# Tax Free Savings Accounts



## RUSH2112 (Mar 25, 2012)

Lots of information online but no reason as to why this was started to begin with. Just a bit skeptical, sounds to good to be true. I have a RBC direct investing account now and I am convinced it is for real, I will be selling my current stocks and starting over within a new TFSA account.

Thanks in advance.


----------



## indexxx (Oct 31, 2011)

The point of your post is not clear- are you asking something?


----------



## RUSH2112 (Mar 25, 2012)

Curious as to why the government would offer a tax free place to hold investments.


----------



## atrp2biz (Sep 22, 2010)

Here's a start.


----------



## humble_pie (Jun 7, 2009)

RUSH2112 said:


> Lots of information online but no reason as to why this was started to begin with. Just a bit skeptical, sounds to good to be true. I have a RBC direct investing account now and I am convinced it is for real, I will be selling my current stocks and starting over within a new TFSA account.



evidently the US has something similar, i believe GB also. I imagine one of the founding ideas was to foster savings & financial independence among canadians. OK it's working!

if you have stocks with taxable events - dividends, potential gains, etc - in non-registered but you'd like to hold them tax-free henceforward in a TFSA, you don't have to sell them. You can simply contribute them to TFSA as a "contribution in kind," provided you have enough TFSA room. The broker will evaluate them as of the day of the transfer.

notice that, in such a case, you would then have a taxable gain or loss in your non-registered account. You would be deemed to have disposed of the stock at fair market value on the day of the transfer, even though you did not sell the stock.

what price to choose as proceeds for this deemed disposition? the most widely used is the closing price of the day. 

best of luck with a new TFSA.


----------



## OnlyMyOpinion (Sep 1, 2013)

Rush,
Here is the wiki discussion of the TSFA: https://en.wikipedia.org/wiki/Tax-Free_Savings_Account
_The Tax-Free Savings Account (TFSA) is an account that provides tax benefits for saving in Canada. Investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn. Contributions to a TFSA are not deductible for income tax purposes, unlike contributions to a Registered Retirement Savings Plan (RRSP). Despite the name, a TFSA does not have to be a cash savings account. Like an RRSP, a TFSA may contain cash and/or other investments such as mutual funds, certain stocks, bonds, or Guaranteed Investment Certificates (GICs)._

It is intended to provide incentive for individuals to save more, and to be more responsible for their own financial future. Thus it was an initiative of the previous Conservative government. We now have a liberal government which more typically believes that government knows best. So we now see a reduced TSFA contribution amount, higher taxes and a growing 'nanny' state.


----------



## RUSH2112 (Mar 25, 2012)

humble_pie said:


> evidently the US has something similar, i believe GB also. I imagine one of the founding ideas was to foster savings & financial independence among canadians. OK it's working!
> 
> if you have stocks with taxable events - dividends, potential gains, etc - in non-registered but you'd like to hold them tax-free henceforward in a TFSA, you don't have to sell them. You can simply contribute them to TFSA as a "contribution in kind," provided you have enough TFSA room. The broker will evaluate them as of the day of the transfer.
> 
> ...


Thanks for that, I will likely have to go sit down with an accountant as it is more complicated than I expected.

I assume it has more to do with revenues for the Bay Street casino than someone being really concerned with how much I save.


----------



## RUSH2112 (Mar 25, 2012)

OnlyMyOpinion said:


> Rush,
> Here is the wiki discussion of the TSFA: https://en.wikipedia.org/wiki/Tax-Free_Savings_Account
> _The Tax-Free Savings Account (TFSA) is an account that provides tax benefits for saving in Canada. Investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn. Contributions to a TFSA are not deductible for income tax purposes, unlike contributions to a Registered Retirement Savings Plan (RRSP). Despite the name, a TFSA does not have to be a cash savings account. Like an RRSP, a TFSA may contain cash and/or other investments such as mutual funds, certain stocks, bonds, or Guaranteed Investment Certificates (GICs)._
> 
> It is intended to provide incentive for individuals to save more, and to be more responsible for their own financial future. Thus it was an initiative of the previous Conservative government. We now have a liberal government which more typically believes that government knows best. So we now see a reduced TSFA contribution amount, higher taxes and a growing 'nanny' state.


Just what I thought, a baby sitting service offered by the financial services industry.

I don't mind paying taxes, but when I put up my own money to help a company get started and create employment, I shouldn't be penalized.


----------



## Woz (Sep 5, 2013)

The US added this type of account in the late 90s. Canada started looking into it shortly after as a means to increase the personal savings rate which had been declining. At first it was called the Tax Prepaid Savings Plan (doesn’t have quite the same ring to it).


----------



## humble_pie (Jun 7, 2009)

OnlyMyOpinion said:


> [a TFSA] is intended to provide incentive for individuals to save more, and to be more responsible for their own financial future. Thus it was an initiative of the previous Conservative government. We now have a liberal government which more typically believes that government knows best. So we now see a reduced TSFA contribution amount, higher taxes and a growing 'nanny' state.



my goodness! i have such a different history!

my version goes The TFSA is a broad spectrum, supra-political success story that allows every canadian to build up his or her own little nest egg with zero taxes ever.

introduced in 2009 with an initial contribution of $5000 & subsequently raised to annual contributions of $5,500, the TFSA was rolling along fine until election campaign 2015, when soon-to-lose prime minister steven harper suddenly boosted the contribution limit to $10,000 in a desperately obvious attempt to buy votes. He announced this vote bribe only 3-4 months prior to election day.

the scheme didn't work for the PCs, who lost the election. Meanwhile debate raged over the longterm future implications of tax-free plans, because it was clear that, once TFSAs had escalated into the $10k annual contribution stratosphere, only well-off canadians could afford them. 

then there were parties who fretted that, since TFSAs & personal residences are excluded from GIS means tests, the True North would drive itself towards an economy in which every household would sprout both a hotbed of rich TFSAs plus a million dollar mansion, meanwhile lolling on government handout GIS & allowing the nation to slop itself into wrack & wruin.

fortunately, though, the liberals won the election & saved true canadian grit by restoring the TFSA to its $5,500 level where it had been only 4 months previously. In other words the TFSA is now right back where it has always been.


