April 21 Federal Budget | Tax Free Savings Accounts | Discussion forum

Higher room for TFSA will benefit retired people most. As I am paying back a mortgage, there is no money left to put into any TFSA.

Not just for seniors, my sons are between 28 and 31 and they all use TFSAs to max. I think their attitude is mortgage rates are so low now and they think they can do better investing within their TFSAs. Plus mortgage will disappear some day anyway, better to have a full TFSA and pay off the mortgage a few years later, I think is their thinking. For some reason, none are keen on RRSPs, maybe they think retirement's a distant dream, I don't know. Either way, do whatever allows you to sleep soundly at night and suits your financial situation, plus TFSA annual limits are cumulative anyway, so the room will be there even if you can't use it for a while.

I have huge praise for TFSA.. 100% TFSA and if I make enough then fill rrsp.. This is the account Canadians needed going forward.. No doubt though there is a consequence for the government.. For low-mid income TFSA should be the main.. High income probably not going to matter you will use both rrsp/TFSA..

I think it'll be in the budget. I think the conservatives will make good on their promise. I think they are the only vote that will climb us out of the big debt hole instead of digging us deeper. Ontario is looking like it will be a new case study for the next economics textbook edition. Just my opinion.

Yatti, I agree. But it all depends on your personal situation. One thing I realize now is I claimed RRSP deductions when I was young, when I wasn't making much so my income tax savings were at relatively low rates - I could have saved the deductions until later in life when my income was higher and the tax refund would have been much bigger. Of course, there are many other factors at play, e.g. time value of money, inflation rates, ups and downs of your income stream over your working life, return on your investments, workplace pension, etc, but it's nice now that young folks have another option with the TFSA.

I also agree with your comments re Ontario, interesting times Ontarians have voted for. I think the Wynne Liberal plan might be to try to deliver Ontario's votes to Liberal Justin and in return he'll use federal measures to bail out Ontario. Just my opinion.

Ed said

The Feds' research argues that "people of all ages and income levels max out their TFSA contribution limits – in fact the vast majority are low-to-middle-income earners, with a large proportion being seniors.” Mr. Oliver’s letter says that 71 per cent of Canadians who currently maximize their TFSA contributions are over the age of 55 and 46 per cent are seniors. He also claims that 59 per cent of them make less than $60,000 and 91 per cent make less than $150,000. The minister’s stats however are in relation to the existing limit rather than an analysis of the impact of doubling the limit.

http://www.theglobeandmail.com.....e23819499/

I have no reason to think that this is not true. For seniors, it's not about income per se (although 60-150,000 is a very healthy income for a senior, especially when you add in income-splitting etc.). It comes down to assets and pensions. Seniors with significant assets who may not have high incomes per se because they are invested in low-risk instruments are able to use the TFSA as a place to park their savings or mandatory RRiF withdrawals without attracting tax on investment income. These people are not in any financial distress. On the other hand, those who live on CPP, OAS and GIS are the ones at risk, and they will never be able to afford to contribute to TFSAs.

Mr Oliver would have been more informative if he'd mentioned the percentage of Canadian adults who have regularly maxed out their contributions under the old rules. I have read that it's under 20%, and it is only reasonable to assume it will be even less when they raise the limit. (sorry, can't find that reference at the moment but saw it yesterday.)
He might also have given us a clearer picture if he'd broken down the participation rate for seniors by source of income. The most you can get from CPP/OAS/GIS is somewhere around $18,000. If their income is, let's say, $50,000, then about $32,000 of it is coming from other sources such as income from substantial assets and/or pension plans. In my view, it is not the latter group that need more tax relief. Rather, it is the ones surviving on the $18,000 who can't afford the basics, let alone drugs not covered by provincial drug plan, taxis to get to doctors appointments, etc.
You can be a millionaire, and even have a spouse who is a millionaire as well, but you may look "poor" according to Mr Oliver's way of presenting things because your "income" will quite likely still be "low" by his standards, i.e. under $60,000, if you are invested conservatively, as a senior should be.

