Get over it, with the $10,000 TFSA limit everyone wins

I think the title says it all.  At least this is my position.

Recently Finance Minister Joe Oliver made good on a Conservative promise to increase the annual contribution limit (to $10,000) for Tax Free Savings Accounts (TFSAs), which currently sits at $5,500 per adult account holder.  Some people don’t agree with my position, and that’s fine, so let’s have the debate friends.

TFSA contribution limit haters say…

  • Lower-middle class and lower working class Canadians will suffer the most. Their argument is with less general tax revenues for our government (over time), fewer social support programs will exist, the less support will be provided to marginalized citizens.
  • Upper-middle class and upper working class Canadians will hoard (tax-free) money.
  • This is only a political move to earn votes from affluent Canadians.
  • The higher TFSA limit only makes sense for teachers and public servants, who have defined contribution or defined benefit pension plans to rely on, since TFSA withdrawals will not push these individuals into a higher income tax bracket.
  • TFSAs already make sense for young adults, in their 20s and 30s, saving for a major purchase or for retirement – there is no need to increase the contribution limit.
  • People will raid their TFSA more.
  • The government should direct their focus on making savings for Canadians (not accounts that hold savings) more tax-efficient.

TFSA contribution limit lovers say…

  • Any way for people to get ahead (i.e., more contribution room) is a good thing.
  • Any way to keep the government’s hand out of our wallet is a good thing.
  • Forget what the government does or doesn’t do with your money, at least this change allows investors more financial flexibility.
  • A higher TFSA limit might mean young adults don’t need to use Registered Retirement Savings Plans (RRSPs) altogether.
  • Using the TFSA room some Canadians may be able to curb “the tax headaches” associated with RRSP or RRIF withdrawals.
  • Savings inside a TFSA can be withdrawn and these withdrawals do not affect the eligibility requirements associated with Old Age Security or Guaranteed Income Supplement programs.
  • It could eventually make the RRSP-Home Buyers’ Plan obsolete – removing more bureaucracy.
  • If you decide to use the RRSP in combination with the TFSA, you can make better tax decisions and effectively re-shelter retirement savings.
  • It may negate the need to hold any investments non-registered, simplifying tax consequences such as the adjusted cost base for most investors.

From my perspective individual and collective financial prosperity will come from flexible saving and investing options that limit bureaucracy.  If we are all given an opportunity to grow wealth, this is where the government should be doing everything in its power to help.  The increase to the TFSA contribution limit is a great thing, for all Canadians.  Stop complaining and take advantage of this account as much as you can while you can.

What’s your take on the new TFSA limit?  Love it?  Hate it?  Let me know.

73 Responses to "Get over it, with the $10,000 TFSA limit everyone wins"

    1. Same Dan. Same goes with maxing out the RRSP as well, but few advisors will say for many Canadians using the RRSP up to the contribution limit is a bad idea. For many 20-somethings, they won’t even need the RRSP unless they can put a good chunk of change away. The TFSA rocks. Thanks for the comment.

  1. I think the increased limit is fine and more people will benefit from using it as a catch-all savings / investing account. $41,000 (times 2 for couples) is a lot of money – kind of daunting if you’re like me and are starting from zero. But I remember when my unused RRSP contribution room was in that range and now I’m within $5000 of maxing it out. Once that’s done I’ll turn my attention towards our two TFSAs and get caught up.

    1. Robb, compared to most, you are killing it. Don’t be so hard on yourself. You have a successful blog, a good job and obtain some great side income. $41k per couple is a bunch of cash but you’ll be maxing your account out in no time once the mortgage is dead.

      The RRSP is great for high net-worth folks but will be obsolete in a few years for most Canadians…they should focus on the TFSA first. That’s what I’ve always believed in although many folks don’t agree with me.

      Back to you, keep up the great work.

