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slidebite posted:I know we have spoken about it here before, and while people should man up and educate themselves, financial institutions have really dropped the ball on the TFSA. I don't know that it's "dropping the ball" as much as it is the banks not making very much money on setting fools up with TFSAs when they could be raking them with other products.
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Nov 7, 2013 22:36
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I do wonder why it was decided to call it an "account" rather than a "plan" like with the RRSP. Savings account definitely has that connotation of dumping some money in there to buy a couch six months down the line and not something that's supposed to be growing for decades.
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Nov 7, 2013 22:38
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It's horseshit to debate the semantics and suggestibility of "account" or "savings" or "plan" or whatever. People need to get their act together and learn this stuff. Most won't, but that's on them. There is an absolute plethora of information out there, all free, in all manner of sources. There's no excuse for anyone who's a well-adjusted, literate, adult. No one was born with the knowledge of a TFSA's taxation rules.
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Nov 7, 2013 22:54
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Lexicon posted:It's horseshit to debate the semantics and suggestibility of "account" or "savings" or "plan" or whatever. Until this thread I had no idea you could use a TFSA as anything other than a savings account. I have had my account since they first came out. No one in the bank ever mentioned that it could be used for mutual funds. There is almost no info floating around saying that they can be used as anything other then a savings account. So pinning it all on the average person seems a bit misplaced.
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Nov 7, 2013 22:58
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Lexicon posted:It's horseshit to debate the semantics and suggestibility of "account" or "savings" or "plan" or whatever. Don't worry, I'm not saying it's all the fault of the name, I'm just curious as to why they named it that way considering RRSPs are hugely familiar to Canadians and would be the obvious precedent to use in naming something.
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Nov 7, 2013 23:02
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Demon_Corsair posted:Until this thread I had no idea you could use a TFSA as anything other than a savings account. I have had my account since they first came out. No one in the bank ever mentioned that it could be used for mutual funds. There is almost no info floating around saying that they can be used as anything other then a savings account. Huh? There is a tonne of information. Everywhere. You never watch the news? Read a newspaper? Pay attention to any business/finance news? Are you on twitter? Facebook? Ever visit CRA's website? I don't know how anyone can say that there is no info floating around about using the TFSA as anything other than a savings account. Blows my mind.
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Nov 7, 2013 23:03
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Demon_Corsair posted:Until this thread I had no idea you could use a TFSA as anything other than a savings account. I have had my account since they first came out. No one in the bank ever mentioned that it could be used for mutual funds. There is almost no info floating around saying that they can be used as anything other then a savings account. Well, you know now, don't you! That's a start  As for 'pinning it on the average person' - no one, and I mean no one gives a poo poo about your financial future. Not your employer, not the government, certainly not the banks, etc. So that only leaves you. People seem to have no trouble quoting the minutiae of offside rules, or world series batting averages, or whatever the gently caress other inane thing. This stuff is rather more important, and it's really not that hard. I mean, Jesus, you can't crack a Globe and Mail or regional daily any day in January through February 28th without financial columnists prattling on and on about TFSA and RRSP decisions, etc.
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Nov 7, 2013 23:04
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Lexicon posted:Well, you know now, don't you! That's a start I do. And I opened a new TFSA for mutual funds and closed my TFSA savings account. Now I just need TD to process my e-Series conversion form. Kal Torak posted:Huh? There is a tonne of information. Everywhere. No. No, other then the metro crossword, no, yes but I clearly don't follow anyone talking finance, ditto for facebook, and I only hit the cra website to submit my taxes. I should do a poll of my friends and see if I'm the only idiot that didn't know this.
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Nov 7, 2013 23:22
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Demon_Corsair posted:No. No, other then the metro crossword, no, yes but I clearly don't follow anyone talking finance, ditto for facebook, and I only hit the cra website to submit my taxes. Start using twitter if you don't already and follow some finance people: @CdnCouchPotato, @preetbanerjee, @CanadianFinance to start with. (Everyone should use Twitter. Not to post necessarily, but to consume… no matter who you are and what your interests are)
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Nov 7, 2013 23:30
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slidebite posted:I know we have spoken about it here before, and while people should man up and educate themselves, financial institutions have really dropped the ball on the TFSA. Most people simply have zero clue as to what it really is and are mislead by the name "savings account" and 90%+ of the financial institutions really aren't helping. Now neither my mom nor my brother have a TFSA because they're worried of doing it wrong again.