Loonie said

Bill said

It's interesting to me how speculations such as lifetime TFSA ceilings, retroactivity of limits, phase-in of limits, etc arise when the government has not mentioned any of those things.

I think the government has not mentioned any of these things because they don't want to admit the fact that the increases now being considered are not sustainable and will have enormous impact on budgets in the future. Many have pointed to this, well beyond the walls of the Globe and Mail or CBC (which regularly presents us with conservative commentators such as Kevin O'Leary). Even people at the C D Howe Institute, a conservative think tank, have their doubts. http://www.moneysense.ca/save/.....tion-limit
However, we are not to worry about this because, guess what, it will all be made up for in increased taxes in other realms - GST, user fees, expenditure taxes and levies.

Taxes have to be fair across all taxpayers. If TFSA limit is huge and poor guys do not have money to enjoy so-called tax-free investments, any increase in GST/fees to compensate tax loss on TFSA is unfair.

Personally, I accept the premise that keeping everyone housed, fed, doctored and able to stretch their legs a bit is a necessity in a society that hopes to thrive.

I do resent those who have squandered what they had and may end up bust as a result, but I know of no reliable statistics on that and cannot assume that there are a lot of them. I don't know any personally. Our society loves the idea of risk when it's associated with possible entrepreneurial success or stock market success, but hates it when it leads to failures. I assume that nobody intentionally sets out to become poor. I support measures to create self-sufficiency such as good pension plans that you can't cash in prematurely.
The people I happen to know who are poor fit into the following categories: mentally ill and unable to work, Metis and product of the "training school" system, uneducated and working class with numerous job changes and no pension plan, veterans, and widows of the above. More than half experienced abuse as children, had no choice but to leave school and home early and never could get past what had happened to them. This is just my own personal sample. The people I know who spent a lot of money on toys and vacations etc still have a lot of money.

Lower income earners pay less largely because they have less income, dependents and/or disabilities. People at higher income levels do get more than "modest" tax relief - dividend tax credit, lower tax on capital gains, existing TFSAs, deferrals through RRSPs and corporate tax structures for those who own businesses, tax-free capital gains from the financial leverage used to afford an expensive principal residence, income splitting for seniors and now for parents as well, to name a few, and I am sure that there are many I don't even know about - that's why they hire the expensive accountants and lawyers! While it is true that not everyone who benefits from all of these is wealthy, there is greater benefit to those who are.

My question is, why do the wealthy think they need this kind of tax break? In the first year, if they couldn't put it in a TFSA, and invested it in GICs etc and earned 3% on their extra $5500, and they were in a 50% tax bracket, the tax would be about $82; if they invested it in the stock market and achieved a higher return, the tax might work out to something similar because of the dividend tax credit and/or capital gains tax system bringing down the tax rate. For a wealthy person, this is peanuts. However, when you add up everyone in this category, it makes a big difference to the govt budget. And in years to come, it will amount to much more - which they would be able to afford, if they are continuing to accumulate it tax-free rather than spending it.

Downloading the costs onto GST and other tax streams just moves it around and will create nasty and unwelcome surprises later. Some say the poor suffer more from consumption taxes because, for example, everyone has to buy toilet paper equally. On the other hand, the rich probably spend more discretionary income.

I agree, it will likely be capped somehow sometime, because it's not sustainable. There are lots of ways to do that. In the meanwhile, as with all tax breaks, take advantage of it while you can because it might not be there later.

I'm sure most of us can think of tax breaks that were once available but are no more. My favourite was "income averaging", which was very sensible, especially for people in sales with inconsistent incomes. If your income was unusually high one year and unusually low the next year, you could "average" them out to achieve a lower tax bill overall. It was fair and a good idea. I don't remember which government brought it in or got rid of it, but it's long gone now. I wish they would bring in some good ideas like that which are fair and really help people who need it.