mind-numbingly boring than most kids under four.”
+++++

Your comments?

#135 Captain Uppa on 02.03.20 at 8:10 am

Anecdotally speaking, I can assure everyone that the GTA (Toronto proper mostly) did and will continue to have large inheritances passed down to children – that’s a large amount of kids afford to buy homes in the 416. I know a lot of people like this.

Reason? Toronto was built by immigrants (European, Asian mostly in 416). That generation is very selfless towards their kids; stay at home as long as you want, school paid for, etc. That generation also only believes in RE and thus their kids now do as well. So … be it with a warm or cold hand, large flows of money are passing down.

Now is this a recent phenomena? Perhaps. The immigrants I speak of are now in their 60s-80s. Do not be mad at them, they worked hard and want to leave their kids with a head start that they never got. This should not be condemned or mocked; stop hatin’.

Actually disliking you is a lot easier when you state that immigrants are more compassionate and caring than others. Accurate or not, it’s divisive. – Garth

#136 Another Deckchair on 02.03.20 at 8:26 am

@98 1% Prepper:

“I have slowly come to the conclusion that I’m an idiot.”

No, you’ve learned – thus you are not an idiot.

I know that Garth and many others disparage the “FIRE” movement for very good reasons, but if you read a bit deeper, one realizes that it’s about freedom, not being tied with a chain around your neck helping someone else achieve happiness.

When you realize that life’s not about buying another purse, or the latest in putter technology, you’re free. :-)

#137 Gillian McKenna on 02.03.20 at 8:26 am

How low will Trudeau stoop to kill Canada? There is no lower bar than Trudeau’s hatred of everything Canada stands for. Trudeau’s mandate comes from hate mongers in the UN and globalist ex- Nazi collaborators like George Soros.

https://business.financialpost.com/news/economy/with-trade-wars-the-new-normal-getting-canadas-exports-to-fresh-markets-matters-more-than-ever

#138 Another Deckchair on 02.03.20 at 8:29 am

@101 Fortune500

“There is a lot of jealousy and hate for competence with the far-leftest types, trust me. It often masquerades as social justice and ‘fairness’ but has deep roots in an attempt to take down others due to an inability to compete.”

Well written. Sad, though. Greed is always around where humans are loudest.

Thanks for the well-written, concise post.

#139 SoggyShorts on 02.03.20 at 8:30 am

#19 Sold Out on 02.02.20 at 2:55 pm
#10 Niagara Region on 02.02.20 at 2:27 pm

You know what would really help those not born to rich parents?
Investments in a sweet tax-free pension.

Seriously, how hard is maxing a TFSA?
1 shift at min wage per week, or a handful of overtime hours.

As someone born to poor immigrant parents from whom I only inherited a strong work ethic, I sure wish I had more TFSA room, not less.

M40vn

#140 Captain Uppa on 02.03.20 at 8:39 am

Not my intention to be divisive. I prefaced my comment with “anecdotally”. Further, I stressed RE. Other “non-immigrants”, though I don’t know who they would be (we all come from immigrants here), might prioritize other wealth building avenues.

#141 maxx on 02.03.20 at 8:44 am

“Why do Liberals hate and punish success?”

I don’t think they do.

Liberals simply pander to those who despise the well off. They shape this cohort of haters by pointing to “the rich” and waste tax-payer revenue with abandon to retain what misguided voter base they have left.

It’s transparent. And ugly. There is nothing easier than using success as a fulcrum to separate people. They become incredibly manipulable. Advertisers have known this forever.

An intelligent government would encourage its citizens to become as financially independent as possible. What a backwater Libs are creating, encouraging bitterness, ignorance and the impression of “payback” through official policy. Punish those who might otherwise be an example of optimism and future opportunity. Savers and investors tend towards optimism, and what is a country without it?…….Canada.

Shameful performance. An absolute fiscal train wreck, the results of which will fall upon the shoulders of the young.

Keep ’em angry and stupid, eh wot?

Amazingly short-sighted report. What, really, was the motivation to write this piece of, for lack of a better word, garbage?