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Nov 7, 2013 23:39
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HookShot posted:Absolutely. And sometimes the info the banks give is completely wrong. My brother had to pay $50 in fees because my mom took him to TD Bank when he turned 18 and they told him how much to put in his, then CRA sent a letter saying that was completely wrong and he had to pay the fee. What did he do wrong? The CRA has also been very liberal about waiving any penalties for over-contributing the last four years. He probably could have gotten the penalty waived and then spent 5 mins reading about the TFSA rules on the CRA website. It's not scary and it's too bad people don't take the time to educate themselves.
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Nov 7, 2013 23:44
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I feel like I have too many beginner questions here. I have a TFSA setup through my bank(Scotia) and I'm trying to transfer shares I have in a company that are currently with Computershare, is the easiest way to do this request a share certificate then send that to Scotia to deposit? Or fill out a securities transfer request?
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Nov 8, 2013 01:00
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Kal Torak posted:What did he do wrong? The CRA has also been very liberal about waiving any penalties for over-contributing the last four years. He probably could have gotten the penalty waived and then spent 5 mins reading about the TFSA rules on the CRA website. It's not scary and it's too bad people don't take the time to educate themselves. I'm not 100% sure, I wasn't in the country at the time. I think it had to do with my mom deposited $5,500 in his account, then he took out $2,500 or so for tuition, then wanted to replace it that same year and TD Bank told him that was fine, and he got nailed with the fee because of it. I don't know why they didn't waive the fee, he definitely had to pay it. I completely agree that people should be educating themselves, but my brother was 18 and my mom is of the generation that never thinks to look things up on the internet, and just took the word of the bank, thinking they would know what the hell they were doing. I'm just saying I can understand why people who have gotten burned from things like bad advice from their banks would be hesitant to use it.
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Nov 8, 2013 02:03
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I just want to make sure I got this right. My company will match my investments in my RSP up to 4% of my salary. It's a no brainer that I'll match that but I invest 10% of my earnings. The other 6% should go in a TFSA, right? I'm already in the lowest tax bracket on the provincial and federal level.
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Nov 8, 2013 03:06
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TheOtherContraGuy posted:I just want to make sure I got this right. My company will match my investments in my RSP up to 4% of my salary. It's a no brainer that I'll match that but I invest 10% of my earnings. The other 6% should go in a TFSA, right? I'm already in the lowest tax bracket on the provincial and federal level. A friendly reminder: none of us are financial planners. It's up to you to decide based on what you read here what makes sense. That said, that's what I'd do in your situation. Take the 4% free money, otherwise you're almost certainly better off with a TFSA over an RRSP. In general, a low income individual is poorly served by contributing to an RRSP, especially with higher taxes looming inevitably in our nation's future.
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Nov 8, 2013 03:13
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What's the income level where the rsrp overtakes the TFSA? I used to max out my RSRP and use the TFSA for my emergency fund as a 20-something making 70k/year and living in Quebec. I got the feeling the priorities got switched around now that I make 12k less, but I don't have the numbers to back it up.
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Nov 8, 2013 04:47
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HookShot posted:I'm not 100% sure, I wasn't in the country at the time. I think it had to do with my mom deposited $5,500 in his account, then he took out $2,500 or so for tuition, then wanted to replace it that same year and TD Bank told him that was fine, and he got nailed with the fee because of it. I don't know why they didn't waive the fee, he definitely had to pay it. I'm guessing he didn't ask CRA to waive the penalty. They were being lenient because of all the confusion, but you still had to submit a written request. The thread title is pretty appropriate right now. It's too bad banks are giving bad info. But it's not like people who work in banks are CA's or CFA's. Most of these people can't even manage their own finances, nevermind yours. FrozenVent posted:What's the income level where the rsrp overtakes the TFSA? There is no black and white answer here. It is actually a very grey area where two very competent people can completely disagree on which is better (despite Lexicon's adamant belief in the TFSA). You have to ask yourself all kinds of questions and make some estimates about future tax brackets, future tax rates, income levels in retirement, time value of money, etc. There is no one size fits all when it comes to RRSP vs. TFSA. Try to do both if you can. But that's just my opinion on it.
