TFSA woes

[dsr7723]

I think all a TFSA is is a tool for the govt' to narrow down the random audit spectrum. for example, if saving the interest on a paltry 5000$ per year is of concern to somebody, then perhaps it's worth a closer look to see where else these individuals are cutting corners, right? I mean come on, interest on 5000$ a year is not a lot of money and won't really affect your tax bill significantly. It's all smoke and mirrors, an illusionary discount so they know who to watch more closely. If they really wanted to help Joe Taxpayer get ahead, there wouldn't be a cap on how much you can contribute. Anybody who thinks the govt' is out to do us any favors needs to give their head a serious shake.

[codetrap]

Originally posted by dsr7723
I think all a TFSA is is a tool for the govt' to narrow down the random audit spectrum. for example, if saving the interest on a paltry 5000$ per year is of concern to somebody, then perhaps it's worth a closer look to see where else these individuals are cutting corners, right? I mean come on, interest on 5000$ a year is not a lot of money and won't really affect your tax bill significantly. It's all smoke and mirrors, an illusionary discount so they know who to watch more closely. If they really wanted to help Joe Taxpayer get ahead, there wouldn't be a cap on how much you can contribute. Anybody who thinks the govt' is out to do us any favors needs to give their head a serious shake.

Sure. And if there was no cap on contributions, I'd put every dollar I had under it, structure my mortgage in there, and put my company in it to. Oh wait, then nobody would be paying any taxes anymore...hmmmmmm

[whiskas]

You can open a TFSA account under a brokerage and manage it yourself. If you know what you're doing you can do a lot better than some shitty little interest rate offered by a bank.

[tenth]

Originally posted by dsr7723
I think all a TFSA is is a tool for the govt' to narrow down the random audit spectrum. for example, if saving the interest on a paltry 5000$ per year is of concern to somebody, then perhaps it's worth a closer look to see where else these individuals are cutting corners, right? I mean come on, interest on 5000$ a year is not a lot of money and won't really affect your tax bill significantly. It's all smoke and mirrors, an illusionary discount so they know who to watch more closely. If they really wanted to help Joe Taxpayer get ahead, there wouldn't be a cap on how much you can contribute. Anybody who thinks the govt' is out to do us any favors needs to give their head a serious shake.

You're missing that you can hold more than just GICs and the like in these things. Plus, after 20 years you're going to have 100k+ in space available, which would generate a pretty healthy tax-free return.

[codetrap]

Originally posted by whiskas
You can open a TFSA account under a brokerage and manage it yourself. If you know what you're doing you can do a lot better than some shitty little interest rate offered by a bank.

Even if you don't know what you're doing, you can do better. The thing that people don't seem to realize is that every product you can put into an RRSP, you can jam into a TSFA as well. Using it just as a straight savings account is just dumb.

[dsr7723]

Originally posted by tenth

You're missing that you can hold more than just GICs and the like in these things. Plus, after 20 years you're going to have 100k+ in space available, which would generate a pretty healthy tax-free return.

All Russian to me dude... GIC, RRSP, blah blah blah.... I make over 100k a year (gross) working for myself and even with near perfect credit and never bankrupt, can't get FUCK ALL from a bank anyways so, fucked if i'm gonna care about the interest on 5000$/yr... it's like, bank and CC statements to the acct., how much, where do I sign, see you next year. I just don't fuckin care, can't take it with you in the end. People over complicate things way too fuckin much for nickels and dimes, like 20 yrs later 100k in "space"??? WTF dude? Ya, I know I'm dumb as fuck to those of you who understand this well and it was no doubt a painful read... sorry. I am just baffled at how people manage to accomplish so much on 50-75k yr....

[RecoilS14]

It's called not pissing your money away on stupid shit.

[dsr7723]

Originally posted by RecoilS14
It's called not pissing your money away on stupid shit.

I don't smoke or do drugs, I don't drink excessively and I hardly think that a (paid for) decent ride and a few toys is "pissing" it away... But I get your point. I Googled around last night a bit and tried to understand this GIC TFSA RRSP jargon, I just cannot understand how a couple hundred bucks a year can get you ahead and why people are so quick to worry about saving the taxes on petty interest on a petty 5000$.