----------



## OnlyMyOpinion (Sep 1, 2013)

Humble,  I have to agree, your tale is much more compelling and dramatic (as most fiction is


----------



## humble_pie (Jun 7, 2009)

no, i'm a well-trained hard-nosed investigative journo from the best school in the land, u didn't know?

one thing that delighted me in J-school was seeing how real life is so much wilder & so much more entertaining than fiction.


----------



## RUSH2112 (Mar 25, 2012)

When I went to my investing website, there was some appreciated basic information along with how I should make use of all these investment ideas.

I have no problem with Jim Flaherty, but herding young people into the stock market is a good way to deplete their savings, not increase it.


----------



## Barwelle (Feb 23, 2011)

Woz said:


> The US added this type of account in the late 90s. Canada started looking into it shortly after as a means to increase the personal savings rate which had been declining.


I like having the TFSA as an option, but does it really provide an incentive to increase personal savings rates over what we had before?

I mean, what it does (generally speaking) is divert investment cash flow away from RRSPs, which increases income tax revenue for current governments, at the expense of future governments. Putting on my tinfoil hat here, that seems like more of a reason for the government to create the TFSA.


----------



## humble_pie (Jun 7, 2009)

RUSH tax-free accounts are priceless little gems so please do not imagine you will ever be able to tarnish one.

nobody needs to own stocks in a TFSA, nobody is being herded.

nearly all the online banks have generous TFSA offers around this time of year. These offers pay interest on CDIC guaranteed deposits, so a beginner TFSA can start with one of these numbers & only move into stocks or ETFs at some future date if the account holder so desires.

hint: a party establishing a TFSA for the first time should check to confirm what the institution's withdrawal & transfer policies are. Some firms - brokers among these - offering stock & fund holdings have significantly high fees to transfer the account to another institution. Other online financial institutions such as tangerine do not charge transfer fees. So it's wise to check out this issue early on.


----------



## tygrus (Mar 13, 2012)

TFSA is the first step in the demise of CCP/OAS. Boomers will cripple that program. Next generation will be 100% responsible for their retirement planning.


----------



## RUSH2112 (Mar 25, 2012)

humble_pie said:


> RUSH tax-free accounts are priceless little gems so please do not imagine you will ever be able to tarnish one.
> 
> nobody needs to own stocks in a TFSA, nobody is being herded.
> 
> ...


It's not a gem to a young couple, if they were talked into a portfolio full of oil stocks or given a list of stocks in which a few tanked.

I will still meet with an certified accountant to better understand what this actually is about.


----------



## humble_pie (Jun 7, 2009)

actually most folks i know in their mid-40s have been saying for years that they've known for a long time that CPP/OAS will have nothing for them when they reach the appropriate age. I even know people in their 40s who advocate that working life should be extended & age of retirement should be pushed later, in order to reduce old age withdrawals.

i don't believe that TFSAs can be linked to CPP/OAS though.


----------



## OnlyMyOpinion (Sep 1, 2013)

RUSH2112 said:


> It's not a gem to a young couple, if they were talked into a portfolio full of oil stocks or given a list of stocks in which a few tanked.


Ah, but that's why you are here. So you don't make those silly investment mistakes 
They are a separate discussion from the attributes of a TSFA as a savings vehicle or 'basket' for your wise investments.

Why would you not use a TSFA if you are going to invest? It means the difference between paying taxes on your investment or not.
It is a no-brainer.


----------



## humble_pie (Jun 7, 2009)

RUSH2112 said:


> It's not a gem to a young couple, if they were talked into a portfolio full of oil stocks or given a list of stocks in which a few tanked.



of course it's a potential gem for any young couple. If some parties are foolish enough to allow themselves to be talked into portfolios full of badly-performing securities, then that's another story entirely. 

TFSAs do *not* equate to worthless holdings. To view them this way is akin to saying I don't like cabbages, so i won't wear navy blue tee shirts.




> I will still meet with an certified accountant to better understand what this actually is about.


more good news! TFSAs are actually a topic where no one needs a chartered accountant. Canada is wall-papered - websites, banks, this forum - with copious information about Tax-Free Savings Accounts. Everything that anyone could ever want to know is easily available.

there are no tax consequences, so there's not much for an accountant to say. A TFSA will be your own blue tax haven. Sweeter than a caribbean island. Very appealing this time of year.

there's only one catch. Losses in TFSAs - from stock trading for example - are not deductible from gains anywhere. For this reason, some folks treat their TFSA as strictly HISA emergency accounts & plan to have only interest payments as TFSA income.


----------



## indexxx (Oct 31, 2011)

It is a great thing- how can anyone not be supportive of a tax-free investment opportunity? There was some reasoning behind taking part of the burden of retirement off the government funds- so the average person is now able to take a bit more control over their retirement future, instead of being reliant on a company pension or OAS. It's a good tool is used correctly. Enjoy it- there are not many incentives the government gives us, this is one.


----------



## Davis (Nov 11, 2014)

TFSAs do not reduce reliance on/entitlement to government programs like OAS and CPP. They just don't. Withdrawals from TFSAs are not included in net income, which is what is used for determining the OAS and GIS clawbacks. So no matter how much or little you have in your TFSA, your eligibility will be determined by your non-TFSA income and duration of residence in Canada.

CPP benefits are determined by what your paid in while working, not buy your income, and are also completely independent of TFSAs.