Did the good professor simply wake up one fine morning, spontaneously incensed at the alarming features of the TFSA? Did he, out of the blue, feel a measure of panic that some are doing too well with their TFSAs? Well here’s something to chaw on: people will return that TFSA money to the real economy rather than sucking quite as hard on the social teat.

After a run in power, the circus leaves town, mostly for greener pastures and the detritus of incompetence will litter the fairgrounds for a long time. Including one crumpled and very silly paper.

#142 Dups on 02.03.20 at 8:53 am

Hands Off my TFSA.
If Liberals ever dare to put this in action, they will never ever see a vote from me or all my family and cousins in our life time.
If I wanted to live in a communist country I would have moved to China not Canada!

#143 Dups on 02.03.20 at 9:01 am

Let’s write an article how can the Gov take away from public servants like this pseudo professor that is preaching these unfair theories. Let’s start with the amount pension they are entitled to, or the 3 months vacation they get each summer, or the crap quality of education they push through to our new generation.

#144 Dharma Bum on 02.03.20 at 9:12 am

#25 Millennial Realist

We are now in charge, demographically and politically.
——————————————————————–

Like I said previously, socialism and its ideas are for LOSERS.

Welcome to your future. mills.

Be happy boomers – we dodged a major bullet.

#145 Dharma Bum on 02.03.20 at 9:32 am

We can all only hope that sometime very soon, Justin Trudeau will do the right thing and fall on his sword.

Wishful thinking, I know.

#146 crowdedelevatorfartz on 02.03.20 at 9:45 am

gee.
The only think the Chinese govt should fear more than the corona virus is…..angry chinese investors?

https://ca.reuters.com/article/businessNews/idCAKBN1ZW0TA

#147 Justin Case on 02.03.20 at 9:46 am

#115. “Taxes are always about the middle class. They are the tax base”. That’s depends on whom you called middle class.
The fact is that according to StatsCan In Ontario top 10% of earners pay 58% of all income taxes while lower 40% have net income tax of zero.

#148 Toronto_CA on 02.03.20 at 9:48 am

Has this writer never heard of a Back-Door Roth? Rich people use the Roth all the time. Perfectly legal as well. It’s not locked down for the people who make more than $111k or whatever the current Roth cut off limit is.

Everything in this article is wrong and pisses me off, and yes, not mentioning the RRSP at all and the inherent advantages for the rich that the RRSP has is very aggravating.

#149 Millennial Classical Liberal on 02.03.20 at 10:06 am

“Millennial Realist” needs a GD reality check.

#150 Sail Away on 02.03.20 at 10:17 am

Tater, strange the way Tesla rose another 10% today and shares short reduced by 2.5M.

Wasn’t that not going to make a difference? Something about arbs?

Huh

#151 JustAboutHadIt on 02.03.20 at 10:34 am

I’m getting tired of paying ever higher taxes and getting nothing in return. Last year I paid double my total annual expenses income taxes alone. If I account for the sales taxes, surcharges, and fees baked into all of my expenses the ratio is 3:1!

Just turned forty, nearly a million dollars in the bank, and no hope of ever owning property in this country… I’m seriously thinking of opting out. Step on a plane and I could be retired tomorrow, or earn as much or more working fully remote. What am I sticking around for, the “free” healthcare and the snow?

#152 MF on 02.03.20 at 10:40 am

#144 Dharma Bum on 02.03.20
#149 Millennial Classical Liberal on 02

That poster (SCM) is a troll meant to stir the pot.

The number of mils that think so radically is the same number of boomers and Gen x that think radically: very small but very loud.

Congratulations on falling for the bait though.

MF

#153 OK, Doomer? on 02.03.20 at 10:45 am

60% of all US wealth is inherited (Alvaredo, Garbinti, Piketty 2015). Can’t imagine the numbers for Canada being much different.
____________________________________________

I call BS.

“A 2017 survey from Fidelity Investments found that 88 percent of millionaires are self-made. Only 12 percent inherited significant money (at least 10 percent of their wealth)”

I understand that you want to ignite an “Eat the Rich” movement, but all that does is destroy the ability of people to better their own lives. I know a lot of millionaires and they made it on their own. Very few inherited anything.

