# The TFSA is not always beneficial



## gibor365 (Apr 1, 2011)

I started to fill out tax return to my mother abd figured that in her case is much batter to have Cash in regular cash account that in TFSA. Her income is less than 10K, so more she gets in interest, more GST/HST return she gets! In case of TFSA she gets less as there is no interest to report ....


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## andrewf (Mar 1, 2010)

Is she retired? Does she have any other income? If not, is she eligible for OAS/GIS?


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## gibor365 (Apr 1, 2011)

andrewf said:


> Is she retired? Does she have any other income? If not, is she eligible for OAS/GIS?


No, she is 66, but she is not eligible for OAS/GIS as I sponsored her to come to Canada.... so for 10 years she is no eligible for any social assistance... she has small income from babysitting.... last year I by mistake moved her money to TFSA and now I see that without TFSA her GST/HST credit would be a little higher....


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## andrewf (Mar 1, 2010)

As long as she has credits to keep her from paying any income tax, then sure. But paying income tax to get GST credits is a losing proposition.


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## arrow1963 (Nov 22, 2011)

Can we get some numbers here for context?

When I was playing around with the CRA GST credit calculator (http://www.cra-arc.gc.ca/ebci/icbc/simnet/SimnController), it suggested a quarterly refund of (alberta, single person):

$65 for $0 income
$65 for $8000
$67.80 for $9000
$72.80 for $10,000
$97.80 for $15,000
$99.25 for $20,000

From where I'm standing, that's an effective tax rate of 1-2% across a narrow band of income (8-15K/year), for a *very* specialized situation. Of course, if your mother was a Canadian retiree and this was her only income apart from OAS, GIS & (optional) CPP, she would be getting absolutely destroyed by the GIS clawback, at a rate of 50%.


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## gibor365 (Apr 1, 2011)

arrow, link you provided doesn't work 

I did simulation woth Turbotax. The best GST/HST return is about 10K income, when still there is still no withholding tax... she can apply for OAS and maybe GIS only in 8 years when she probably won't have any income at all


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## arrow1963 (Nov 22, 2011)

Try that...

http://www.cra-arc.gc.ca/bnfts/clcltr/gstc_clcltr-eng.html

My general point still stands, your initial post says your mother could be 'much better off' without a TFSA. What kind of $$$'s are we talking about?


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## gibor365 (Apr 1, 2011)

arrow1963 said:


> Try that...
> 
> http://www.cra-arc.gc.ca/bnfts/clcltr/gstc_clcltr-eng.html
> 
> My general point still stands, your initial post says your mother could be 'much better off' without a TFSA. What kind of $$$'s are we talking about?


It doesn't matter amount, the point is that w/o TFSA she gets more money... and for retired oerson that doesn't have any gov. assistance and who fully dependant on her son , even $30 is income. 
btw, the time I spent, by opening this TFSA (ING didn't want to open, because she didn't have credit history and needed to fill out some papers where guarantor should lign and othe BS like this) cost me much more than this $30 ... Just if I new it, I'd just skip it. That's everything i wanted to say.


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## andrewf (Mar 1, 2010)

This sounds like a totally inconsequential amount of money. Worry about things that matter...


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## RBull (Jan 20, 2013)

^my thoughts too.


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## OptsyEagle (Nov 29, 2009)

Still interesting. Giving more money to people with higher incomes. Who would have thunk it. Obviously they figure a person with no income is not having any GST applied against them, and they are right. I didn't think about it that way.


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## gibor365 (Apr 1, 2011)

I didn't think about it as neither myself not my wife have never got any GST/HST/XXX and other trillium rebates (even though cannot tell that our income is extremely high), didn't know even such thing exists until starting filling her taxes... so for us TFSA is beneficial, but for ppl with very low income - not


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## arrow1963 (Nov 22, 2011)

gibor said:


> I didn't think about it as neither myself not my wife have never got any GST/HST/XXX and other trillium rebates (even though cannot tell that our income is extremely high), didn't know even such thing exists until starting filling her taxes... so for us TFSA is beneficial, but for *ppl with very low income* - not


Not true. Should read 'people with very low income, who do not benefit from any means tested social programs that might be scaled back'.