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Nov 8, 2013 05:09
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FrozenVent posted:What's the income level where the rsrp overtakes the TFSA? I think the answer will be like this: A. Figure out your current tax rate. B. Figure out your required retirement income level tax rate. If there is a pretty large difference between A and B, then the RRSP may be helpful. If not, then it's really not that great. The TFSA is useful in case the difference is not that large, but it's also not very much money so you'll probably have to save something in addition to maxing it out.
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Nov 8, 2013 05:11
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tuyop posted:The TFSA is useful in case the difference is not that large, but it's also not very much money so you'll probably have to save something in addition to maxing it out. You've said this a couple times now and while 5,500 doesn't seem like a lot, it can certainly snowball. I agree it probably can't be your only investment vehicle but after 5 years, you're at 25,500. After 10 years, it will be over 50K. If you're young and married, after 10 years you could effectively have 100K+ growing tax free for the next 30 years not counting future deposits and a possible increase to the limits as Harper has stated is a goal. Eventually they might have to kill this because people will have too much money sheltered from tax. Unless the public continues to not use it. Compound interest is pretty powerful. Tax free compound interest...  Here's a good calculator to mess around with: http://www.retirementadvisor.ca/retadv/apps/tfsa/tfsa_inputs.jsp?toolsSubMenu=investment Kal Torak fucked around with this message at 05:30 on Nov 8, 2013 |
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Nov 8, 2013 05:27
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Sure, it's an important, powerful tool for investing, everyone should max it out, it's great. But even if you want to live on 25k/year in retirement you need like 625k. 20 years of TFSA room is only 110k, after returns of 7% it's worth an incredible 241k, tax-free, but it's still less than half of what a very frugal retiree would need to live on. And if you're saving for early retirement or financial independence, you're probably saving like 60-80% of your net income, which is almost definitely going to require using all of your available tax-sheltered room, the majority of your assets will probably end up in taxable accounts. The taxable accounts are just relatively easy to understand, and if you're in that situation you're probably not as confused about these things.
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Nov 8, 2013 05:46
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The vast majority of people aren't aiming toward a financial independence goal of 40 though. I ain't livin in a yourt, sorry - and I like my career way too much to stop at forty. Plus 240k put of 660k is, well, a sizeable chunk of 660k. A sizeable tax free chunk.
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Nov 8, 2013 05:53
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tuyop posted:Sure, it's an important, powerful tool for investing, everyone should max it out, it's great. Okay fair enough. I don't think we're saying different things. Your right, you need more than just the TFSA for retirement (assuming the current contribution level), but even that 241K has what, 40K extra due to no tax? Depending on where you live I guess. 5,500 doesn't seem like a lot but if in 20 years it means an extra 40K in my pocket, I'm not complaining. And as I'm more than 30 years away from retirement, the difference will be significant.
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Nov 8, 2013 06:02
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/\/\ I think the difference between investments in a TFSA and taxable accounts is just, simply, your tax rate + (your rate of return * your tax rate). So a 7% return in a TFSA, at a 30% tax rate, is a kickass 9.1%. And we're bitching about .5% MERs! Well, sure. And you could start saving when you're 18 and retire at 65, which gives you over 1.9 million dollars at a 7% rate of return. The great part is that, if you're making 70k/year in Alberta, for instance, that amount is 108% greater than what you would have in a taxed account. It also gives you 77.4k to live on for the remaining possible 30 years or so. I just default to FI numbers, so I guess I should be more clear about that. tuyop fucked around with this message at 06:09 on Nov 8, 2013 |
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Nov 8, 2013 06:06
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tuyop posted:/\/\ I think the difference between investments in a TFSA and taxable accounts is just, simply, your tax rate + (your rate of return * your tax rate). So a 7% return in a TFSA, at a 30% tax rate, is a kickass 9.1%. And we're bitching about .5% MERs! It's a lot more sophisticated than that. In a non-sheltered account, taxable gains are taxed at an inclusion rate - essentially you only pay tax (at your marginal rate) on 50% of the gain you have realized. You can also write off your losses against your gains, which you cannot do in a TFSA or RRSP, for example. Finally, qualifying Canadian dividends are taxed at a very low rate (relative to most people's marginal rate) as well. The truth is that even in a non sheltered account, there are all sorts of tax benefits to be had.
