Weekend Reading – TFSA contributions up and RRSP contributions down
Hey Everyone,
Welcome to a new Weekend Reading post – highlighting some encouraging savings related to Tax Free Savings Accounts (TFSAs).
You can find some recent posts below before I get into this headline subject!
Last weekend, I wrote about why I don’t (and won’t) invested in covered call ETFs even though they offer juicy income. (fyi – What I own is the blue line in the chart!)
I got delayed in posting my dividend income update for September this week, so I decided to refresh this post with some updated content including considerations we’ve made:
Weekend Reading – TFSA contributions up and RRSP contributions down
Great news (I think) when it comes to the TFSA.
Earlier this week, I read from Stats Can (key link, table below) that TFSA contributions continue to rise overall as part of personal (retirement) savings, as a major proportion of registered savings.
There are certainly many great things you can do with your TFSA!
As you well know…
- Tax-free savings accounts (TFSAs) allow residents aged 18 and older to save up to a yearly contribution limit.
- Contributions are not tax deductible but any income earned on these contributions can accumulate in your TFSA tax-free.
- An account holder can withdraw money from the account at any time, free of taxes. Money withdrawn from in the current year increases the contribution room in the subsequent year by the same amount.
From the link/update:
“A possible explanation for the new growth trajectory is that the TFSA offers different incentives for families in different income classes to save. Higher income families with extra savings may not have sufficient RRSP contribution room. Without the TFSA, these families’ extra savings could generate additional taxable income and potentially place them in a higher income tax bracket. Thus, the TFSA offers a tax-efficient tool to higher income families to park and grow their savings. In contrast, tax liabilities are generally low for families with a low to moderate income; hence, saving in the RRSP is not tax efficient. In addition, future withdrawal from their RRSP account may also reduce their retirement benefits from public pensions. More importantly, saving for a rainy day is essential for these families. Without the TFSA, they would have to park this type of savings in a regular savings or investment account to which interest and other gains may potentially reduce or even disqualify them from certain income-tested government transfers. With the TFSA, these risks would be eliminated, whether it is used as a short-term savings vehicle or a retirement savings tool by families with a low or moderate income.”
100%.
Since Day 1, I’ve been saying the TFSA is an outstanding account/savings vehicle for any income-level.
And 10 years ago, I wrote this when it comes to any RRSP vs. TFSA investing debate:
Managing the refund well is the linchpin in the RRSP vs. TFSA debate
It is my hope our nephews and nieces learn the significant compounding power behind this account for wealth-building. In fact, just focusing on maxing out their TFSA in the coming decades could make them a millionaire.
Based on reader emails, questions, clients I help out with at Cashflows & Portfolios and more, I know of some couples that now have close to $300,000 combined saved up/invested inside their TFSAs to date – since TFSA inception. Factor in simple rules of 72 and the like, and even if such couples never contribute anything to these TFSAs ever again, that money is likely to double about every 10 years or so – making them millionaires using the TFSA alone.
How have you used the TFSA for your investing power? Do share in a comment below!
More Weekend Reading…
A historical gem from A Wealth of Common Sense who offered a guide to navigating your first bear market.
This is good guidance that I’ve followed for years:
“Automate your savings so you don’t have to think about it. Automate your retirement contributions so you don’t allow bad days or months to affect your multi-decade time horizon. Automate your investment purchases on a periodic basis so you’re not tempted to time the market.”
Dale Roberts asked others on X/Twitter recently about selling off low-cost dividend ETF VDY and owning the stocks directly.
I created an RRSP spousal account for my wife, likely 20 years ago, or so. $VDY is the top holding at $150,000 value. Given the 0.22% MER I can replicate the index by way of individual stocks and move ongoing "MER" to near zero. Even the first year with $10 trades will be cheaper…
— CutTheCrapInvesting (@67Dodge) October 18, 2023
My reply:
I absolutely believe you can unbundle your CDN dividend ETF for income.
Just sayin'.
From 2016. Works so far. https://t.co/eyPhNDB11p
— Mark Seed (@myownadvisor) October 18, 2023
While cash ETFs deliver great yields at this moment, they are no long-term substitutes for classic fixed income funds.
Check out some popular cash ETFs below:
A must-see YouTube video from Dr. Preet Banerjee on AI and voice cloning technology. Wild…
Tiny Thought
“When you see someone doing something that doesn’t make sense to you, ask yourself what the world would have to look like to you for those actions to make sense.” – @ShaneAParrish
(Share this Tiny Thought on Twitter)
In 2021, at Cashflows & Portfolios, while an interesting product, we were not convinced the Longevity Pension Fund was worth going all-in on. In 2023, we still feel that way. Read why.
Dividend Growth Investor wrote about generational wealth.
“Anyway, let’s imagine a family which:
1. Invested $10,000 in S&P 500 at the end of 1927
2. Turned the DRIP on
3. Let the investment alone until today
They would have a portfolio worth $74,200,000 today.”
Incredible…
Finally, the 2023 Canadian Financial Summit remains on….for a few more days….
Yup, we’re into the last few days of the Summit!
This virtual Summit remains on to cut through the fog and noise of confusing financial jargon to help build your confidence needed to seize control of your personal finances. Over a few days, each speaker has their own expertise to share. With their actionable words of wisdom, all speakers are coming online to support your money management and wealth-building progress in one spot!
Here are the topics covered this year:
- How to plan your own retirement at any age
- The Pension Paradox: Lump Sum vs Cash for Life
- How to save money on taxes by optimizing your RRSP to RRIF transition
- Plan your personalized combination of a DIY portfolio alongside an annuity for a customized stream of retirement asset growth + monthly income.
- How to maximize the new FHSA (First Time Home Savings Account)
- How to adjust for high interest rates in your portfolio and day-to-day life
- How to efficiently transition your investing nest egg to a steady stream of retirement income
- What Canadian real estate investments looks like in 2023
- How to deal with inflation on your bills and in your investment portfolio
- The best Canadian personal finance books of all time!
- When to take your OAS and CPP
- Travel for free with Canada’s loyalty rewards programs
How to Check Out The Canadian Financial Summit
In order to reserve your tickets, click this link and check out my talk – that just finished!
A reminder when the Summit starts, you’ll be sent an email each day with the link to the sessions that go LIVE for the next 48 hours.
That’s it. There’s no paperwork. No need to put in payment information that you have to cancel later. No worries.
Now if you want to check out all the videos after the free window has passed (and get access to a whole smorgasbord of bonus resources and video sessions) then you’ll want to sign up for the low-cost All Access Pass.
How Do You Sign Up?
Again, click here and sign up and the folks at the Summit will get you ready to roll to watch all the content.
P.S. Another BIG thanks to all of you who have shared this event with your friends and family including this year. I have sincerely appreciated the feedback on my topic this year! 🙂
Have a great weekend!
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