I think this is a wrongheaded discussion for a number of reasons. My initial interest in this post was to see whether the statement 'A TFSA is good for everyone' should be amended to '...., except....'. I don't think that hurdle has been passed.

First, as been mentioned previously, it's over a really small amount of money. 

Secondly, acting on this requires proactively micromanaging your money. The last thing that Canadian almost-savers need is a 'but' affixed to the TFSA (causing them to worry they're going to screw themselves over), when there is a 99.99% chance that they're not in this situation.

Lastly, as far as I'm concerned, there is way, way too much discussion in Canada that pertains to elderly immigrants who get into the country on the basis of family connections. You can bet that if there's an article on healthcare costs, you won't need to wade 10 comments into the online forums to find xenophobic, innumerate fearmongering at the G&M or the NP, never mind local tabloids. So, the last thing anyone needs is for the received wisdom on TFSA's to be 'Good for everyone, except poor relatives who immigrate to Canada and who might lose part of their government benefits'. Not good messaging, and only barely connected to the truth.


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## dogleg (Feb 5, 2010)

I'm not trying to change the subject but has anyone had a problem with the reporting of contributions in your TFSA? 
I switched some TFSAs around and added my $5500 for the year and discovered the institution has it appear the transfered funds are new money. I got it corrected but if not it would have cost me. Has anyone had a similar experience? Thanks.


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## Eclectic12 (Oct 20, 2010)

^^^^

Having read irate posts from people in 2010/2011 complaining how their financial institution tagged money as new contributions instead of a transfer - I stick to withdrawals in late Dec and re-contributions the following Jan. So no, I've had no problems.

It sounds like you had this problem lately so it seems to still be happening. Though I suppose all it takes is one party to think "transfer = withdraw then contribute" when the other party thinks "transfer = direct transfer that won't affect contribution room". Or just plain old keying errors of the codes.


Cheers


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## gibor365 (Apr 1, 2011)

arrow1963 said:


> Not true. Should read 'people with very low income, who do not benefit from any means tested social programs that might be scaled back'.
> 
> I think this is a wrongheaded discussion for a number of reasons. My initial interest in this post was to see whether the statement 'A TFSA is good for everyone' should be amended to '...., except....'. I don't think that hurdle has been passed.
> 
> ...


Nothing should be amended my friend. the title and post exactly describe situation. You can open your own thread with your description. 
I'm not telling that TFSA is bad (it's very good for me, as I can get some relieve form CRA dogs), I'm just stating the fact.
... and you are wrong with your number it's not 99.99% , it's 99.99999%. looks like you are very good with %  What college did you finish?!


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## arrow1963 (Nov 22, 2011)

Just to satisfy my curiosity, how much money did her TFSA cost your mom this year?


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## gibor365 (Apr 1, 2011)

I don't understand your questions... and again, doesn't matter how much money, the fact that she (or anyone with similar circumstances) would get bigger refund without TFSA


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## arrow1963 (Nov 22, 2011)

gibor said:


> I don't understand your questions... and again, doesn't matter how much money, the fact that she (or anyone with similar circumstances) would get bigger refund without TFSA


What's not to understand?

(Refund if she didn't have the TFSA) - (Refund with TFSA) = (How much the TFSA cost her)


This is a financial forum. Numbers matter. My research (on the first page of the thread) suggested that your mom would have to have at least $6000 in income before this made a difference. I don't know if this is the case. Second, your initial post said that her money would do better in a 'cash account' than in a TFSA. By my math, if she had $25K in a savings account at 2% interest, that's going to be $500. 1% of that (which appears to be the GST refund rate) is $5.

Now, that's if her income happens to be between $6,000 and $10,000, and she doesn't qualify for any other government payments. When she does, that $500 will trigger a GIS clawback of $250 + reduced income taxes.

$5 of potential loss. $250 of potential gain. Damn TFSA.