----------



## gardner (Feb 13, 2014)

indexxx said:


> There was some reasoning behind taking part of the burden of retirement off the government funds


Well, it is itself a government program -- the cost of tax-free to the crown is real. And as Davis points out, the use of it does not replace or chip away at any of the other government programs one might be entitled to. I do disagree with Davis to some extent though -- it does not diminish entitlement to OAS, but it may augment a persons finances so as to reduce their RELIANCE on OAS.


----------



## Davis (Nov 11, 2014)

I think the term "reliance on": is ambiguous. I would agree that TFSAs increase the standard of living for those who invest in them, compared to investing in taxable investments or not investing. But they really have nothing to do with OAS and CPP. 

Some may argue that if people put money into TFSAs, then the government will not have to provide as much through OAS. This misses the point that not everyone can or will save through TFSAs, so the need for OAS will still be there, and the entitlement for it will be the same without regard to TFSAs.


----------



## humble_pie (Jun 7, 2009)

of course, davis, you're right (you are usually right)

no one was saying that TFSAs reduce OAS or even GIS entitlement though?

what i was jokingly saying upthread is something that was discussed during the summer 2015 pre-election months.

the issue goes that current means tests for GIS eligibility do not consider either a principal residence or a TFSA. This caused some parties to joke that the ideal old age would be a couple with 2 humungously rich TFSAs (after all, eventually these tax-free accounts could end up holding $1M or more) plus a multi-million-dollar McMansion.

equipped with goodies like these, our wily & crafty elder citizens could then apply for & conceivably receive full GIS.

yea it's a stretch but it's funny, no?


----------



## Davis (Nov 11, 2014)

indexxx said:


> There was some reasoning behind taking part of the burden of retirement off the government funds- so the average person is now able to take a bit more control over their retirement future, instead of being reliant on a company pension or OAS.


humble - this is the comment that i was responding to. TFSAs don't take the burden off government funds. in fact, as your example points out, it will likely increase the burden on OAS and GIS if higher income people invest in TFSAs instead of taxable investments and therefore don't have OAS clawed back, and lower income people invest in TFSAs instead of RRSPs and don't lose their GIS. To me, preserving entitlement to government benefits is the flaw in the TFSA structure. I don't have an issue with the tax treatment, since is is roughly equivalent to RRSP treatment (just in a different order).


----------



## Eclectic12 (Oct 20, 2010)

humble_pie said:


> ... notice that, in such a case, you would then *have a taxable gain or loss in your non-registered account.* You would be deemed to have disposed of the stock at fair market value on the day of the transfer, even though you did not sell the stock.


In general terms ... this is good.
In the details ... this is not like you HP. I am surprised that the capital loss part is included (plus that it seems no one has corrected this).

A CL is to be avoided with the transfer in-kind to a registered account as having the same stock the TFSA within 30 days triggers the superficial loss rules.
http://www.taxtips.ca/personaltax/investing/transfersharestorrsp.htm

In a taxable account, one can take advantage of the CL but to do it properly would be a complicated process involving selling everything in registered accounts then the taxable account. Better/simpler to stick to transferring cash then buying more in the TFSA, if the taxable stock is in a loss position.

Or where one plans to sell in the taxable account in the future to get a CL, transfer $$$ then buy an equivalent but different investment in the TFSA (plus look at what is held in the RRSP). For example, contributing cash then buying TD Bank leaves the Bank of Nova Scotia stock in the taxable account available for selling for a CL (assuming no BNS is held in the RRSP).

http://www.taxtips.ca/personaltax/investing/transfersharestorrsp.htm




humble_pie said:


> ... what price to choose as proceeds for this deemed disposition? the most widely used is the closing price of the day.


YMMV ... I'd phone to ask one's broker so that one can be prepared on the day the transfer is requested. My broker allows the investor to pick any price from the open of trading to when the transfer was recorded so I usually spot check during the day then phone in around 3pm or so (assuming I have seen a price I like).



Cheers


----------



## Eclectic12 (Oct 20, 2010)

RUSH2112 said:


> Thanks for that, I will likely have to go sit down with an accountant as it is more complicated than I expected.
> I assume it has more to do with revenues for the Bay Street casino than someone being really concerned with how much I save.


What do you see as "complicated" about whatever investment is held in the TFSA is Canadian tax free?

Your main risk is that a future gov't changes the plan but I suspect "takes effect today with no transition period" type changes would cause too much politically. I've heard from people for decades that the gov't will cancel the RRSP "any day now" where the RRSP has been chugging along with minimal changes so I don't think there is a ton of risk to using it.

The other risk is that one does not understand things like the superficial loss rule or that a loss in a registered account is not useful to counter-balance one's taxable account losses. These are relatively easy to research and deal with, where one has already built knowledge of the taxable account rules, IMO.




RUSH2112 said:


> Just what I thought, a baby sitting service offered by the financial services industry.


What baby sitting? 
You do know that you can setup a self-directed TFSA where the investment choices, buy/sell timing is all your own, right? Baby-sitting or training wheels or fully under one's own control is up to the investor.




RUSH2112 said:


> I don't mind paying taxes, but when I put up my own money to help a company get started and create employment, I shouldn't be penalized.


What penalty?

You put up your money when you buy stock in the taxable account ... the big two differences in the TFSA is that one does not pay Canadian tax on gains (dividends, interest, RoC, capital gains etc.) and where one loses money, the money is lost without any sort of mitigation.

As long as one wins more than they lose ... missing out on claiming the CL seems like a small price to pay for dropping the taxes, IMO. 

Then too, where one sells because the market is dropping and one expects the company prospects have changed (oil companies in 2015 say), taxes don't whittle down what is available to re-deploy into other investments. Doing the same in a taxable account is going to mean that when the tax return is filed, either there is a CL to reduce/counter balance the tax or there is less after-tax to re-deploy.