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Nov 8, 2013 13:37
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DariusLikewise posted:I feel like I have too many beginner questions here. Compushit err I mean share is a awful company to deal with. The only dealing I have with them is via my wife who has stuff in her maiden name so I am probably biased, but in my experience they go out of their way to make it a nightmare to deal with. My advice would be to call them and speak to them, and get the persons name and ask for them each time going forward in case you need to talk again. We received contradictory information which makes it very difficult to get anything done. quote:The truth is that even in a non sheltered account, there are all sorts of tax benefits to be had. slidebite fucked around with this message at 15:11 on Nov 8, 2013 |
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Nov 8, 2013 15:08
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slidebite posted:Other than deduction for losses, what benefits are you thinking of? Honest question.
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Nov 8, 2013 15:13
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tuyop posted:Sure, it's an important, powerful tool for investing, everyone should max it out, it's great. I'm not saying it's the only thing needed to save for retirement. I'm saying: it's an account for which my primary purpose is retirement savings. That plus non-registered investing also. At the present time, RRSP makes no sense for me to participate in (I am self-employed, and can pay myself exactly what I need to live, without drawing out excess earnings), especially given my firm belief in higher future taxation.
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Nov 8, 2013 15:49
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Saltin posted:It's a lot more sophisticated than that. In a non-sheltered account, taxable gains are taxed at an inclusion rate - essentially you only pay tax (at your marginal rate) on 50% of the gain you have realized. You can also write off your losses against your gains, which you cannot do in a TFSA or RRSP, for example. Finally, qualifying Canadian dividends are taxed at a very low rate (relative to most people's marginal rate) as well. Which is why any calculator you use has to make some assumptions. I just think the argument that the TFSA contribution room is "not a lot" is a little silly. Most people can't save that much anyway and those that can, should. The difference will be significant.
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Nov 8, 2013 16:10
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Kal Torak posted:Which is why any calculator you use has to make some assumptions. Ok fine dude, but the assumption is not "your marginal rate".
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Nov 8, 2013 16:12
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I'm realizing this too, as an Aussie that was initially looking at your TFSAs and thinking.. anyone wanna marry a nice Australian? I'll do the dishes every night and we can laugh at silly Americans together, but I just want access to your sweet, sweet TFSA. But it's just not that much, it needs to be combined with other retirement ideas. Our own superannuation system isn't too far off from it, except rather than being a savings account we heavily legislate you can't touch it until you're 60. 7% p.a. I'm learning is quite conservative, as in you're only using index funds like the S&P 500s which are on the lower end of the mid-risk spectrum (bonds and cash is low risk, property and ETFs are mid risk, individual stocks high risk). If you put sections of your portfolio into higher risk ETFs, that's how you can really get rich, as opposed to just put together a decent retirement. I've been looking even at simple index funds in other countries, not leveraged or inverse but even S&P 500 indexes of say the Swiss exchange has show growth figures that made me swear and check twice. Combined with a MER of .09% (what.. really? poo poo!) and I guess there is investing level one (buy the house and pay it off, continue life as normal  ), investing level 5 (basic solid ETFs and diversification with low risk such as bonds), level say 50 (risker ETFs and not just international funds but actually trading ETFs on other exchanges in other currencies. Even just playing with the currency conversion here required to do this can yield return if timed right), level 500 (stock trading, options or common stock, but individual entities) and then level 5 billion (forex trading).A diversified portfolio can keep major reserves in low risk equities while you more gamble with 'betting money'. You of course don't have to do any of that, but I'm learning without it you won't be retiring early and living a great lifestyle.
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Nov 8, 2013 16:21
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Lexicon posted:Well, you know now, don't you! That's a start I guess the point though is that the term "savings account" has a pretty specific definition that is ingrained in us ever since you are a child, or at least it did with me and I am presuming others. A person could be excused in assuming that when a financial institution advertises a "tax free SAVINGS ACCOUNT" they see the last two words and hence "Oh. Wow. A savings account"  Saltin posted:I literally listed them in the post you are quoting. Preferential tax treatment of both captial gains and dividend income. They are not a function of the "account", as you know, but my point is that non-sheltered investments are not simply taxed at your going marginal rate.