You should be ashamed of yourself for promoting that garbage. I’m betting that you’re an arts major at some college and just finished an introductory Social Justice class.

Prove me wrong.

#154 MF on 02.03.20 at 10:46 am

31 NRI13 on 02.03.20 at 7:49

Actually, if you did any research (clearly you didn’t) you would see most government spending is on benefits (like OAS and CTB).

Age is the problem, not government employees…although it’s easier to blame government employees when you combine the whining and envy with the BS.

MF

#155 PetertheSeparatistfromCalgary on 02.03.20 at 10:53 am

The feds war on responsible people is just one more reason for Alberta to leave Canada!

#156 leebow on 02.03.20 at 10:54 am

For example, Canadians who make $50,000-$55,000 in annual income, have on average $20,000 in their TFSA accounts and an unused contribution room of $32,000. In contrast, those who make $250,000 yearly or more, have an average balance of $43,000 and an unused contribution room of only $16,000.

Ah, I see now. 20K vs 43K. Whopping 23K difference in average TFSA savings between “rich” and “poor”. Yep, rich get richer… If that’s not a testament to the great divide, then what is? A great call by Barnea.

#157 Smoking Man on 02.03.20 at 10:59 am

#58 Long-Time Lurker on 02.02.20 at 5:52 pm
This is late but welcome to The Thunderdome, Ryan L!

Smokey, how ya doing? Flop, are you still here?
………………

Getting Stronger.

#158 crowdedelevatorfartz on 02.03.20 at 10:59 am

@#154 MF
“Age is the problem, not government employees…although it’s easier to blame government employees when you combine the whining and envy with the BS.”
++++

I think we’re talking about old , retired govt employees lapping up gold plated guaranteed pensions subsidized by the unpensioned taxpayers.
What are you BS’ing about?

#159 Sail Away on 02.03.20 at 11:16 am

I suspect a lot of the rich in this country are dual US citizens who won’t put anything into TFSAs due to US tax treatment.

This could skew the richer/poorer TFSA ratio, since…

Most expat US Americans I know in Canada are business owners and doing quite well. A study should be done to see if ‘Americanism’ offers implicit business advantage here. Maybe less politeness is more profitable?

#160 NoName on 02.03.20 at 11:22 am

i was looking at this last night

https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html

#161 Chris Serran on 02.03.20 at 11:33 am

Wow you guys sure get worked up over speculation. This is a Toronto star story, not something from the government. Garth is just hoisting around what-if’s and you all jump on it like it’s a done deal. Just like all the interest rate speculation and people who think they can predict the dollar. Also, the libs did not really “gut” the TFSA – it was only jacked up last minute by Harper to try and buy some votes, and that didn’t work, so the liberals kept it where it had been since inception. So much bluster. Take a breath.
Also, Canada is a great country to move up in financial standing but it takes hard work and learning how to be financially responsible. Neither of my parents went beyond elementary school, dad worked lower middle class jobs, no fancy cars, no out of province vacations. But I went to university, and am now near 1% based on good education, hard work and financial prudence. Just like physical fitness, it’s there if you want it, but you need to work for it.

#162 NoName on 02.03.20 at 11:34 am

addendum to that wealthe world report

page 18 take a good look.

#163 Shawn Allen on 02.03.20 at 11:38 am

Envy versus Effort

Those who strive to get ahead economically can be heartened that so many of the people they are competing against have apparently given up and decided that Envy is a better strategy than Effort.

#164 Timis on 02.03.20 at 11:40 am

108 kommykim on 02.02.20 at 10:17 pm
RE:#99 ShawnG in TO on 02.02.20 at 9:37 pm
how about we cap pulic servants’ db pensions to $250k and return any excess to the tax payers?

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

As a public servant, I paid over $6000 into my db pension last year. How much did you contribute to your pension? Maybe we should cap yours also and put the excess into general revenue just for kicks.
===============
ComuieKim,
I also put $6000 in my TFSA last year, which is for my future pension. There was a sugestion made to cap the TFSA at $250k. Because Canada is the land of fairness, a cap should be put on yours as well.