[codetrap]

Originally posted by dsr7723
I just cannot understand how a couple hundred bucks a year can get you ahead and why people are so quick to worry about saving the taxes on petty interest on a petty 5000$.

Year 1 $5000. I earned 18% on it $900 Tax Free.
Year 2 $5900+$5000 = $10900, I expect to earn 18% on that. = $12862
(I'm up $2862 that I don't have to pay 40% to the Gov't.
Year 3 $12862+$5000=$17862 @18% = $21077
So, I've put in $15000 of my own money, and I have $21k for it.
Year 4 $21077 +$5000 @ 18% = $30771
Year 5 $30771 +$5000 @ 18% = $42210
Year 6 $42210 +$5k @ 18% = $55707
Year 7 $55707 +$5k @ 18% = $71634
Year 8 $71634+$5k @ 18% = $90429
Year 9 $112,606+$5k @ 18% = $112,606
Year 10 $138,775+$5k @ 18% = $138,775
Decide to not keep putting in 5K each year, so just have returns.
Year 11 @18% = $163754
Year 12 @18% = $193230
Year 13 @18% = $228011
Year 14 @18% = $269053
Year 15 @18% = $317486

So, for a 50K investment spread out over 10 years, I get a return of $267483. If I had to do that outside of the TSFA, I would have to pay taxes on that amount close to $124000, reducing my return to $134k.

Do you see why it's a good thing now?

[RecoilS14]

Originally posted by dsr7723


I don't smoke or do drugs, I don't drink excessively and I hardly think that a (paid for) decent ride and a few toys is "pissing" it away... But I get your point. I Googled around last night a bit and tried to understand this GIC TFSA RRSP jargon, I just cannot understand how a couple hundred bucks a year can get you ahead and why people are so quick to worry about saving the taxes on petty interest on a petty 5000$.

A lot of money is wasted through unneccesaaey purchases Such as a cup of tummies everyday. Yeah it's only$2 but it adds up. It's stuff like that, that will buckle and dime you down to nothing.

If you have never watched Till debt do us part, please do. You might learn a thin or two like I did. I know my budget was in shambles an I was pissing away more money than I knew untill I started watching it and applying some of her techniques.

Just wish I had this mentality a few years ago before I ran up my credit cards.

[maestro_87]

Originally posted by codetrap


Year 1 $5000. I earned 18% on it $900 Tax Free.
Year 2 $5900+$5000 = $10900, I expect to earn 18% on that. = $12862
(I'm up $2862 that I don't have to pay 40% to the Gov't.
Year 3 $12862+$5000=$17862 @18% = $21077
So, I've put in $15000 of my own money, and I have $21k for it.
Year 4 $21077 +$5000 @ 18% = $30771
Year 5 $30771 +$5000 @ 18% = $42210
Year 6 $42210 +$5k @ 18% = $55707
Year 7 $55707 +$5k @ 18% = $71634
Year 8 $71634+$5k @ 18% = $90429
Year 9 $112,606+$5k @ 18% = $112,606
Year 10 $138,775+$5k @ 18% = $138,775
Decide to not keep putting in 5K each year, so just have returns.
Year 11 @18% = $163754
Year 12 @18% = $193230
Year 13 @18% = $228011
Year 14 @18% = $269053
Year 15 @18% = $317486

So, for a 50K investment spread out over 10 years, I get a return of $267483. If I had to do that outside of the TSFA, I would have to pay taxes on that amount close to $124000, reducing my return to $134k.

Do you see why it's a good thing now?

your lucky to get 5% interest these days, ally offers 3.25%. even at a high risk acct. your lucky to top 6%. I'd like to know what type of acct. is offering 18% every year for the next 25years and count me in.

[LongCity]

I think it's 18%/12 months...

Edit: What's Ally? At BMO, they only offer 1.25% so wherever this 3.25% is, let me know!

[Aaron@Tuner]

Originally posted by maestro_87


your lucky to get 5% interest these days, ally offers 3.25%. even at a high risk acct. your lucky to top 6%. I'd like to know what type of acct. is offering 18% every year for the next 25years and count me in.