RUSH2112 said:


> I assume it has more to do with revenues for the Bay Street casino than someone being really concerned with how much I save.


Based on what was *already* going on in taxable accounts and RRSP, never mind company pensions plus CPP/QPP plus other companies investing in the stock market, do you really think creating a tax free account boosted what was already going on?

Before you answer, consider that for the first several years, people didn't realise that stock were allowed in TFSAs so that hire percentages of TFSAs *only* held cash.


Cheers


----------



## lonewolf (Jun 12, 2012)

RUSH2112 said:


> Curious as to why the government would offer a tax free place to hold investments.


 The real reason is so the banks can make money on the TFSA. RRSPs have been a huge success for the banks. The banks collect interest from mortgages while people with mortgages take longer to pay off mortgages because they invest in RRSPs with fees attached to the RRSPs. There are 2 forces @ work making us go in to debt well fair state for the voters & well fair state for the politician & corporations. The smoke & mirrors is TFSA is for retirement savings


----------



## humble_pie (Jun 7, 2009)

(laughter)

davis you're right again
thank gawd we have people like you to figure all these things out

(more laughter) (it was gibor who first thought up the freebie GIS-with-rich-TFSA-&-big-house-benefits for cmf forum) peach


----------



## Eclectic12 (Oct 20, 2010)

OnlyMyOpinion said:


> Humble,  I have to agree, your tale is much more compelling and dramatic (as most fiction is


It follows the news reports as well as confrontational threads about how much/little the gov't is losing in tax revenues due to the TFSA existing/who uses it/what the impact of doubling the contribution room would do over time.

One can choose to quibble about some of the wording or attributed rationale to various political parties but it is clearly not fiction.


Cheers


----------



## humble_pie (Jun 7, 2009)

Eclectic12 said:


> In the details ... this is not like you HP. I am surprised that the capital loss part is included (plus that it seems no one has corrected this).



eclectic u are right. Oops. I forgot. Thankx for fixing.

here's one to throw you for a loop, though.

in talking with an awesomely capable broker rep recently - we were discussing shorting the box - he said that selling a security in RRSP while buying the exact same security in non-registered - or vice versa - is regarded by the broker as illegal "shorting the box" & therefore it is not allowed.

he said it happens because most reps don't catch it & it's not happening on a large enough scale for their detect-wrongful-client-trades algorithms to pick up.

i was surprised, but then i don't agree with this broker's definition of what is shorting the box. This broker likes to haul out the can't-short-the-box argument whenever they are feeling peckish about currency gambit trading.

the rep & i agreed, amiably, that only a pair of experienced securities lawyers pleading before a high court justice & hauling out all the relevant jurisprudence back to the original US securities act of 1934 that first banned shorting the box, would be able to come up with any consensus.


----------



## NorthernRaven (Aug 4, 2010)

humble_pie said:


> actually most folks i know in their mid-40s have been saying for years that they've known for a long time that CPP/OAS will have nothing for them when they reach the appropriate age. I even know people in their 40s who advocate that working life should be extended & age of retirement should be pushed later, in order to reduce old age withdrawals.
> 
> i don't believe that TFSAs can be linked to CPP/OAS though.


OAS is paid out of current revenue, so that's simply a matter of being willing to continue to fund the program. The boomer bulge hitting retirement does skew things from uniformity, and perhaps we should have been building up some sort of surplus in the good times to smooth things out. But according to this, OAS is currently about 2.3% of GDP, and will peak at 2.8% of GDP in 2033 (a level it hit in the 1990s, as well). I haven't looked through closely to see how realistic the forecasting assumptions are, but on the face of it, this doesn't seem like an existential crisis that would kill the program. I also don't know what magnitude of savings could be achieved by tweaking the OAS clawback, or eventually including a simple TFSA means-test in the calculations, if necessary. Given the traditional voting power of seniors, I can't imagine this being under serious threat by vengeful millennials in the next couple of decades... 

CPP is a pension plan, with a bunch of actual assets and a perpetual stream of contributions from the entire Canadian workforce. The latest actuarial is here.

Perhaps there really are ticking time bombs not accounted for, but I'd want to see clear stories that outlined them, before worrying about this rather than healthcare costs or nursing home/care availability problems.


----------



## Eclectic12 (Oct 20, 2010)

RUSH2112 said:


> When I went to my investing website, there was some appreciated basic information along with how I should make use of all these investment ideas.
> 
> I have no problem with Jim Flaherty, but herding young people into the stock market is a good way to deplete their savings, not increase it.


Maybe the information was too basic?

LOL ... I would have loved it if the gov't/financial institutions had "herded" me decades ago to be able to have a savings account, GICs, bonds, stock etc. tax free. What a terrible thing to do!


BTW ... you did read the 2013 BMO survey that found that cash (held in 57% of TFSAs) and GICs (held in 24% of TFSAs) formed the bulk of the investment types in TFSAs, right? That is despite about five years of ads/articles to highlight that stocks can be held in a TFSA.

The "herding" does not sound like it has been all that effective.


Cheers


*PS*

I am pretty sure that adding the TFSA tax free withdrawals to what after-tax dollars I had to pay down the mortgage early then using the increased cash flow to re-stock the TFSA helped. Avoiding paying interest helps one save, does it not?

If you prefer to avoid the TFSA and stick to a taxable account or an RRSP ... that is your choice. From my experience, you are likely skipping a nice benefit.


----------



## RUSH2112 (Mar 25, 2012)

Eclectic12 said:


> Maybe the information was too basic?
> 
> LOL ... I would have loved it if the gov't/financial institutions had "herded" me decades ago to be able to have a savings account, GICs, bonds, stock etc. tax free. What a terrible thing to do!
> 
> ...


