2025 TFSA options | Tax Free Savings Accounts | Discussion forum

Thought 1: Don't proliferate into yet another new TFSA in a new institution. It just spreads the shrapnel everywhere and makes management more difficult.

Thought 2: What is the long term purpose of one's TFSA? Short term (<5 year) needs? Or long term growth?

Thought 3: Depending on 2 above, no one has timed the global stock (or bond) markets successfully over long periods of time. Trump is but a temporary aberration in a single regional market. Believe in the trend line over 5-10 year rolling periods of time. There are a lot of options to 'buy the whole market' as in index ETFs. Stock picking is not necessary.

My bias: I don't think short term. My horizon is always 5-10 years out, even if I die in the interim. My Executor will do what's best for estate distribution.

Kirk said
It's 2025 and it is once again time to top up, add or start a new TFSA. I'll be looking at my options in the hope that a few good promotions pop up this month. I'm hesitant to invest in the stock market with Trump taking power. Please feel free to offer your thoughts.  

Short of a bunch of revolutionaries coming to power and confiscating property, the impact politicians might have on the stock market is impossible to predict. Its noise which is hard to ignore but one should try to.

TFSAs are for stocks with the exception of a few special case situations when you know for certain that the money will have to be spent next year. My worst financial mistake was to use TFSAs as a savings accounts until 2016.

dougjp said
I guess everyone has different priorities for different reasons. I think that, if you have any cash and invest it somewhere (duh), because 100% of interest is taxed (unlike Capital gains and Dividends), that naturally the first place to put that cash is in a tax free savings account. Otherwise its going to end up in some HISA or GIC, and there goes the net yield on the same $'s ...

It's true if you have room and no investments outside tax sheltered accounts. But the first asset to put into your TFSA should be stocks.

Yes, you will end up paying a higher tax RATE on interest by having cash in a HISA than you would pay on Canadian dividends or cap gains but you will pay less tax overall and, crucially, end up with more after tax $s.

I don't know how I did it ... My TFSA stock portfolio has been in *red* for a year or so. But with lower interest rate expected ...

My strategy with tax sheltered investments:
- I have kept my TFSA in cash/GIC investments so that they are readily available if an emergency/job loss arises, and also the fee-free opportunity to switch FI's once a year.
- My RRSP is full into market stocks & ETFs, since it is laborious to change brokerages, and the timespan for needing these funds is long.
- My FHSA is also at the brokerage, but is placed into a more balanced portfolio of ETFs because I am not sure of the timeline when I will use these funds (I would like to own my own abode before I retire)

My long term savings budget is to keep all 3 of these tax shelters maxxed, sometimes I save cash beyond that, but I consider the extra savings as more for short term wants (vacations,stuff,etc) rather than for the long term.

Alexandra said
I'm getting so old that I put all my funds now into HISA and GIC's.

I am younger than you, but I do the same. All my funds are HISA and 1yr GICs. I treat TFSA as savings account which happened to be tax free.

This year, I will not have to pay taxes on about $5,000 interest income generated by my TFSA 1yr GIC. Even at modest 20% income tax rate that saves me $1,000 which I will gladly spend on myself. If I am in luck, I might not even have to pay GST/HST on something I buy with that money soon, which is extra 13% savings in Ontario.

Alexandra: The Conservatives under Harper tried to raise the contribution limit to $10K, which only lasted one year. Ideologically, they like measures that help those with lots of cash, and increasing the TFSA contribution limit would certainly help many Conservative supporters. But Poilievre is not Harper, so Our Mileage May Vary. Poilievre often tries to portray himself as the friend of the Little Guy.

mordko said
government employees with Defined Benefit pensions

What 'defined benefit has to do with 'government employees'???

What government employee have is INDEXED pension which gets increased every year.
I do have 'defined benefit' (I did not pay a cent into it comparing to 'defined contribution' where employee contributes a bit of its money) but it is NOT indexed so when I start getting it amount will be fixed for life.

CAD, a defined benefit pension plan may, unlike yours, require employee contributions. For example the federal employees' indexed defined benefit pension plan is currently funded 50/50 between employees and employer.

TFSAs are definitely useful to the average earner, you can see all the marketing around them is aimed at everybody vs it being portrayed as a vehicle for only the wealthy. And wealthy people don't really fuss about sheltering $7K a year though no doubt they make use of TFSAs too.

Can't recontribute RRSP withdrawals. So, government doesn't need to add RRSP withdrawals back to available RRSP contribution room.

Government does not receive real-time updates about TFSA transactions. TFSA issuers have until end of February of the next year to upload the TFSA transactions for a year.

As well, I don't think the government ever intended a TFSA to be a day-to-day account. It was intended to offer a controlled amount of tax benefit on investments to individuals only. That's in contrast to the uncontrolled amounts of tax benefit that income trusts were starting to extract for businesses before the Canadian tax laws were changed.