#165 IHCTD9 on 02.03.20 at 11:58 am

#135 Captain Uppa on 02.03.20 at 8:10 am

Anecdotally speaking, I can assure everyone that the GTA (Toronto proper mostly) did and will continue to have large inheritances passed down to children – that’s a large amount of kids afford to buy homes in the 416. I know a lot of people like this.
___

90% of the “kids” will be retired themselves by the time Mom croaks.

100% of them will be way past first home buying years when the inheritance arrives.

Not sure how you can know a lot of “kids” with inheritances.

If you do, then it’s an early inheritance.
If it is early, then it’s not a big one.
If it is big, then their parents are rich.
If they are rich, then there’s not really a lot of them.

Hell, I was half way done paying my mortgage by the time my last GRANDPARENT passed away. Now I’m knocking on 50 and both my parents and in-laws are alive and kicking.

#166 kommykim on 02.03.20 at 12:25 pm

#164 Timis on 02.03.20 at 11:40 am
108 kommykim on 02.02.20 at 10:17 pm
RE:#99 ShawnG in TO on 02.02.20 at 9:37 pm
how about we cap pulic servants’ db pensions to $250k and return any excess to the tax payers?

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

As a public servant, I paid over $6000 into my db pension last year. How much did you contribute to your pension? Maybe we should cap yours also and put the excess into general revenue just for kicks.
===============
ComuieKim,
I also put $6000 in my TFSA last year, which is for my future pension. There was a sugestion made to cap the TFSA at $250k. Because Canada is the land of fairness, a cap should be put on yours as well.

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

To make it “fair”, according to ShawnG, the government will take any money in excess of 250k from your accounts without compensation which is what I was objecting to. FYI, in addition to my $6000 db contribution I also maxed my TFSA as well because I’m not a gov lifer and only have a relatively small db pension coming to me.
For what it’s worth, the federal government already raided the db fund in the past due to there “being a surplus” and claiming that there actually wasn’t an actual “fund” anyway… Conservative speak. Then they turned around later and claimed it was underfunded and increased the contribution rates!

#167 IHCTD9 on 02.03.20 at 12:31 pm

#161 Chris Serran on 02.03.20 at 11:33 am

Also, Canada is a great country to move up in financial standing but it takes hard work and learning how to be financially responsible.
___

Right, that is the Canada of the past you are speaking of. It’s changing. The financial situation, the policies, and the sentiment, all point in the same direction – more taxes, and less ability to save (especially if you’ve “moved up in financial standing”)

If your roof sprung a little leak – would you not immediately get to work fixing it? Or would you say “take a breath, it’s a tiny little drip, the roof is fine” and wait until the drywall is falling off the ceiling before you took it seriously?

I see this article as a suggestion, a conversation starter, PLENTY of Canucks will agree with this guy. Once it’s a “done deal” it’s too late to “jump on it” at that point.

#168 Sail Away on 02.03.20 at 12:43 pm

#52 Rico on 02.02.20 at 5:04 pm

…lest we decide to live in a s-hole country like the US where a large portion of the population wallow in violent poverty.

——————————-

Sure, Rico. Tell yourself anything you need to keep your feeling of superiority.

Quick test:

1. Name one world-changing Canadian innovater
2. Name five world-changing US innovaters

Thought so

#169 The Flying Foxtrot on 02.03.20 at 1:12 pm

Letter sent. Thanks Garth.

#170 Sail Away on 02.03.20 at 1:27 pm

#81 Black Swan on 02.02.20 at 7:51 pm
The financial markets at the center of corona virus will open on Monday with a massive capital injection.

By spending 1.2 trillion yuan to prop up the stock market, Chinese authorities hope to prevent a massive crash when trading resumes.

The government’s efforts will fail.

Expect Panic Selling on Monday.

This problem is long from over.

————————-

#82 7.5% Drop Monday on 02.02.20 at 7:59 pm
Monday morning is going to be chaotic, as the mainland doesn’t have circuit breakers to limit index losses or gains…

————————–

Hey, you were both completely wrong.