    1. I’d keep the RRSP contribution room until you are in a higher tax bracket and focus on filling up the TFSA. Another alternative is to contribute to your RRSP and use the RRSP-generated tax refund to fill up your TFSA.

  2. Overall I like the TFSA since I’m for most anything that gives a financial benefit to those who are proactive with their finances and savings.

    Although, I don’t think any of us really know the true impact of the TFSA and especially now with the limit increase, until time passes.

    We won’t have the same benefit with the TFSA as we’re now retired and will likely not be topping up or even contributing in years to come. I plan to withdraw RRSP money and make some contributions however. I would have loved to see the TFSA with 2x10K room annually in place 20 years ago!

    1. This is where I like the TFSA limit increase Deane, it’s an incentive to save. I think anything the government does in that regard is a move in the right direction.

      The TFSA limit increase is just one part of a massive tax credit package and we can’t possibly know the impact until decades from now. Thanks for your comment as always!

      1. Yes I agree it’s an incentive to save and I am a big advocate of people taking charge of their own financial future and ensuring retirement funding on their own.

        Unfortunately it seems no matter what the government does very few people take advantage of these incentives, gives unused RRSP room, TFSA participation etc.

    2. >>>>Although, I don’t think any of us really know the true impact of the TFSA

      Sure we do. No impact.

      The RRSP has been around for decades, and how has that adversely affected low income earners? Not at all. TFSA will be the same thing.

  3. I love the TFSA for me and my family. I do see where it could be an issue in the future when people with hundreds of thousands, if not a million, in TFSA investments are qualifying for full OAS and maybe even GIS. The original program (5K with indexing) combined with the RRSP program is fine. Raising the limit was politics.

    1. I also see an issue, long-term, if folks have been diligent with TFSA savings but I suspect rules will change with OAS and GIS over time as well Lloyd. You have a good point about raising the limit was a political move; highly motivated no doubt but we should still cheer for this account and the increased room – no? 🙂

      1. Like I said, great for me and my family. I will be using it. I don’t think it is the best thing to do for the country. I base all my opinions on legislation in force at the time, not what “might” be changed by a future government.

      1. I’m not a big fan of OAS rules and thresholds, now that you bring it up Brian. I don’t see why any senior making >$70,000 per year needs government intervention in the form of “income security”.

        GIS should be revisited as well although I am and will always be in favour of supporting a bare minimum income for folks and those that are disadvantaged. Thanks for the comment!

  4. I’m really surprised at this post. It’s myopic and simple. You can do better than this.

    I’m not going to bother going through why the TFSA is bad policy on the national level. Yes, it works great for you and for me but so would abolishing socialized medicine in Canada and I wouldn’t advocate that either.

    Not impressed.

    1. Hey now none, this wasn’t meant to be a tome! Why is the TFSA bad policy? What if the contribution limit was still $5,500? Is that bad policy? It’s good politically, at least the Conservatives are banking on it. Tell me more… Cheers.

      1. It’s quite simple Mark, anyone with an income greater than 150K a year will fully fund their TFSA. The consequence of this is an approximate $5000 gift to these people b/c of no capital gains. That’s the end result of this policy. Anyone making 150K or more per year gets $5000 every ten years. How would that policy sell to the average Canadian? There would be a revolt. This TFSA expansion is that but with lipstick on it. There is obviously an opportunity cost to this 5K per person lost to the treasury. Where will that 5K come from?

        The next common argument is that ‘rich people won’t even know this!!!!”. Unfortunately, rather than supporting the TFSA expansion policy this is another poor aspect about it. What kind of policy would be deemed a good one if it results in a substantial loss to the treasury yet those who benefit from this won’t even notice it? See what I mean?

        Yes, the TFSA expansion is good for you and me in the short term but as national policy it’s terrible. Much like cancelling socialized medicine would be good for me, closing mental institutions would be good for me, closing schools and increasing classroom size would be good for me. Just because these policies would be good for me doesn’t mean I support them. L

        1. We could also make the same argument for the RRSP though right? Someone making >$150k will fund their RRSP as well? As they should, unless of course they are making that much money in retirement….