I don't read surveys because a large percentage of people lie.

Makes for good propaganda.


----------



## Eclectic12 (Oct 20, 2010)

RUSH2112 said:


> I don't read surveys because a large percentage of people lie.
> Makes for good propaganda.


Interesting ... most of the people around me, especially the younger folks are saying "TFSA who?" or "Why bother? Interest rates are so low I can't buy an extra beer at the bar with the tax I would save on the pitiful interest".

Add in all the TFSA postings here on CMF or other financial boards on the same line and IMO, the survey numbers look accurate as opposed to propaganda.


IAC ... avoid it at your leisure or use it. Call it "baby sitting", "herding" or "propaganda" but that won't change the potential benefits or losses from using it, using it inappropriately or whatever else.

Me, I'm going forward with it and have already benefited.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

tygrus said:


> TFSA is the first step in the demise of CCP/OAS. Boomers will cripple that program. Next generation will be 100% responsible for their retirement planning.


Interesting ... this sounds a lot like the advice "do not contribute to the RRSP as the gov't will cancel it any time now" that I have heard for decades.

The gov't has already made changes so what makes you think the won't tinker as needed, at least for the CPP part.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

RUSH2112 said:


> It's not a gem to a young couple, if they were talked into a portfolio full of oil stocks or given a list of stocks in which a few tanked.


TFSA, RRSP or taxable account ... letting oneself get talked into buying swamp land in Florida or the Brooklyn Bridge because it "is a sure thing" is a bad choice period.
A bad investment is a bad investment.




RUSH2112 said:


> I will still meet with an certified accountant to better understand what this actually is about.


What are you looking to get for your $$$ from the accountant that is not already available from CRA's web site or the people on CMF who have experience?

Or are you paying the accountant to design a nice safe portfolio for you?


Cheers


----------



## bgc_fan (Apr 5, 2009)

Eclectic12 said:


> TFSA, RRSP or taxable account ... letting oneself get talked into buying swamp land in Florida or the Brooklyn Bridge because it "is a sure thing" is a bad choice period.
> A bad investment is a bad investment.


No kidding, I remember a few years after TFSA was implemented, there were a lot of message board comments about what a scam TFSAs were because people would buy stocks which tanked and they couldn't claim the capital losses.

As a result, they stay away from TFSAs, without realizing that it wasn't because of the TFSAs that they lost money, but because of their choice of stocks.


----------



## Eclectic12 (Oct 20, 2010)

^^^^

Interesting ... most of the posts in 2009 and 2010 that I recall that were anti-TFSA were because the interest rate was crap. A lot of people seem to have associated the "savings" part of the TFSA name as "only GICs or savings accounts are allowed". Understanding that just like the RRSP - a TFSA is a container for whatever one contracts with the supplier for was a revelation to them.

Contract for only GICs and savings means that is all that account allows. Setup a second account or start with an account that allows a broader range of investments means a broad range of investments are allowed.

This is similar to someone complaining that the only interest bank accounts pay is the paltry interest paid on chequing accounts. As long as one sticks to chequing accounts, it is true but does not change the fact that savings accounts are also available at higher interest rates or GICs.


The only complaint that I can recall that seemed to be more broadly complained about was the part about withdrawals can only be put back next year, without having surplus TFSA contribution room to accommodate the second contribution. 

For example, having $5K contribution room in Jan 2009, contributing $2K then withdrawing and re-contributing in 2009 is only okay because when the re-contribution of $2K happened, there was $3K contribution room still available. The $2K withdrawal does not become contribution room until 2010. Doing the same thing with $5K means a $5K over-contribution, triggering the 1% per month penalty.


Anyway ... it is important to have one's plan/portfolio setup to take into account the attributes of a registered account "being herded into oil stocks" at a bad time can happen to anyone at any time. Only educating oneself to protect one's $$$ is going to help with this issue.


Cheers


----------



## RUSH2112 (Mar 25, 2012)

bgc_fan said:


> No kidding, I remember a few years after TFSA was implemented, there were a lot of message board comments about what a scam TFSAs were because people would buy stocks which tanked and they couldn't claim the capital losses.
> 
> As a result, they stay away from TFSAs, without realizing that it wasn't because of the TFSAs that they lost money, but because of their choice of stocks.


These stocks would have ended up as losers anyway, regardless of which account they put them in.

So better off they had the ability to claim a loss.

Notice the banks always make a profit, owning the casino and politicians has it's perks.


----------



## OhGreatGuru (May 24, 2009)

So much misinformed comment and political opinion in reaction to such a simple subject. Who'd a thunk it?

I'm still trying to get my head around an OP who felt qualified to manage a direct investing account, but doesn't understand TFSA's, which have been around since 2009.


----------



## Eclectic12 (Oct 20, 2010)

RUSH2112 said:


> These stocks would have ended up as losers anyway, regardless of which account they put them in.
> So better off they had the ability to claim a loss.


LOL ... if our hypothetical couple are not trying to protect themselves through knowledge and are picking such poor advisors, what makes you think they will have an gains to use the losses against. 

They sound more like my aunt who wanted an answer from someone who worked in the industry then promptly rejected the answer because "dollars paid means the same thing was bought". Sure, $$$ paid for a Maserati gets one the same mileage as a Fit!




RUSH2112 said:


> Notice the banks always make a profit, owning the casino and politicians has it's perks.


 ... which would be why one needs to educate oneself but again - the more critical factor is learning enough to protect onself or finding a more trustworthy money manager. Account type is for after one understands the investment.


Cheers


----------



## atrp2biz (Sep 22, 2010)

Did jrsaballa open another account?


