By Jonathan Chevreau
Following last week’s federal budget, the Hub ran a piece making the case for immediately topping up annual contributions for Tax-free Savings Accounts (TFSA) from the existing maximum $5,500 to the proposed $10,000.
As we later reported in our weekly media roundup on Saturday, the Canada Revenue Agency and most major banks had by the end of the week confirmed it should be okay to make those contributions now, without having to wait for formal legislation later in the summer.
At the end of the earlier piece, I asked readers for comments. We reproduce them below, using initials where we’ve not gotten permission to use actual names.
We’ll start with Brad A:
Really appreciate your articles on TFSAs. I only make 25K a year & love TFSAs. This whole talk about future lost revenue makes me cringe because there are many other loopholes/tax shelters that also create future lost revenue … principal residence real estate being just one. Don’t get me started on subsidies for medical or business expenses etc. etc. Having said this though, I’ve had enough trouble with Revenue Canada, that any time I get a brown envelope in the mail, my heart starts to pound. So, for now, I’ll probably play the waiting game on the extra $4,500. I don’t normally vote conservative but this election it’s going to be tempting because my TFSAs & RRSPs are about the only thing that will keep me out of poverty when I’m older.
I will be making the additional $4,500 transfer in-kind for both myself and my wife. We are in our 50s, semi retired with less than $60K/year in passive income. TFSAs are not just for the rich.
We’ve always had modest income (no pension) but have always maxed our RRSPs. Kids are gone. We recently sold the family home. The non-sheltered invested proceeds pay for all of our housing expenses in our apartment condo. (95% mort, condo fee, property tax). So naturally the more we can move to a tax sheltered account the better. (our net worth is >$1M)
I don’t know who advises Trudeau but he should get a new one. I would guess that a lot of Baby Boomers will be “Down Sizing” and have non-sheltered investments generating dividends.
Let’s not forget dividends are after-tax profits. Then taxed again in my hands and taxed again when I spend them. Pretty nice deal, like a toll gate on money.
I keep hearing TFSAs are only benefitting the rich. Someone put a number to rich. Most of my friends and relatives, including our children, are contributing to TFSAs. Why can’t we, the people, be smart about our money? The government sure isn’t.
From John Davies (with permission):
Would add it if I had it. But, being retired, living frugally and owning my home, I put $1.000+ in my TFSA each month ($15K last year). In a year or so I will be at a point where I will have reached my maximum limit. So, for me, that extra ‘space’ will be very important in the future. On a side note, whenever I talk up fellow seniors to get a TFSA, they almost always say the low interest rate doesn’t interest them. They don’t get that the account is just a jumping off place for purchasing investment in a tax free environment. A future article for seniors?
I increased on Wednesday (2015.4.22) to the max ($4,500). I am self employed & need all that is allowed for a possible future retirement.
This in response to your column make it to TFSA now!The last two years I have been holding on to about $100K for a better investment opportunity somewhere and avoiding the TFSA, but it’s enough … I am going to make it right now :). I am not so savvy an investor doing my TFSA myself with TD-e account … and yes i read you lot!
From someone who didn’t want to be identified in any way:
I transferred the additional $4,500 contribution to my TFSA on Friday from a non-registered account in my CIBC Investor Edge account. The process was no problem to do and took just a few minutes to complete.
I also redeemed $5,000 ( 10% withholding tax ) from my RRSP account so I can contribute to my wife’s TFSA. This was also done on Friday to be completed on Monday through my CIBC Wood Gundy account.
I am currently retired while my wife is still working.
I currently help with my three children’s TFSAs. I wanted to help them establish strong saving disciplines in their early working careers, so four years ago for Christmas I started a five-year program with them. I match their monthly contribution up to $2,500 per year, as well since they are busy and inexperienced I manage their investments and guarantee them at the end of five years they will have a minimum of $25,000 in their TFSAs. ( $12,500 their contribution and $12,500 my matching contribution). TFSAs are a great program; one of my children is going to use the TFSA funds to help with a down payment on a condo/house. Their knowledge/interest in investing has dramatically improved over the years.
The above reader also sent us a copy of the actual Christmas letter given to the children in 2011. We will run it in its entirety on the Hub on Sunday.
Hi. I have money sitting in a savings account that’s paying only 1%, so I will probably transfer my money over to my TFSA, which pays 2.3%. Thanks.
From Lou Kaiser (with permission):
Both my wife and I are recently retired and will definitely be taking advantage of this option of topping up the TFSA but we’re going to wait until it becomes formalized by the government, most likely later this year. I have been reducing my RRSP holdings as of late, to move some of the investments into my non-registered plan to reduce the hit when I have to start taking it out of the RRIF at age 71. I’m doing this as the RRSP plan is larger than the non-registered plan. This will allow me to move this capital into the TFSA and start earning tax free savings plus reduce the RRSP before I reach 71. I do not have a company pension plan and have had to save all my life to retire at age 65. This along with the reduction in the amount I have to take out, starting at 71 , will help to keep the money coming in until the end, hopefully.