Comments on: The Tax-Free Savings Account (TFSA) – A Creative Financial Approach http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/ This is where your finance takes place Mon, 13 Oct 2008 04:49:48 +0000 http://wordpress.org/?v=abc By: The Financial Blogger | TFSA VS RRSP – The Ultimate Fight http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-2079 The Financial Blogger | TFSA VS RRSP – The Ultimate Fight Tue, 18 Mar 2008 10:00:46 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-2079 [...] the Canadian Government’s create of the Tax-Free Saving Account, many bloggers wrote their thoughts about it. I did a comparison between the RRSP and the TFSA in [...] [...] the Canadian Government’s create of the Tax-Free Saving Account, many bloggers wrote their thoughts about it. I did a comparison between the RRSP and the TFSA in [...]

]]> By: This and That http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1984 This and That Fri, 07 Mar 2008 01:23:12 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1984 [...] The Financial Blogger compares TFSA with RRSPs. [...] [...] The Financial Blogger compares TFSA with RRSPs. [...]

]]> By: Paul http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1948 Paul Sun, 02 Mar 2008 15:07:33 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1948 The U.S. has had the Roth IRA since 1997 as a tax-sheltered retirement savings vehicle, so Canada was way behind on this. But now Canada has leap-frogged ahead with the TFSA: contribution room isn't "use it or lose it" (it's carried forward indefinitely) and it offers complete withdrawal flexibility. The U.S. has had the Roth IRA since 1997 as a tax-sheltered retirement savings vehicle, so Canada was way behind on this. But now Canada has leap-frogged ahead with the TFSA: contribution room isn’t “use it or lose it” (it’s carried forward indefinitely) and it offers complete withdrawal flexibility.

]]> By: Jason http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1947 Jason Sun, 02 Mar 2008 10:07:14 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1947 let's just hope the politicians a little further south pick up on this idea. let’s just hope the politicians a little further south pick up on this idea.

]]> By: Paul http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1946 Paul Sun, 02 Mar 2008 01:56:08 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1946 CRA will allow transfers in-kind to the TFSA but will consider it a disposition. So you will be forced to realize a taxable capital gain using the asset’s market value at time of transfer. Hence no wash. “In-kind” only means you get to hold on to the asset, not that you avoid taxes. CRA will allow transfers in-kind to the TFSA but will consider it a disposition. So you will be forced to realize a taxable capital gain using the asset’s market value at time of transfer. Hence no wash. “In-kind” only means you get to hold on to the asset, not that you avoid taxes.

]]> By: The Financial Blogger http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1945 The Financial Blogger Sat, 01 Mar 2008 21:50:02 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1945 Quentin; I guess it would work but you would lose your tax deductibility advantage at that point. I think it could be a could way to end-up the Smith Manoeuvre when you are about to retire. I would suggest we wait until next year and speak to an accountant ;-) Quentin;
I guess it would work but you would lose your tax deductibility advantage at that point. I think it could be a could way to end-up the Smith Manoeuvre when you are about to retire.

I would suggest we wait until next year and speak to an accountant ;-)

]]> By: Quentin DSouza http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1940 Quentin DSouza Sat, 01 Mar 2008 01:49:06 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1940 I was thinking about this again. Please correct me if I'm wrong, but I think it might actually be useful for the Smith Manouvre Investments. Not on the front end but on the back end. It is difficult to say exactly until the TFSA comes into play but here is an idea, if transfers in kind are allowed. If we are able to do a "transfer in kind" of non-registered funds into a TFSA closer to retirement in order to avoid taxation and wash non-registered funds like those of the Smith Manouvre before we actually need it. Just say your a couple and want to retire in 10 years, so you together have 100,000 of TFSA room, you transfer in kind from the non-registered funds of the SM - then withdraw funds from the TFSA to avoid taxation and create room again to do it again the next year? That would mean that a couple who needed $100,000 before tax could now only need to save $70,0000 - since there would be no tax on the money from the TFSA. I also mentioned this over at Canadian Dream- http://blog.canadian-dream-free-at-45.com/?p=364#comment-3800 but haven't got a response yet. I'd appreciate some FPs opinions on this. I was thinking about this again. Please correct me if I’m wrong, but I think it might actually be useful for the Smith Manouvre Investments. Not on the front end but on the back end.

It is difficult to say exactly until the TFSA comes into play but here is an idea, if transfers in kind are allowed. If we are able to do a “transfer in kind” of non-registered funds into a TFSA closer to retirement in order to avoid taxation and wash non-registered funds like those of the Smith Manouvre before we actually need it. Just say your a couple and want to retire in 10 years, so you together have 100,000 of TFSA room, you transfer in kind from the non-registered funds of the SM - then withdraw funds from the TFSA to avoid taxation and create room again to do it again the next year? That would mean that a couple who needed $100,000 before tax could now only need to save $70,0000 - since there would be no tax on the money from the TFSA.

I also mentioned this over at Canadian Dream- http://blog.canadian-dream-free-at-45.com/?p=364#comment-3800 but haven’t got a response yet. I’d appreciate some FPs opinions on this.

]]> By: The Financial Blogger http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1934 The Financial Blogger Fri, 29 Feb 2008 00:20:57 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1934 FT and CC; That's too bad for the SM! I guess I'll have to wait and pray to have the tax exemption on the capital gain next year!! CR; I am a firm believer of leveraging based on the power of compounding interest. Many financial institution (including the National Bank starting this April) allow you to combine a fixed mortgage with a HELOC. On the other side, it has been mathematically proven that if you take the variable mortgage rate over 25 years, you will end up paying less interest than renewing a fixed rate every 5 years. FT and CC;
That’s too bad for the SM! I guess I’ll have to wait and pray to have the tax exemption on the capital gain next year!!

CR;
I am a firm believer of leveraging based on the power of compounding interest. Many financial institution (including the National Bank starting this April) allow you to combine a fixed mortgage with a HELOC. On the other side, it has been mathematically proven that if you take the variable mortgage rate over 25 years, you will end up paying less interest than renewing a fixed rate every 5 years.

]]> By: Customers Revenge http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1932 Customers Revenge Thu, 28 Feb 2008 14:44:01 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1932 Is the smith manouvre really that profitable? Doesn't it just convert your mortgage into an investment loan so you can tax-deduct the interest? Typically you can get a mortgage rate that is cheaper than the prevailing HELOC rates, so much of what you gain in a tax savings is lost to the higher rate. The timing of when you lock into your mortgage might make a difference. I did the calculations on converting my own mortgage in the past, and the amount of the return was very small. In general though, borrowing to buy investments is way better than borrowing to buy consumption. Is the smith manouvre really that profitable? Doesn’t it just convert your mortgage into an investment loan so you can tax-deduct the interest? Typically you can get a mortgage rate that is cheaper than the prevailing HELOC rates, so much of what you gain in a tax savings is lost to the higher rate. The timing of when you lock into your mortgage might make a difference.

I did the calculations on converting my own mortgage in the past, and the amount of the return was very small. In general though, borrowing to buy investments is way better than borrowing to buy consumption.

]]> By: Canadian Capitalist http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1931 Canadian Capitalist Thu, 28 Feb 2008 12:41:06 +0000 http://www.thefinancialblogger.com/the-tax-free-savings-account-tfsa-%e2%80%93-a-creative-financial-approach/#comment-1931 Thanks for the link FB. FT is right. The budget specifically mentions that borrowing to invest in the TFSA is not tax deductible. Thanks for the link FB. FT is right. The budget specifically mentions that borrowing to invest in the TFSA is not tax deductible.

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