Quote:
Originally Posted by Slava
Ya, I do agree that for low income seniors there should be a program; there is also the Guaranteed Income Supplement (GIS) for low income seniors. I suppose if they dropped the clawback to start at about $30k and it was totally clawed back at about $65k I could see that working.
The TFSA is a great account and I do think that it will be a large factor for financial planning going forward. Even this year the limit is at $40k for a couple, plus growth. Thats a significant sum of money for most people and soon enough it will be enough to build a reasonable portfolio with. A few years ago there were quite a few people who used the account for either really low risk investments (because it is called a savings account and many didn't realize it could be invested), or high risk or speculative investments (because it was only five grand). Now I see more planning and thought given to these investments though and as the amounts rise I think you will see more of that.
Overall there are a few major benefits to the TFSA. You don't pay taxes on gains, or on withdrawals. That is a huge benefit over an RRSP; while the RRSP gives you a tax break when you invest, it really defers that tax until you withdraw it. The other major benefit is that you can withdraw funds from the TFSA and not lose the room. So if you take $5000 out for something you can reinvest that again the next calendar year. In an RRSP (unless its a specific program) you don't have that flexibility and once you withdraw that contribution room is gone.
Feel free to ask any questions you have or send me a PM if you prefer.
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You have explained it very well. Frankly, I ignored the TFSA the first couple of years it was around. The name is misleading. I am building mine into what will become my main investment account. The fact that I will never have to declare a capital gain (and therefore not have to carefully record all my activity) in this account makes me get excited about investing again. You can keep on contributing to it as long as you live, as there is no cut off age like with the RRSP. I have read a snivelling cynical negative take on the TFSA (from who else, the Toronto Star) saying that its a gold mine for the investment community and a further erosion of the tax base. I say that its a reward for people who are willing to sacrifice some of their disposable after tax income early in their careers, and I believe it will make TFSA investors less of a burden on the taxpayer when they retire.