Now you have to get a prediction right to get back to even.

Why do people make predictions and put their credibilty on the line?

#171 Justin Case on 02.03.20 at 1:28 pm

#156 leebow

“Ah, I see now. 20K vs 43K. Whopping 23K difference in average TFSA savings between “rich” and “poor””.
I see you didn’t get the message. That’s not the rich who really need and use TFSA a lot (despite that would be an easy thing for them to do) – poor and middle class utilize TFSA en masse. TFSA is insignificant for the wealthier. But it is the favorite pension vehicle of the less affluent. So capping it or reducing the allowed contribution is against the interest of the poor and the middle class population.

#172 Piano_Man87 on 02.03.20 at 1:35 pm

If we pay teachers low wages, then all the people who understand math go on to STEM careers rather than teaching.

Then the kids end up financially illiterate.

So they gorge on debt when they become adults.

They don’t want teachers to get paid more, because that means taxes have to go up.

The cycle continues.

I would’ve loved to be a teacher. But before I hit 30 I was already making the high end of what a teacher would make, as an engineer. It’s just incentives.

The people who end up rich tend to have parents from a high socioeconomic background who teach them financial literacy at home. It is not taught in the classroom. My dad pretty much FORCED me to get an RRSP at age 19 when they offered one at my summer job. I didn’t see the point, but now I do. It was a wise choice.

I don’t like the government trying to punish my family and me for trying to be careful with our money. That’s definitely the wrong thing to do.

#173 Chris Serran on 02.03.20 at 2:18 pm

#167 IHCTD9 on 02.03.20 at 12:31 pm

You’ve clearly drunk the “angry” coolaid that flows on this site. Right this second, any Canadian can set themselves up for prosperity if they choose to. Or they can complain that the big bad government is holding them back, or it was so much easier way back when… Waahh.

The TFSA still exists – use it. Same for RRSP. If these get taken away (which I highly doubt), there will be other methods to save and invest – use them.

To use your example, if my roof sprung a leak I would fix it. However, I would not complain and speculate for months about a possible roof leak that may or may not happen – in the meantime I would invest in shingle companies and be ready if and when the time comes.

How many times have we heard on here about things that are about to happen but don’t? Once in a while, something big and unexpected does happen (ie Income Trusts being slashed by the Conservatives on Halloween). Nobody can predict this stuff, even Garth, so read the blog for what it is, speculation and quit pretending like it’s already been announced. If it does happen, then deal with it.

#174 Double dipping on 02.03.20 at 2:22 pm

How about if public servants with db pensions aren’t allowed to have TFSAs…

Seems more fair since the rest of us can’t contribute to a db pension but they can contribute to both

#175 Sold Out on 02.03.20 at 2:24 pm

“For example, Canadians who make $50,000-$55,000 in annual income, have on average $20,000 in their TFSA accounts and an unused contribution room of $32,000. In contrast, those who make $250,000 yearly or more, have an average balance of $43,000 and an unused contribution room of only $16,000.”

What isn’t clear from these numbers is the total household income of contributors, and whether the contributions represent asset-shifting and/or spousal contributions. For example – higher earning spouse makes RRSP contribution, takes tax refund and gifts it to lower earning spouse, who deposits it into their TFSA. Very different outcome than a lower earning individual contributing to their own TFSA, but not apparent from the stats presented.

Read what one of the original researchers who was instrumental to the formation of the TFSA has to say about who benefits from them. Or just herd together for safety…

https://www.macleans.ca/economy/economicanalysis/who-benefits-most-from-tax-free-saving/

The article is half a decade old, based on a contribution level no longer in effect and the author had no involvement whatsoever in framing the TFSA legislation. – Garth

#176 jess on 02.03.20 at 2:30 pm

22/01/2020

Washington, DC: January 22, 2020 – Public pensions are seriously underfunded in some states, and the situation is not helped by the fact that states continue to give huge tax breaks and other subsidies to corporations. Such subsidies often exceed the amount a state owes to maintain its pension obligations.