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## gibor365 (Apr 1, 2011)

I don't remember exact numbers, her income is about 10K... she doesn't need to worry about GIS clawback or OAS , she doesn't receive it (as I said before)... I played with numbers and got something about $50 more if she doesn't have TFSA. - so it's beneficial for her, not to have TFSA and instead have simple interest (T5). I'm pretty sure that in the same situation tens thousands sponsored old immigrants as they 10 years cannot get GIS or OAS....
and as I told you, "beneficial" means not only money... I wasted a lot of times on filling up different forms, ING didn't want to open account as my mom didn't have credit history and wanted guarantor (specific list of people) , so I should take day off to go with her.... 
The final thought, *for retired immigrants or immigrants with income less than about 15K - TFSA doesn't make sense.*


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## Koala (Jan 27, 2012)

In theory I find this interesting. For a while, as a student I received GST rebates. For the typical student, I still think that the long-term benefit of increasing the total amount of TFSA contribution room would be better than the short-term benefit of the GST rebate.


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## gibor365 (Apr 1, 2011)

Koala said:


> In theory I find this interesting. For a while, as a student I received GST rebates. For the typical student, I still think that the long-term benefit of increasing the total amount of TFSA contribution room would be better than the short-term benefit of the GST rebate.


If student have account brokerage and investing (like accumulating shasres from dividend) - yes, but I was talking about retired people


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## MrMatt (Dec 21, 2011)

Koala said:


> In theory I find this interesting. For a while, as a student I received GST rebates. For the typical student, I still think that the long-term benefit of increasing the total amount of TFSA contribution room would be better than the short-term benefit of the GST rebate.


Except at the bottom income levels, short term matters more.
People at lower income levels can't afford to max out their TFSA every year anyway. Who has an extra $400 or more a month?


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## gibor365 (Apr 1, 2011)

MrMatt said:


> Except at the bottom income levels, short term matters more.
> People at lower income levels can't afford to max out their TFSA every year anyway. Who has an extra $400 or more a month?


MrMatt, we are talking about different population, you
re talking about Canadian losers who cannot or doesn't want earn money, and I'm talking about immigrants who coming with money (but because of the age, language and luck of NA experience ) cannot find decent job...
btw, my point is also applicable to Canadian students....for example my son going to University next year, he has and will have more money from us, but I'll tell him not to open TFSA before graduation (unless he likes to open discount brokarage TFSA), when he finds job after, he will have nice room for 20K in TFSA


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## andrewf (Mar 1, 2010)

gibor said:


> MrMatt, we are talking about different population, you
> re talking about Canadian losers who cannot or doesn't want earn money, and I'm talking about immigrants who coming with money (but because of the age, language and luck of NA experience ) cannot find decent job...
> btw, my point is also applicable to Canadian students....for example my son going to University next year, he has and will have more money from us, but I'll tell him not to open TFSA before graduation (unless he likes to open discount brokarage TFSA), when he finds job after, he will have nice room for 20K in TFSA


Not coming with that much money if they don't earn enough income to pay taxes...


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## gibor365 (Apr 1, 2011)

andrewf said:


> Not coming with that much money if they don't earn enough income to pay taxes...


Not true. Practically everyone who immigrating here has money from savings, selling of condo/house etc... (same my mom), but in Canada their income can be very low...

I just don't know what do you mean by "that much", for sure my mom savings is not enough to get more than 15K in interest with current rates  for 15K interest she should've have more than 1,000,000$

Again, guys, don't attack me! I , personally like TFSA very much and would like to see constistant increase in cap (this year I'm 100% filled out RRSP room for me and my wife and I don't want to have Cash account in discount brokarage) , but this is beneficial not for everyone.


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## Flock of Loons (Jan 3, 2013)

gibor said:


> MrMatt, we are talking about different population, you
> re talking about Canadian losers who cannot or doesn't want earn money,


Yes, everyone was put on this earth to dedicate their lives to chasing money.

If they don't make much money they are "losers".

God what an idiot.


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## gibor365 (Apr 1, 2011)

Flock of Loons said:


> Yes, everyone was put on this earth to dedicate their lives to chasing money.
> 
> If they don't make much money they are "losers".
> 
> God what an idiot.


No , they are a "winners" and looks like your are one of them


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