That applies to Washington to, of course! Either way, and as the article points out, truly free money from Government is a rare thing, since money is really flowing in the opposite direction in the form of taxes.
Still, there are ways to minimize the tax burden in either country, and you shouldn’t say no to them when they’re on offer.
There’s a popular story told by banks and financial authors to encourage people to start saving for retirement at an early age. It’s called the Parable of the Twins and it goes something like this:
One twin puts aside $3,000 every year into his tax-free savings account starting at age 22, and stops at 32 – never adding another penny to the account. His sister starts saving $3,000 annually at age 32, and continues until 62. Who has the larger nest egg?
You know how this story goes by now. Assuming an annual return of eight per cent, the twin brother wins hands-down. He ends up with $437,320 in his TFSA, compared to his sister’s $339,850, even though he contributed $60,000 less than his sister.
It’s a ubiquitous tale, but one that resonated with me at a young age. I was drawn to the awesome power of compounding – how money grows exponentially over time. Continue Reading…
We at the Hub have always said frugality is the key to saving and ultimately building wealth. But according to the most-emailed New York Times article this week, it’s tough for millionaires to dump the frugal habits that got them there: Millionaires who are frugal when they don’t have to be. Shades of the book, The Millionaire Next Door!
Don’t believe various reports that Canadians are saving too little for retirement, says C.D. Howe senior fellow Malcolm Hamilton in a report issued Thursday. You can get the full 30-page report on PDF by clicking here.
As is typical of Hamilton, now a retired actuary, the report is insightful and entertaining. While there are exceptions, generally speaking, “Canadians are reasonably well prepared for retirement,” he writes.
Right under the report’s Headline (Do Canadians Save Too Little?) the answer is delivered in small Italic type on the title page: “Reports of undersaving by Canadians for retirement are exaggerated. They rely on faulty assumptions, questionable numbers and ignore the diversity of individual retirement goals.”
Among the various reports cited, one is the Ontario Government’s backgrounders that served as its rationale for launching its own Ontario Retirement Pension Plan, more on which below. Continue Reading…
Liberal deputy leader Ralph Goodale (National Post.com)
The Financial Post ran an op-ed written by me today (A10), titled simply How to Max Out your TFSA. We’ve written on this topic before of course, but it specifically addresses an oft-repeated Liberal comment that few middle-class Canadians have “$10,000 lying around” for a TFSA contribution.
On the contrary, I argue, many middle-aged middle-class Canadians have hundreds of thousands of dollars in non-registered or “open” investment accounts, money that is subjected to annual rounds of tax on interest and dividends, and often capital gains, and which would love to find a tax-free home in a Tax Free Savings Account.
Similarly, many seniors already in retirement have large RRSPs or RRIFs that can also be a source of funds for a TFSA, once withdrawals are made and a one-time tax hit is sustained.
In fact, this weekend, I spent time with a 98 year old friend (a woman), who proudly informed me she recently put $10,000 into her TFSA and is saving up from her part-time job to put in another $5,000. Why? She felt she needed a bit of cushion in case some medical problem arises.
As the end of the FP piece notes, there are plenty of other potential sources too, including sale of a principal residence (perhaps in a downsizing situation), severance payments, life insurance proceeds, sale of a business, lottery wins and — this one’s for you, Justin — inheritance.
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