https://www.goodjobsfirst.org/news/releases/report-corporate-tax-giveaways-harm-state-revenues-needed-pension-funding

=====
what’s to like?
https://www.goodjobsfirst.org/violation-tracker
https://violationtracker.goodjobsfirst.org/prog.php?parent=goldman-sachs

toxic securities abuses $8,762,900,000 5
investor protection violation $3,478,168,127 9
mortgage abuses $404,000,000 3
securities issuance or trading violation $179,027,860 9
foreign exchange market manipulation $174,750,000 2
financial institution supervision failures $80,500,000 4
banking violation $36,390,000 2
illicit political contributions $12,000,000 1
employment discrimination $9,995,000 1
data submission deficiencies $1,650,000 1

#177 Retief on 02.03.20 at 2:32 pm

#47 Dejavu

60% stock etfs
20% bonds
15% preferreds
5% reits

VFV for America
VEF for global developed excluding America
Vee for emerging markets
Vab for bonds
Cpd for preferreds
Vre for reits

Pick weighting’s and rebalance annually in the spring

++++++++++++++++++++++++++++++++

This may be great as your portfolio grows and you get older. But you are only 33 and have only just started. You have at least 30+ years to keep it growing.
Why not just go 100% VFV until you are within 5 to 10 years of needing the money and then start to balance the portfolio. It will minimize trading costs and any need to rebalance along the way. It has an extremely low MER compared to your other fund choices. The US market has on average higher returns than anything else. No problem with withholding taxes in TFSA as it is a Canadian Fund that handles that within the fund. Great returns so far. Make sure you DRIP the dividends.

The TFSA needs to be used for growth. Not income for most of its life. When the withdrawals begin, then start looking for more income. An alternate might be a Vanguard Total Market ETF for the US so you get all the stocks of the US market. (maybe VUN) Perform similarly. You can’t get much simpler than a one ETF portfolio in a TFSA. Max it out.

#178 crazyfox on 02.03.20 at 2:36 pm

#24 BS on 02.02.20 at 3:20 pm

Not everyone wins with investments in TSFA’s unless it’s low risk and that’s not really what TSFA’s are designed to do, they are there for high risk investments since they encourage investments in equity’s or markets. – crazyfox

“Typical false narrative by those who are clueless about investing. Equities are not high risk. They have produced consistent returns above inflation for a century. But even if you choose to buy a GIC which have produced returns below inflation for a century you are still better off not paying tax. Beats having the government waste the money on progressive pet projects with the money.” – BS

You do realize that an equity is a term used to describe a stock, right? The fact that you suggest equities don’t pose high risk tell readers all one needs to know.

Obviously TSFA’s are a great tool for some. For people who are high earners or have a half mil cash or more lying around to invest, nothing is sweeter because they can take a portion of that cash and invest in stocks or ETFs and if they see nice gains keep it all tax free, bully for them. They can offset risk through bonds outside of TSFA’s as smart money managers do, invest in fixed income, REIT’s, buy ETF’s and put them in TSFA’s make the most sense in a higher valued market like it is now but think for a moment what I said.

Don’t cherry pick what I said and think. Are most mom and pop investors smart enough to do that? Do they have the cash even to do that? Garth is using an income mean of $300k or more per family… is that a typical Canadian family income? And why the hell would anyone who is financially literate put GIC’s into a TSFA? Let’s say you are financially literate, earn less than 50K and have 100K to invest. Will you diversify using a formula like Garth’s and diversify a pie that small or will you put it all into a TSFA (if you could) and invest in stocks and ETF’s? It’s still high risk, there’s no question about that, you could still get creamed.

My point stands. TSFA’s are great for higher earners and great for winners but for the losers and the gamblers and the financially illiterate? Not so much because they can’t write off the capital losses and gains free accounts will attract risk whether you are literate and flush with cash… or not.

When the Fed looked at TSFA’s and tax leakage, what they found was plenty of losers to offset the tax loss from gains. The fact that there is only a billion in tax leakage from TSFAs when markets have outperformed should tell you all you need to know and please don’t put words in my mouth.