          I don’t think you’d have a hard time selling this policy. This TFSA increase makes the RRSP pretty much obsolete unless you are talking about high income earners. Second, this is tax-free money, most Canadians still don’t get that. You start selling the fact that for most Canadians, they can start putting their entire house downpayment there (instead of a HISA, tax-free) and mostly elderly Canadians they can put their excess RRSP and RRIF withdrawals there tax-free, they will rejoice.

          Lastly, I do like your points about our treasury dollars but how are we going to determine the impact of this? Not this year, not next year, not even another decade from now. It will take a generation to understand the impact and by then, HST and other consumer taxes will have risen to offset this tax credit. I’d put money on that 😉

          1. Of course you could say the same about RRSP contribution room. It was capped for a reason WITH the stop gap that the government would make up all lost tax revenue in the event that someone died prior to fully emptying out their RRSP (eg. 1 million at highest tax rate). It had a lot of controls on it.

            Assuming we are a talking about high income earners where they will be at the highest marginal tax rate both when they put money in and when they extract it – the TFSA and RRSP are mathematically equivalent products (with the exception of the latter having marginally better tax protection and the former not counting towards clawbacks). If that’s the case then the 10K TFSA is work appox and addition 18,000K in RRSP room per year. Is that a good idea because most people can’t use what they have already so again this extra bit is just a hand out to the wealthy in such a disproportionate amount that it’s unfair.

            yes, you can put lipstick on the pig and say TFSAs are better for people in the lowest bracket but just barely really. Only if when you retire your tax bracket goes up and that is extremely rare.

            Anyway, also, if there is no cap on these then someone who turns 30 will have $120K in TFSA room growing at 10K per year plus all of their RRSP room. The end result of this policy is effectively that capital gains in Canada is no longer taxed for people below the upper-upper middle class. is that fair? I certainly don’t think so. The below middle class never paid gains before because they either didn’t have the means to invest or already had an over abundance of room.

          2. If the RRSP was capped with the sole reason to make up all lost tax revenue, then why a cap on deferred taxes at all? Wouldn’t more taxes deferred = more tax revenue eventually?

            I agree as long as tax rates are constant, the TFSA is very similar to the RRSP.

            The RRSP is actually a handout to the wealthy since if you are not in a lower-tax rate come retirement age, you are deferred taxes you owed anyhow; you might be just as well off investing in a non-registered account and getting a DTC along the way.

            I remain convinced the TFSA is an excellent account with excellent incentives for folks to save money. Saving money is a good thing, no?

          3. The whole basis of the RRSP was to encourage people to save money with the goal to reduce poverty in seniors and it’s been a great success. Nobody, not society, neighbourhoods, health care benefit when old people live in cold apartments eating cat food. The RRSP is a great example of something that costs taxpayers but pays dividends to the taxpayers in excess of what they pay.

            You are right though, should RRSPs really be tax deductions or should they be tax credits. Perhaps they should be tax credits as you slightly suggest. you’re right, that would make it more fair. Canada, however, is partially about handouts to our financial industry – that’s a halmark of being Canadian: hence we have the highest MERs in the world.

            There are many ways to encourage people so save but policies need to be directed correctly. This TFSA expansion targets ‘super savers’ and the wealthy. Those are two groups that do not need the encouragement. If i had a choice I’d much rather see the revenue lost to this program instead going to improving our crappy socialized medicine, improving our schools, making more accessible child care opportunities for low income families. Everything has an opportunity cost – it’s not free money. It either has to be made up with more taxes later or social programs which Canadian generally over overwhelmingly support (although don’t want to pay for) get cut.

          4. The TFSA expansion is good for super savers and in that regard, it helps those already saving. The thing is though, those folks will be able to spend money in the future because they saved. The money will flow back. The more people that “get” this big picture, the better off we all are.