----------



## RUSH2112 (Mar 25, 2012)

OhGreatGuru said:


> So much misinformed comment and political opinion in reaction to such a simple subject. Who'd a thunk it?
> 
> I'm still trying to get my head around an OP who felt qualified to manage a direct investing account, but doesn't understand TFSA's, which have been around since 2009.


I am better off looking after my own money than some well dressed punk, just out of university, out to sell me a basket of funds in which they stand to lose nothing.

As for the TFSA, looking more an election ploy sponsored by the big banks.


----------



## bgc_fan (Apr 5, 2009)

Eclectic12 said:


> ^^^^
> 
> Interesting ... most of the posts in 2009 and 2010 that I recall that were anti-TFSA were because the interest rate was crap. A lot of people seem to have associated the "savings" part of the TFSA name as "only GICs or savings accounts are allowed". Understanding that just like the RRSP - a TFSA is a container for whatever one contracts with the supplier for was a revelation to them.
> 
> ...


Those were the two other main complaints which boiled down to misunderstanding the concept of TFSA: 1) thinking that only bank savings accounts were the only eligible use, and 2) thinking that you can withdraw and deposit as much as you wanted as long as the TOTAL TFSA account was less than the limit. I guess the problem is that TFSA should have been named TFIA (I for Investment).



RUSH2112 said:


> These stocks would have ended up as losers anyway, regardless of which account they put them in.
> 
> So better off they had the ability to claim a loss.
> 
> Notice the banks always make a profit, owning the casino and politicians has it's perks.


Funny, I didn't think people buy stocks because they think they're going to be losers. Unless you are suggesting all stocks go down, in which case why in the world do you plan on opening a TFSA investment account to purchase (I assume) stocks)?

IIRC there may have been some posters on CMF who actually said they wanted to use their TFSA as a "gambling" account and trade penny stocks to try to shoot for the moon. To each their own I guess.


----------



## indexxx (Oct 31, 2011)

Davis said:


> humble - this is the comment that i was responding to. TFSAs don't take the burden off government funds. in fact, as your example points out, it will likely increase the burden on OAS and GIS if higher income people invest in TFSAs instead of taxable investments and therefore don't have OAS clawed back, and lower income people invest in TFSAs instead of RRSPs and don't lose their GIS. To me, preserving entitlement to government benefits is the flaw in the TFSA structure. I don't have an issue with the tax treatment, since is is roughly equivalent to RRSP treatment (just in a different order).


My apologies Davis- of course you are correct. I was not being clear in my thinking nor wording- my actual thought in writing the post was that TFSA's help mitigate our personal reliance on government assistance in retirement.


----------



## Eclectic12 (Oct 20, 2010)

OhGreatGuru said:


> ... I'm still trying to get my head around an OP who felt qualified to manage a direct investing account, but doesn't understand TFSA's, which have been around since 2009.


It is interesting ... the market knows how to value things efficiently but there seems to be a lot of variation in the investors that make up part of the market.




RUSH2112 said:


> I am better off looking after my own money than some well dressed punk, just out of university, out to sell me a basket of funds in which they stand to lose nothing.


Then why are you worried about a basket of funds being pushed on you?
The answer seems to be to open a self-directed TFSA that you control.




RUSH2112 said:


> As for the TFSA, looking more an election ploy sponsored by the big banks.


A seven year old one that in this time frame, few things have changed ... the potential maximum penalty and the annual allotment of contribution room being examples.
If the TFSA is so bothersome, by all means ... skip it.

At the end of the day, those that choose to trust/follow bad advise (example my aunt) are going to do so, regardless of input suggesting anything else. AFAICT, one needs to move on after the input is provided as typically a closed mind means further input is a waste of one's time.




bgc_fan said:


> ... I guess the problem is that TFSA should have been named TFIA (I for Investment).


It would be interesting to run a study to find out how much or little it would help. I still can't wrap my head around the Mar 2009 web site saying withdrawals would become contribution room the following year or people who understood the RRSP contribution limit rules all of a sudden dreaming up new ideas for the TFSA that were not in the relatively simple TFSA rules.

The big time delay for me was to keep re-reading the rules as I kept thinking "I must be missing something, this is too simple".


Cheers


----------



## My Own Advisor (Sep 24, 2012)

Why it was started?

I wasn't in the room but I suspect these two reasons, in this order:

1. A way for the financial industry to make more money and pay more corporate taxes, via 
2. A way for every adult Canadian to save more after-tax money.

Focus on #2 😊


----------



## humble_pie (Jun 7, 2009)

atrp2biz said:


> Did jrsaballa open another account?



ubiquitous, aren't they


----------



## OnlyMyOpinion (Sep 1, 2013)

RUSH2112 said:


> As for the TFSA, looking more an election ploy sponsored by the big banks.


Wow, here's my recommendation: RUSH back under the rock you have been living under and have a happy and prosperous life under it. :stupid:


----------



## bgc_fan (Apr 5, 2009)

Eclectic12 said:


> It would be interesting to run a study to find out how much or little it would help. I still can't wrap my head around the Mar 2009 web site saying withdrawals would become contribution room the following year or people who understood the RRSP contribution limit rules all of a sudden dreaming up new ideas for the TFSA that were not in the relatively simple TFSA rules.
> 
> The big time delay for me was to keep re-reading the rules as I kept thinking "I must be missing something, this is too simple".


Most people seemed fixated on the Savings component of the word and seemed to think that it was a big bank conspiracy to charge account fees while providing very little interest. OTOH I haven't paid a TFSA related fee since the inception of the program. But then some people just believe what they want regardless of the evidence in front of them.

Perhaps some people just over-complicate their thinking. OTOH there are people who seem to think they found some loophole by withdrawing funds one year and suddenly have increased their contribution limit for the next year without realizing that it is essentially a zero-sum transaction.