Again, I want to see TSFA’s around. Money managers want to see them increased to the moon because their clients by enlarge have the money to invest (and risk). But what I’m also saying is put yourselves in the shoes of everyone else like the government is forced to do, like those who are financially illiterate (like most of the population) who aren’t making $300 K a year. The government has to consider what’s best for them as well. Do that, and the argument is there for them to not bump TSFA’s to 10K annually.

In the same breath, I don’t see an argument for caps other than tax leakage and a billion over periods where the market is frothy is not enough to warrant a cap on TSFA’s. Garth’s argument for this has merit. The rich pay their share in of taxes in Canada. It’s not just the high tax rates for individual earners, its 50% taxed capital gains. Compare for example, our tax code to that of the U.S. where individual tax exemptions start at a little over 4K as opposed to 15K in Canada. That’s a tremendous difference!

The Libs will pop it from $14,500 to 15K in the next budget and its costing the Fed meaning us, $ 4 billion to do it. Just 500 bucks! Who pays for it? The rich. We are 50% taxed on gains in Canada where Americans pay 15% gains. That difference is also HUGE! There’s your reason why the Buffets of the world are only 15+% taxed, his income is mostly gains.

The rich up here in Canada pay our share compared to rich Americans and I’m sure we will find all kinds of folks (y’know, rich folks) who would prefer an American tax code over a Canadian one because it best suits them but what will we get in return….? Income inequality, that’s what. More homeless, more dead broke and gone bust and staying that way, more people missing meals, the kind of thing that gets the Bernie Sanders of the world elected as presidential candidates if not presidents and it starts with taxes.

I’ve been on both sides of the tax equation (rich and poor) and I’m telling readers what we have is better when you consider the overall health of people and the system but we have to give the rich in Canada something for their extra efforts. A cap free TSFA (status quo, leave it alone) is a good place to start.

#179 kommykim on 02.03.20 at 2:45 pm

#174 Double dipping on 02.03.20 at 2:22 pm
How about if public servants with db pensions aren’t allowed to have TFSAs…

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

Public servants with db pensions already have their RRSP room clawed back in a big way. The db pension is 100% taxable upon receipt. So it is already pretty equitable even if public servants have TFSAs.

#180 Mari on 02.03.20 at 2:46 pm

Wow. This.
I really lack eloquence, even though I want to write my MP I don’t know how to word something well. Anyone have a form letter? Garth, may I paraphrase your post?

#181 Linda on 02.03.20 at 3:23 pm

Where did this CPP/OAS clawback meme come from? For those who apparently do not know – CPP is a DB pension plan, funded by employees/employers. It can’t be clawed back, though it will be taxed in retirement. OAS is NOT the same as CPP. There is no OAS deduction off your pay cheque, though it is funded by taxpayer dollars & can be clawed back if your income in retirement is high enough. Most of us will not need to worry about OAS clawback.

#182 theoryAndPractice on 02.03.20 at 3:26 pm

#174 Double dipping on 02.03.20 at 2:22 pm
—-
I have alternative idea: Instead of limiting & punishing, just promoting :

Variable TFSA contribution limit per year : Contribution goes up to variable min=6K max=25K per year capped with paid taxes for the calendar year involved. ie if 30K tax is paid for the year it will be 25K room for TFSA, (yeah 40% will be limited to 6K only that will corresponds no tax paid at all for that calendar year)

But why not promote the ones that carries the load? win & win situation after all.

Not sure why Garth did not come up with this variable TFSA limit approach?

#183 Keith on 02.03.20 at 3:39 pm

Quoted from the All Canadian Wealth Test, money sense magazine 2009. All numbers sourced from Stats Can, article found by googling “how much Canadian wealth is inherited.” Bottom of first page of search results.

“Canada is still a land of opportunity, but in an age where middle-class incomes aren’t budging by much, inherited wealth can play a big role in determining where you wind up. According to Statistics Canada, 36% of families in the wealthiest quintile of the population have received an inheritance; the average amount of that inheritance was $136,000. In contrast, only 10% of families in the bottom quintile inherited money and the average amount of that inheritance was only $13,200. No matter how hard you work, it is also good to be born into, marry into, or know people with money.”