          5. I suppose but I really don’t see how this policy encourages people (who aren’t already doing so to save). 5500 & RRSP & favourable tax treatment to Canadian equities was already a massive amount of either tax free or very tax friendly room.

            From your other posts I get the impression that you feel that it’s a bit unfair (hence you suggestion to cap it eventually) but will be taking advantage of it.

            of course I’ll take advantage of it too but I will vote for a party that will put controls on it. Effectively having tax free investment income has too high of an opportunity cost to society.

          6. I actually have no problem with a TFSA cap none. From a policy perspective, if I was in the government’s shoes, you need to do what is viable, fair, sensible, realistic but will also get you votes. I don’t care about the latter (votes) really but I do care the former. Just like the RRSP limit that most folks will not get to, the TFSA limit hike is a good thing and provides options for many folks. I will certainly take advantage of the TFSA as much as possible but I’d do that regardless of income level, if I make more, it just means I should max out the account faster that’s all.

            On the subject of costs to society, what was the cost to society when the RRSP was introduced decades ago? I don’t know of one myself.

          7. Sorry, double post – the other one was in the wrong place.

            THe RRSP was enormously successful at reducing senior poverty:
            Anyway, your title is just wrong. LOTS of people don’t win. There are many many people who have a hard time scrapping together RESP saving let alone any TFSA savings. These people are dependant on government assistance of some sort (it could just be lower tax rates at low income). because the tax base is reduced the new TFSA limit hurts them, it certainly does not help –> THEY DO NOT WIN.
            Hey, I bought a beer yesterday. Instead I could have bought a couple vaccinations for impoverished Sundanese even though I think that (at least on the surface) life is more important than buying cheap crap from China. Ergo: I’m a horrible person too. Life is partially about finding the level of hypocrisy that one can live with. Unfortunately the level tends to increase with age and income.

          8. Well, if my title is misleading, no biggie. I can live with that 🙂

            There are a number of people scraping by. I don’t deny that and it might get worse before things get better. On that note, regardless how things go hopefully I’ll be in both a financial and time-oriented position to help more as I get older, via financial donations or volunteering my time as I age.

            I still like the TFSA changes none!

  5. Selfishly, I love the idea but I can’t see how this could be good for anybody other than folks with money who can contribute more. This probably includes most readers of this site, so the arguments here may be biased.

    The writer of this article from the G&M in Feb thinks there is an insidious plot by the Conservative party to starve the government of revenue, ultimately shrinking its importance over the next 30 to 60 years. While certainly no fan of Harper, I really can’t believe that his long term plans are this calculated, let alone this sinister. But maybe I’m just naive!

    1. I doubt it’s that organized or a conspiracy. I think it’s far more likely that they realized how much it would benefit themselves and their voting block and didn’t care about the long term consequences. This is classic conservative behaviour.

      “Let Harper’s granddaughter worry about it” sums it up amazingly well.

      Unfortunately, politics being for the sake of politics has completely shadowed good governance which is what it’s supposed to ultimately be about.

    2. I also love the idea, as you know Peter, but most folks do not bother maxing out their RRSP so why complain about the TFSA limit?

      I wouldn’t think this is the long-term plan but then again, smaller government in a few focused areas such as a min. standard of healthcare for all and a min. standard of education is a good thing IMO. I am also no fan of Harper but I really don’t like my alternatives this fall…. *sigh*

      1. Exactly so why give it to them? Rather than a defence this is a great example of bad policy.

        An expensive program that means nothing to the majority that benefit the most.

        1. No; So why give it to middle class people like me, and others on this thread, that can use it?
          How a minority of self-entitled rich people, and Canada’s destroyers, are we. Let’s dumbing down the already taxed wealth…

          I think this debate is without issues, so I let it here.