----------



## Eclectic12 (Oct 20, 2010)

bgc_fan said:


> Most people seemed fixated on the Savings component of the word and seemed to think that it was a big bank conspiracy to charge account fees while providing very little interest.


That is an odd combination ... none of the savings style TFSAs that I can recall had a fee for the account or withdrawl. 

The main conspiracy comments I can recall were more for the gov't hoodwinking people to put $$$ in where in the future, either OAS and/or CPP would be canceled for those using the TFSA or a variant of the gov't will cancel the TFSA in a few years so avoid it.


This is the first conspiracy theory I've seen that has the banks behind the TFSA. (I guess the insurance companies missed this money maker!)


I was not spending a lot of time looking beyond CMF and any web articles that came to my attention so what I saw was by no means everything out there. For example, I did not check any conspiracy web sites.




bgc_fan said:


> OTOH I haven't paid a TFSA related fee since the inception of the program. But then some people just believe what they want regardless of the evidence in front of them.


Me neither ... the Self Directed one had a "the second plus withdrawal has a $25 fee" but that has since been dropped. Pre-planning for a Dec withdrawal meant I never paid the fee. The main fee left is for transferring to another institution but that is easy to avoid using a Dec withdraw from TFSA #1 and Jan following year deposit to TFSA #2.




bgc_fan said:


> Perhaps some people just over-complicate their thinking.


It seems like it ... as I say, some of those posting wild theories about the contribution limit and/or that the value in the account matters seem to have mastered the RRSP rules so why the RRSP rules would not be the basis for building one's knowledge for the TFSA differences puzzles me.




bgc_fan said:


> OTOH there are people who seem to think they found some loophole by withdrawing funds one year and suddenly have increased their contribution limit for the next year without realizing that it is essentially a zero-sum transaction.


That one I can at least understand the source ... "look at year X, year X-1 was $5.5K but year X is $15K ... whoo hooo". The part I don't understand is that when it is pointed out that year X-1's TFSA value had to drop by $9.5K so putting it back has done nothing - some prefer to cling to their notion.


Cheers


----------



## Koogie (Dec 15, 2014)

I love the TFSA. Any person who has actually taken the time to read about it and understand it would. And if it is a "scam" then the same scam is being run by the governments of the UK, US, etc.. on their citizens as well as they all have the same type of tax advantaged accounts.

However, it is also naive to assume that the rules surrounding the TFSA can never be changed (cough..income trusts..cough) Will withdrawals some day count as income and be used to measure against eligibility for government programs ? Depends how tax hungry future governments get. And how entitled future generations feel.

In the meantime, much like the sky falling, there is no planning for that eventuality. Live it up. Fund your TFSAs. A dollar saved today is always worth it.


----------



## Eclectic12 (Oct 20, 2010)

^^^

The nice thing is that "scam" can be used today where any future changes affect the date the changes come into effect and going forward.
The part of the alleged scam where a crap basket is being pushed already has a solution today in the many self-directed TFSAs available today.


While the rules can change ... at the same time, the RRSP rules that I can recall changing are the over-contribution allowance being cut down to $2K from a higher level and the foreign content limit being dropped. These changes seem poor reasons for those I know who have avoided using an RRSP because "the rules could change".


As you say ... A dollar saved today is always worth it. 


Cheers


----------



## bgc_fan (Apr 5, 2009)

Eclectic12 said:


> The main conspiracy comments I can recall were more for the gov't hoodwinking people to put $$$ in where in the future, either OAS and/or CPP would be canceled for those using the TFSA or a variant of the gov't will cancel the TFSA in a few years so avoid it.
> 
> I was not spending a lot of time looking beyond CMF and any web articles that came to my attention so what I saw was by no means everything out there. For example, I did not check any conspiracy web sites.


I didn't really mean conspiracy at the level of 9/11 theorists, more that there was a distrust of the government and the fact that banks make so much profit.



Eclectic12 said:


> It seems like it ... as I say, some of those posting wild theories about the contribution limit and/or that the value in the account matters seem to have mastered the RRSP rules so why the RRSP rules would not be the basis for building one's knowledge for the TFSA differences puzzles me.


Well, not necessarily. There are some who don't really understand the RRSP rules either, but participate, i.e. the fact that it has to be collapsed by 71 doesn't really occur to many people.



Eclectic12 said:


> That one I can at least understand the source ... "look at year X, year X-1 was $5.5K but year X is $15K ... whoo hooo". The part I don't understand is that when it is pointed out that year X-1's TFSA value had to drop by $9.5K so putting it back has done nothing - some prefer to cling to their notion.


You see the same thing with politics. You can point out all the facts you want, but they will just harden their resolve and stick with their mindset: right or wrong.


----------



## Willwemakeit (Feb 7, 2016)

YMMV, but we are like Koogie, totally love, love, love the TFSA and set up, sad they reduced it from Harper's increase last year. We for sure intend to max ours out any way we can, including moving funds, whilst still not being naive enough not to think for one minute that goal posts will be moved later on by the powers that be! 

In the interim, it sure feels good that every dime we make over and above what we put in is tax free income = EUREKA. Whilst we would love the results of the folks detailed in Moneysense that turned their TFSA's into a quarter million and half million and so on within the first 5 or 6 years by buying lower grade more speculative stocks than we tend to - we are not grumbling about the 4000 SLW shares we bought back around 21st January at $14.58, and sold out for what to us was a considerable tax free profit yesterday, as we have done with many other stocks/etfs/indexes the first year they started TFSA's. Or at the other end the 27 cents per share we made today quickly in another one of our accounts owning that same ticker for just a few hours. No advisories needed about buy and hold please, or cash derivatives, we do that as well to some degree but have generous trailing stop losses behind to hopefully lock in some profits and avoid hitting another 2008/9 disaster until it turns back around.