Funny. 36% of 20% is 7%. Stop worrying about the advantage a tiny proportion of people might have. What are you doing to better your own life? – Garth

#184 Linda on 02.03.20 at 6:34 pm

About inherited wealth – isn’t there a 3 generation rule? First generation makes, second generation takes & by the third generation, back to being part of the 99%. Bottom line is, earning (or inheriting) money is the easy part. Keeping it is the part people have trouble with.

#185 Gravy Train on 02.03.20 at 6:52 pm

#168 Sail Away on 02.03.20 at 12:43 pm
“Sure, Rico. Tell yourself anything you need to keep your feeling of superiority. Quick test: Name one world-changing Canadian [innovator] […]”. Just one? How about these? Alexander Graham Bell, Lester Pearson, James Cameron, Guy Laliberté, Norman Bethune, Sir Frederick Banting and Charles Best, Sir Sanford Fleming, James Naismith, Mike Lazaridis, Robert Mundell, Jane Jacobs, Marshall McLuhan, Sid Altman, Willard Boyle, Bert Brockhouse, Gerhard Herzberg, David Hubel, Rudolph Marcus, Art McDonald, James Peebles, John Polanyi, Michael Smith, Donna Strickland, Jack Szostak, Henry Taube and Richard Taylor. :)

“Thought so.” Thought what? :)

#186 Scott on 02.03.20 at 7:20 pm

@153
I think there are lots of people like myself where the ‘eat the rich’ has nothing to do with someone making a million dollars a year. The issue is people and companies making millions of dollars a day and paying a lower effective tax rate than a “middle classer” (who ever that is).

I agree with Buffett and Gates when they said they should be paying far more in tax and that money would go a long way to improving people’s lives.

#187 Sail Away on 02.04.20 at 8:51 am

#185 Gravy Train on 02.03.20 at 6:52 pm
#168 Sail Away on 02.03.20 at 12:43 pm

“Sure, Rico. Tell yourself anything you need to keep your feeling of superiority. Quick test: Name one world-changing Canadian [innovator] […]”. Just one? How about these? Alexander Graham Bell, Lester Pearson, James Cameron, Guy Laliberté, Norman Bethune, Sir Frederick Banting and Charles Best, Sir Sanford Fleming, James Naismith, Mike Lazaridis, Robert Mundell, Jane Jacobs, Marshall McLuhan, Sid Altman, Willard Boyle, Bert Brockhouse, Gerhard Herzberg, David Hubel, Rudolph Marcus, Art McDonald, James Peebles, John Polanyi, Michael Smith, Donna Strickland, Jack Szostak, Henry Taube and Richard Taylor. :)

“Thought so.” Thought what? :)

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There you go, Gravy, you’ve proven my points, which are:

1. Most of of these are not recognizeable names, even to Canadians
2. Of the ones who are, fully a quarter are dual or US citizens only
3.The majority of them achieved success in the US – birthplace is irrelevant when success is achieved elsewhere. Similarly with Elon Musk- born in South Africa, did his great work in America

The US is the place for innovation and brilliance. They encourage and support it. By no means is it a s-hole as Rico stated

#188 joinem on 02.04.20 at 10:15 am

Letter sent to Heather McPherson in Edmonton

#189 Scott on 02.04.20 at 1:50 pm

@187
As someone who frequents the US I can tell you that there are vastly different USAs even within a city.

Definitely bs to say that it’s a shit hole country. What he’s probably eluding to is that it’s a country where a significant portion of citizens are trapped in a very hard life. Good luck getting your kids to college if you’re in the bottom quarter of income earners even if you’re working sixty hours a week. Your kid has to be really bright considering they go to a school that pales in comparison to a school in a rich neighborhood (let alone a private school). You’re probably a medical emergency away from bankrupting your family.

Don’t get me wrong Canada has it’s divide as well. It’s not like we make sure all kids are entitled to the same education like Finland does. I’ve spent weeks at hotels down in the US enough to hear stories about staff working full time and still having to work another job just to able to afford rent where gun shots go off every other night.