        2. Well I am not rich. I make very little money, under $10,000 per year. And I am very happy with this increase. I can contribute to my TFSA by cashing in other investments.

          I am old enough to remember when interest rates were very high, but not in real terms. So after taxation you were netting less than the inflation rate. We needed the TFSA in the 1980s!

          1. Well, *None* (Justin? Is that you? Hilarious…), it would appear that if the Liberals get elected, they will repeal the TFSA increase, so the whole debate would be moot anyway. I’d be OK with that.

            On a completely different note, according to Stats Can, there were 312,930 Canadians earning more than $200K in 2012. Full disclosure: between 2 salaries and dividend income from a non-reg account, that makes my wife & I part of the elite 1%. Funny, I sure don’t feel like a full-on Capitalist oppressor but I guess I am! And I don’t even own jackboots…

      1. Samantha – I don’t think I ever said specifically that I do not promote smaller government, although perhaps someone might infer that because I do not automatically advocate for it by rote.

        That said, I really think that government and taxation play a huge role in our society. We all pay taxes into a large pool and draw from it what we need, as we need it: security, education, health care, Employment insurance, etc etc. I am actually quite happy to pay my taxes and let us all benefit from our pool of riches. I have heard this called societal insurance and that sounds like a good way to describe it to me. So no, I don’t think that smaller government is always good for individuals and businesses. I think smaller just for the sake of smaller doesn’t necessarily take into account the needs of all the people, all the time (I’m starting to sound like Abe Lincoln over here…).

        Is there wasted bureaucracy in government? Absolutely.
        Is there corruption in the system? Sometimes.
        Do some politicians take advantage of our trust? Duffy.

        However, those things are not restricted to solely to public service or government organizations and I accept them as a necessary evil of, as George Constanza said, living in a society!

        PS I’m not a government employee (but I sure would like the pension! LOL)

  6. Love love love the new limit. It totally changes the landscape of retirement saving vehicle. Previously RRSP seems to come ahead when you compare between RRSP and TFSA. Now I want to say TFSA probably will come ahead for most people. I could see the government putting a lifetime cap on TFSA though.

    1. I think so as well Tawcan. I’ve always seen the TFSA as the clear winner for most Canadians, the RRSP tends to favour high-income earners. I could also see the government putting a lifetime cap on this thing…likely $100,000 in contributions.

  7. 10k is a godsend to me, because it is about what I can contribute by year.

    Needless to say that, if it stay at 10k…, I will never use my non reg account.

    The nay sayers and whinners about the increase eat too much of socialism. I come from a socialist euro country, I know how it turns so “well” with their mindset…

    Sorry for this last politics sentence.


    1. Nothing to be sorry for farcodev, your respectful comments are always welcome here, even if we ever disagree now and then….healthy debates are good debates.

      I hope to never own a non-reg. account (eventually) given the TFSA room bump.

      I can appreciate everyone isn’t a fan of this increase but I need to understand (better, somehow, someway) why some extra TFSA contribution room is putting our entire country in peril.

      1. Thanks for your understanding Mark, thumbs up!

        I suppose they do a gross calculation of what in term of capital gain taxes it would bring to the state and multiply that by a certain number of years.

        After that, they say this increase will cost to the country a trillion of $ in … 2080…without even taking in account how fiscally and economically Canada would be in 65 years…

        They surely like to gives fuel to anti-capitalistic sentiments, but as always they fire at the wrong target and that continue to divide and push down the middle class, while the organizations that holds our country’s debt continue to empty our wallets.

        1. “They surely like to gives fuel to anti-capitalistic sentiments…”

          Oh no doubt the fuel is there now!!