You can put ANY type of registered security in a TFSA be it a stock, bond, mutual fund etc, whatever. It's not completely unrealistic to be making 18%.

[LongCity]

Also, isn't it monthly interest?
So 1.5%/month. You get more money this way over 18%/anually albeit only ~$78.

[Bisklimpkit]

Originally posted by maestro_87


your lucky to get 5% interest these days, ally offers 3.25%. even at a high risk acct. your lucky to top 6%. I'd like to know what type of acct. is offering 18% every year for the next 25years and count me in.

I believe in this example codetrap was referring to the TFSA being used as a self-directed account. I have a TFSA which I'm trading stocks in, so if you invest correctly, 18% is quite do-able.

dsr7723 - RRSPs would be good for sheltering your money from tax if you're running your business as a sole proprietership. If you're incorporated and taking money out of the company as dividends, as I'm doing with my business, then you don't need to shelter your income from the tax man via RRSPs. This is where a properly managed TFSA can help you out big-time, as it's the only way to earn interest that is 100% tax-free on an investment.

[gyu]

I have a question regarding the contribution room.

Say you used 5000 of the 10,000 allowed into a investment account and lost 500 at the end of the year, at the beginning of next year when they increase the contribution room to 15,000 are you still capable of putting in 15,000 or only 14,500?

[whiskas]

Originally posted by codetrap


Year 1 $5000. I earned 18% on it $900 Tax Free.
Year 2 $5900+$5000 = $10900, I expect to earn 18% on that. = $12862
(I'm up $2862 that I don't have to pay 40% to the Gov't.
Year 3 $12862+$5000=$17862 @18% = $21077
So, I've put in $15000 of my own money, and I have $21k for it.
Year 4 $21077 +$5000 @ 18% = $30771
Year 5 $30771 +$5000 @ 18% = $42210
Year 6 $42210 +$5k @ 18% = $55707
Year 7 $55707 +$5k @ 18% = $71634
Year 8 $71634+$5k @ 18% = $90429
Year 9 $112,606+$5k @ 18% = $112,606
Year 10 $138,775+$5k @ 18% = $138,775
Decide to not keep putting in 5K each year, so just have returns.
Year 11 @18% = $163754
Year 12 @18% = $193230
Year 13 @18% = $228011
Year 14 @18% = $269053
Year 15 @18% = $317486

So, for a 50K investment spread out over 10 years, I get a return of $267483. If I had to do that outside of the TSFA, I would have to pay taxes on that amount close to $124000, reducing my return to $134k.

Do you see why it's a good thing now?

You make a point that you save in taxes, but a consistent return of 18% is pretty optimistic. If those kinds of returns were commonly achievable you'd have people retiring when they're 35.

Just a word of warning to people new to managing their own portfolio's, you can just as easily make a -18% return as you can +18%.

[Bisklimpkit]

Originally posted by gyu
I have a question regarding the contribution room.

Say you used 5000 of the 10,000 allowed into a investment account and lost 500 at the end of the year, at the beginning of next year when they increase the contribution room to 15,000 are you still capable of putting in 15,000 or only 14,500?

If you had already used $5000 in contribution room, you would be capable next year of adding an additional $10,000 to bring you to the $15,000 limit. Whether you make or lose money within the account has no bearing on the contribution limit. The only time the limit is affected is when you either deposit or withdraw money into/from the account.

[KRZY403]

o fuck I just realized I over contributed $1700 over last week! I forgot about some of the contributions I made at the beginning of the year. I just withdrew that extra $1700 out. How will I be taxed for the over contribution? 1% for the 7 days that the 1700 was in there or 1% of 1700 from when I went over up until dec 31?

[Seanith]

Originally posted by KRZY403
o fuck I just realized I over contributed $1700 over last week! I forgot about some of the contributions I made at the beginning of the year. I just withdrew that extra $1700 out. How will I be taxed for the over contribution? 1% for the 7 days that the 1700 was in there or 1% of 1700 from when I went over up until dec 31?

Fuck i'm glad i just found this thread today. I was treating my TFSA like a savings account, and i'd remove $1000 and replace it a few days later. Looks like i'm $700 over, so i guess 2 months of 1% and i'll owe $14 or so. Could be worse!