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Nov 8, 2013 16:53
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slidebite posted:A person could be excused in assuming that when a financial institution advertises a "tax free SAVINGS ACCOUNT" they see the last two words and hence "Oh. Wow. A savings account" Believe me, I understand the argument - I just don't think it's even worth mentioning. If you make it a significant ways into adulthood as a Canadian citizen, and think a TFSA is a savings account… well, you hosed up I guess, from a financial literacy/planning point of view. edit: it's a bit like the situation with marginal tax rates. A huge number of people believe that if they work too much overtime, they will be "put into a higher tax bracket" and be financially worse off. We can concoct all sorts of reasons why this might be believed, why "higher tax bracket" is a misleading term and so on - but at the end of the day, if you think this, you failed at comprehension of a basic, financial reality. Lexicon fucked around with this message at 17:14 on Nov 8, 2013 |
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Nov 8, 2013 17:11
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My husband became a permanent resident in April (and has lived in Canada since). Does he have $5500 in contribution room for 2013, or does it start next year, or does he have $3630 as the pro-rated amount of how long he was in Canada?
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Nov 8, 2013 18:04
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HookShot posted:My husband became a permanent resident in April (and has lived in Canada since). Does he have $5500 in contribution room for 2013, or does it start next year, or does he have $3630 as the pro-rated amount of how long he was in Canada? Does he have a valid SIN? There is no pro-rating. If he has a valid SIN, he would have 5,500 of room.
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Nov 8, 2013 18:18
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You can check how much room he has on CRA's website. http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/cntrbtn-eng.html Or call them. I have never heard of it being pro rated, though.
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Nov 8, 2013 18:24
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Ok cool yeah, he has a SIN. When I came back to Canada and was only a resident for like two months all my tax stuff was pro-rated (so my credits were basically all 2/12 of what they normally would be) so I thought maybe TFSAs worked the same way.
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Nov 8, 2013 18:31
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Lexicon posted:Believe me, I understand the argument - I just don't think it's even worth mentioning. If you make it a significant ways into adulthood as a Canadian citizen, and think a TFSA is a savings account… well, you hosed up I guess, from a financial literacy/planning point of view. With only a few exceptions, when I have discussed the TFSA with people I know, have they actually had a decent knowledge of what it was. I am 40 years old and this is talking to people in my age group and older. Generally >30 years old. This includes very intelligent and financially secure people from real blue-collar to the bonafide professions. I think it's that most people do not have a personal interest in investing and banking and would far rather do other things, even if it's costing them them tens, if not hundreds of thousands of dollars. Just earlier this week it happened too. Maybe it's a bit of a fall-back to the time when investing was some sort of a nebulous thing in the pre-WWW when you had to make somewhat of an effort to get educated. I don't know. Now, with the WWW and forums like this and others with readily accessible information, there is really no excuse.. but that baggage is still there. It is sad, it's money being left on the table, but people just don't get it and it's certainly not rare. Going back to the earlier point, would it even make a difference if it wasn't even called a "Savings Account?" I really don't know, but I am pretty confident it's not helping.
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Nov 8, 2013 20:36
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^ All of that is plausible and reasonable, etc, but none of it is really at odds with my contention.
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Nov 8, 2013 20:39
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Right, and I'm certainly not saying or arguing that you are in general wrong. Your point seems to be if you don't know what a TFSA is at this point you're largely financially illiterate. I do not disagree. My point is that using your definition "most" people probably are financially illiterate, even those that shouldn't be and there might be some simple things that might at least help that. Calling it a "savings account" for example isn't helping although your point seems to be that the name is trivial. Once again, this is completely anecdotal, but I feel most people have a rough idea about a RRSP is and realize you can put things like mutual funds, GICs, maybe even equities, etc into it. However, in my experience most of those same people have no clue you can do that with a TFSA. Would calling it something different alleviate that? My guess is it might. e: I guess the crux of my position is the name isn't trivial and could make a difference, even though it shouldn't.
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Nov 8, 2013 20:59
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Fair enough. I'm all for good marketing of things, of which good naming is a key element. But the main issue you identified would largely remain: many people simply can't be bothered learning this stuff and have other stuff they would rather do. Bottom line: everyone needs to eat their financial-knowledge vegetables, or neglect to do so at potentially-considerable-expense
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Nov 8, 2013 21:06
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