          This should be an interesting election year…lots of issues on the table really…

  8. Population can be split in three categories (for the present case)
    1. Those who are nonprofit putting the maximum in TFSA and RRSP
    2. Those who still had room in their RRSP but were finding TFSA more interesting
    3. Those who are fully contributing to their RRSP

    For the first group, the increase in TFSA is useless, at least in a near future. End of the story.
    For group 2 (which I am), it is interesting and greatly welcome because I will much prefer put the additional $4500 in TFSA rather than putting $6400 in RRSP. Yes it is costing me $1900 in tax immediately, but the money is mine. It is also important to notice they IT IS EXACTLY what the government is looking for! People who prefer to put their money in the TSFA now rather than in a RRSP because they got the tax revenue NOW! Very logic and technically, this should not have any impact in futur governments except if they change the law and make it more interesting to move from TfSa to RRSP.

    For group 3, it is simply a gift and a lost in the long term for government. Pretty sure that the additional cash from income Tax from group 2 will be greater that the interest tax revenue lost .

    Great move for the investor and for the government, a rare win win situation 🙂

    1. That’s an interesting point I hadn’t considered actually. I’d have to understand the math better because the governent does sometimes get tax windfalls when someone dies prior to depleting their RRSP and all monies get taxed at the highest marginal tax rate.

    2. I guess put me into camp #1 (a bit?) but mostly group #2.

      I suspect I will not use/contribute to my RRSP as much going forward and simply max out the TFSA. Only after the TFSA is maxed out, the RRSP contributions flow but that’s largely the case now. I tend to focus on my TFSA every year first and seek to max it out as much as possible, as soon as possible. I want the money to be MINE 🙂

      Unfortunately with the RRSP the government has their hand in my pocket and to be honest, I’m not a fan of that!

      1. “Unfortunately with the RRSP the government has their hand in my pocket and to be honest, I’m not a fan of that!”

        Exactly my reason to not use my RRSP.
        They can keep their tax returns, that they will take back anyway in the end + interest, with such account.
        I would like that the Canadian population have the same power to their account too, by right of vote for ex.
        Especially when you see that they’re entitled of 10% return each year on their retirement accounts, whatever the events on the markets.
        But that’s another topic 😀

        1. The RRSP is not for everyone, I 100% support that. Modest to higher-income earners, who will be in a lower-income bracket come retirement, go for it – but you still need to manage the RRSP-generated refund well every year. That’s the linchpin in any RRSP, TFSA or non-registered debate in my book.

          Happy to read about your other topic farcodev!

      2. Dudes, their both accounts registered with the government. If you want to play crazy tin foil hat conspiracy theories both of these accounts are potentially seizable.

  9. Cool thread. Lots of interesting points. I am happy to have the increase, but feel it will be a burden on future generations. I feel the government has done this to keep their tax revenue in the short term up as the world still adjusts to credit issues. Macroscopic issues aside, I will gladly take advantage of the extra room, by transferring some of my unregistered investments… I will also add, that I don’t believe the general Canadian populace even understand personal finance, so limits, no limits, RRSPs, RESPs, TFSAs or anything else that would allow people to control their future makes much sense to then unfortunately… Now increasing my $90 Hydro bill by 42% over 5 years or doubling the cost of basic groceries even though many eat out at restaurants way too often… well those things are important… in the short-term, as we all know. If people could be convinced to look past just next year or even their next pay cheque for that matter, well then what we are debating would matter to those who really need it, and need to understand it. – Cheers.

    1. Same Phil. I will be moving some assets from no-reg. account to TFSA in the coming years.

      “I don’t believe the general Canadian populace even understand personal finance, so limits, no limits, RRSPs, RESPs, TFSAs or anything else that would allow people to control their future makes much sense to then unfortunately…”

      Too bad isn’t it?

      Always great to hear from you Phil.

  10. The pluses: allows mid-life savers to accumulate a bit more of a nest egg and partially offsets the fact they won’t be able to contribute for as many years as younger individuals; there is no longer a commitment to raising the limit from time-to-time so the monstrous tax issue the anti-Harper crowd are screaming about will, most likely, not exist in 30+ years as they forecast; for many professionals the early-career RRSP contributions are a dubious investment – the tax deductions can be less than the tax payable in retirement, and of course there’s no deductibility of losses, and gains/dividend payments are usually taxed at a much higher rate when being withdrawn from an RRSP than if outside a registered plan.