Like I said YMMV, but for us the TFSAs were a wonderful opportunity for our whole family. Heck, even our 25 year old University student daughter will finish debt free after almost 6 years in December and have tens of thousands of dollars she's saved in her TFSA she got at 18 years of age, and she's still got the past two years room to contribute still. She's done this through working since she was 14 years of age at school part time; buying a house in 2011 near Uni and renting out the rooms to other students, paying down her mortgage exponentially, as well doing a 2hr each way turn around every week to come back and stay with us whilst she works her part time job. Nothing comes easy to our family, we have to work our tails off for it all, and to be frank reading some of the other threads lately on folks commenting about taxation and university changes had our eyes rolling, but the TFSA's for us all were true blessings.

With the highly inflated taxes we pay in one form or another with almost everything we touch in our day to day lives, it sure feels great to get those returns tax free. Well ............ at least for now!!!

"If" it stays in it's current form and the current proposal on increased contributions or better, it will sure feel fantastic if we are spared, after working our butts off and paying considerable taxes over many years to be able to enjoy a good increased additional income to support our OAS and GIS payments.

There's been much speculation for many many years and generations gone by long before our time and those folks have long passed, that the old age pension or social security or whatever you chose to call it whether in Canada, England or many other countries wouldn't be around - Yet it still is.

All we can deal with is the here and now and avail ourselves to make the best informed benefit for ourselves with whatever tools offered we can today.

WWMI.

PS: PeterK = really enjoyed reading your logical responses on several threads FWIW 

PPS: Only fee I've been notified of by TD lately is $75 if we wish to move our TFSA to another institution effective from 1st March I think and we have till 30th March to do so without that charge being effected.


----------



## Joe Black (Aug 3, 2015)

My advice to the OP is to stop trying to figure out how the banks (and/or government) benefits and just figure out how you benefit. What's so bad about a win-win transaction, as long as you are on one side of it?


----------



## Eclectic12 (Oct 20, 2010)

bgc_fan said:


> I didn't really mean conspiracy at the level of 9/11 theorists, more that there was a distrust of the government and the fact that banks make so much profit.


As did I but there is a lot of room for different views depending on where the comments are posted.





bgc_fan said:


> Well, not necessarily. There are some who don't really understand the RRSP rules either, but participate, i.e. the fact that it has to be collapsed by 71 doesn't really occur to many people.


True ... but that does not seem to stop understanding the "earn RRSP contribution room, contributions reduce that contribution room" mechanics, which seem to be better understood than the TFSA. The idea that TFSA contributions use up available TFSA contribution room seems to be a foreign concept where my comment outlining that RRSP contribution limits operate in a similar fashion seemed to get over the misunderstanding.




bgc_fan said:


> You can point out all the facts you want, but they will just harden their resolve and stick with their mindset: right or wrong.


Or as the saying goes ... one can lead a horse to water but can't make them drink (or similar).


Cheers


----------



## Davis (Nov 11, 2014)

Another way of looking at it is that if people like this don't take advantage of TFSAs or RRSPs, they will pay more taxes, and that will benefit the rest of us. So it's not a bad result.


----------



## bgc_fan (Apr 5, 2009)

Eclectic12 said:


> True ... but that does not seem to stop understanding the "earn RRSP contribution room, contributions reduce that contribution room" mechanics, which seem to be better understood than the TFSA. The idea that TFSA contributions use up available TFSA contribution room seems to be a foreign concept where my comment outlining that RRSP contribution limits operate in a similar fashion seemed to get over the misunderstanding.


The wrinkle was the whole, re-contribution after withdraw that was messing people up. RRSPs don't have that feature.



Eclectic12 said:


> Or as the saying goes ... one can lead a horse to water but can't make them drink (or similar).


Been there and done that. It is literally true.


----------



## Eclectic12 (Oct 20, 2010)

bgc_fan said:


> The wrinkle was the whole, re-contribution after withdraw that was messing people up. RRSPs don't have that feature.


If RRSP's did ... my impression is that it would not have helped. 

Contributions reducing available room is pretty standard to RRSPs yet the same idea for the TFSA's contribution room seemed foreign to posters. Not many have posted "what's my lifetime RRSP contribution room" versus "what's my lifetime TFSA contribution room", irregardless of what contributions have been made (never mind withdrawals becoming contribution room the following year).




bgc_fan said:


> Been there and done that. It is literally true.


 .... but did you get the same T-shirt? 


Cheers


----------



## bgc_fan (Apr 5, 2009)

Eclectic12 said:


> Contributions reducing available room is pretty standard to RRSPs yet the same idea for the TFSA's contribution room seemed foreign to posters. Not many have posted "what's my lifetime RRSP contribution room" versus "what's my lifetime TFSA contribution room", irregardless of what contributions have been made (never mind withdrawals becoming contribution room the following year).


I would say that the re-contributions is the big part of misunderstanding. As an example, look at the RRSP Home Buyer plan. You can take up to $25K from the RRSP and pay it back over 20 years. What I see is that some people think that somehow you've gamed the system so that you are actually contributing more into the RRSP than you normally could. But don't realize the implication of lack of compound growth.



Eclectic12 said:


> .... but did you get the same T-shirt?


Just photos. T-shirt wasn't worth the money.


----------



## bgc_fan (Apr 5, 2009)

bgc_fan said:


> I would say that the re-contributions is the big part of misunderstanding. As an example, look at the RRSP Home Buyer plan. You can take up to $25K from the RRSP and pay it back over 20 years. What I see is that some people think that somehow you've gamed the system so that you are actually contributing more into the RRSP than you normally could. But don't realize the implication of lack of compound growth.


Sorry, I got things mixed up. I meant holding your mortgage in your RRSP and not the HBP. People see the interest that you are paying into the RRSP as gaming the system and increasing RRSP contribution even though you don't get a tax deduction.


----------