    The only minus I see: Being a typical weak-willed procrastinator I like the “locked-in” feel of an RRSP. Not unlike owning your house. The “one-click away – it’s my money and I’ll spend it when I want to” feel of a TFSA makes me a bit nervous. For myself at least!

    1. Lots of +ves for sure… I could see the TFSA capped out/max. lifetime limit of $100k. You?

      As for the -ves, yes, the TFSA is one-click away but also, not many folks can max it out every year. $20,000 per couple every single year would be a great feat. Thanks for your comment.

  11. Hi Mark

    I agree with title of your post. I don’t get all the whining and the vague attempts of making those that work hard for their money to feel some kind of guilt for using these minor breaks. The way I look at it there ar many many other things that we could put the microscope on in the way of government waste, welfare fraud or general inefficiencies . Why don’t we fix all that so when the government comes knocking for more money to waste it’s actually put to good use and we won’t feel so bad. That billion $ gas plant fiasco could have paid for a lot of “vaccines”…

    I know some won’t agree with me but I feel that the “rich” already pay MORE than their fair share of taxes. Let’s all be realistic, sit down and add up what you pay in taxes starting from your paycheck. Also don’t forget the TFSA is tax free, but whenever you remove money from the account and pay for a good or service you will pay sales tax. (13% in Ontario). I maxed out my TFSA’s extra room. I applaud mr Harper for giving us all this opportunity. Nice the middle class get something once in a while too.

    Every year around tax time there is that joke “simplified tax return” form that gets around. Box 1 “How much did you make?
    Box 2 “send it to Ottawa”

    It seems some people think that’s actually appropriate? A high tax rate Worked really well in France didn’t it? (Sarcasm).

    1. Happy to hear from you Paul.

      I have no guilt whatsoever using this account for as long as I can. It’s a gift.

      I have sat down and added up my tax dollars, I do it every year, I think I pay my fair share 🙂

      We hope to max out our TFSAs with the $9k room at some point, but it’s a big ask for us this year. We already maxed them out.

      I can’t wait for the “simplified tax return” but that’s dreaming. I mean, if you just have a T4 and some T5s, why do you even need to file a tax return since the government requires those forms to be issued in the first place? Dumb.

  12. The TFSA contribution increase is a net positive because it encourages Canadians to save and invest more money. Any program that does this, whether it be RRSPs, RESPs, TFSAs, is terrific for the typical highly taxed Canuck!

    I think what gets glossed over by naysayers is that TFSA contributions represent already taxed money. The government gets its share of the TFSA contribution “pre-contribution” courtesy of our taxation system. This means that TFSA holders are paying tax upfront for the benefit of maxing out their annual contributions. Granted, all growth is tax-free in future, but that’s how the system is structured. The exact opposite can be said for the RRSP, which by the way, doesn’t seem to receive the same criticism.

    The TFSA unfortunately has been introduced during a period when the typical Canadian is highly indebted with both good or bad debt. As a result, they’re struggling to maximize contributions to existing government tax saving programs. Therefore, it’s not surprising that the TFSA increase is being met with angst, and even outright hostility.

    BTW: The TFSA program change will have little impact on my vote this fall. While the Conservatives have had a decent run, it’s probably time for a change at the federal level.

    1. Correct on two points – totally agree.

      1. TFSA contributions are after-tax money, including when money flows from tax-deferred accounts (RRSP and RRIF). The government ALWAYS gets its share! 🙂

      2. The TFSA was introduced when Canadians had/still have a love affair with real estate. I prefer not to have my retirement eggs in the same basket so I’m reducing my RE risk as I get older using the TFSA for other investments.

      Thanks for your comment CP!


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