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They Dropped it
January 5, 2015
10:52 am
Rick
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PT web site now shows TFSA rate @ 2.5%
sf-frown

You can do better (but not by much) if you want to lock it in.
Tax-Free Savings GIC
1 year- 2.600
2 year- 2.450
3 year - 2.450
4 year- 2.500
5 year- 2.600

January 5, 2015
11:03 am
james1900
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The boots finally fell.

January 5, 2015
11:14 am
doc
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disappointing

January 5, 2015
11:27 am
Greg Franklin
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I am not surprised that this happened. I guess they want more of their business to be fixed rate deposits even if it is for just 1 year.

They do now have the highest 1 year TFSA GIC rate but we have to watch to see if they add fees to transfer out TFSA's or another TFSA rate reduction in a year.

They know that those that need their TFSA money liquid have to put it somewhere so they decided to not cut more than 0.50% from 3.00% to 2.50%.

I think those that do not need liquidity will seek higher interest paying alternatives in coming days, weeks.

January 5, 2015
12:49 pm
Koogie
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In anticipation of this, for the first time ever I transferred my contribution to TD instead of PT.

Think I'm going to stick the 5.5K into a low beta dividend yielding stock instead and use it as an experiment. As the years go by it will be advantageous to have the TFSA in stocks anyway, so I have allowed PT to push me into beginning my "education" in that regard.

January 5, 2015
12:50 pm
Loonie
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I am thinking very seriously about moving my TFSA elsewhere and locking in. That will be 2 accounts actually, including spouse, fully maxed out.
I am not going to need the cash any time soon, so it makes sense. I can stay ahead of inflation elsewhere, and there is no income tax, so I can come out ahead on this, if nothing else!
I think, for anyone who has alternate sources of income, TFSA should be the last thing you touch.

For those who can't afford to have their money tied up, it's still a decent daily rate, no withdrawal fees, and a good place to park your money.

I wish it could have lasted a bit longer, for everyone's sake, but it's fair. Their GIC rates are not very good though, with the exception of the 1yr, if that's what you want.

I think they are following a plan that I had suspected some time ago, of getting money from a younger demographic and gradually transitioning them from short-term to longer term investments. In a year or two, the 2-yr might be their best deal; and so on. I'll come back when they get to an exemplary 5yr rates, maybe. If they don't get enough takers at 1yr, they might offer a 9 month special, or something like that. I think it's a strategy that makes sense for a small bank. But it is not what I need.

I think Koogie's strategy also makes sense. As a long-term investment, which TFSA should ideally be, you SHOULD be better off down the road.

I think this move on Peoples' part will push a lot of people to reconsider what they money is for, when they are likely to need it, and what would be the best way of preparing for that. It will dislodge a lot of us fence-sitters!

January 5, 2015
1:10 pm
Greg Franklin
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Koogie and others that are thinking of having dividend paying ETF's, shares etc. in their TFSA, be careful that if you are getting U.S. dividends it is likely taxable in a TFSA.

They usually take a withholding U.S. tax of 25% which is not refundable at income tax time.

I read this back in 2014 I believe in the Financial Post but can't remember exactly when. I am not sure about foreign dividends being taxable in a TFSA but it makes sense that it could possibly be taxable.

I think the best thing to do is talk with a tax expert, an accountant, tax preparer that specializes in U.S. taxes, foreign tax withheld and foreign income and TFSA's.

Take care and try not to get tax complications with your TFSA by the type of investments being held.sf-confused

January 5, 2015
1:29 pm
phrank
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I've already moved one TFSA into a 5 year GIC, just mulling over what to do with the other account.

Not sure I want it all locked in and have always managed to find a high enough GIC rate so as I'm not tempted to go into stocks etc.

Not surprised by this, but do feel this is the beginning of more moves by them. It would be nice to see at least a %3 GIC offering of some sort from PT so I don't have to go through the hassle of moving and more funds.

January 5, 2015
1:40 pm
Greg Franklin
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Voodoo22, we know what you mean, we have been locking in GIC's and bonds the last 16 months.

We got alot of bonds at the 4.00% to 4.21% rate and GIC's at 3.15%, 3.10%, 3.05, 3.00%.

We have put in place a liquidity, contingency percentage of 15% of our investments which is over $115,000 in different maturity GIC's savings accounts, cashable GIC's, 18 month, 30 month, 40 month etc.

This will protect us until my spouse gets her OAS and C.P.P. in coming years. We made sure we have no debts so this is helping us a great deal.

We would not want to be in the position of having a $400,000, $500,000 mortgage, $350 a month car payment or $700+ month for 2 cars, $250 monthly credit card payments etc. as so many are.

Voodoo22, I agree that financial institutions are not done with lowering rates in coming months and maybe in 1 year.sf-frown

January 5, 2015
2:59 pm
Koogie
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Greg Franklin said

Koogie and others that are thinking of having dividend paying ETF's, shares etc. in their TFSA, be careful that if you are getting U.S. dividends it is likely taxable in a TFSA.

They usually take a withholding U.S. tax of 25% which is not refundable at income tax time.

I read this back in 2014 I believe in the Financial Post but can't remember exactly when. I am not sure about foreign dividends being taxable in a TFSA but it makes sense that it could possibly be taxable.

I think the best thing to do is talk with a tax expert, an accountant, tax preparer that specializes in U.S. taxes, foreign tax withheld and foreign income and TFSA's.

Take care and try not to get tax complications with your TFSA by the type of investments being held.sf-confused

Thanks. Yes, I am aware of the various tax ramifications. If you want a handy shortcut to bookmark that spells it out, here is one I use: http://www.finiki.org/wiki/Tax.....allocation

I realize it is a bit of a waste of the DTC to hold qualifying CDN common stock in a TFSA but I'm doing it with a purpose behind it and you can't beat 100% tax free anyway.

January 5, 2015
3:59 pm
Jon
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Take the CFF deal if you are resident of Ontario, they get 3% promotional interest in saving account until march 31 and 3.3% 5 years GIC along with 3% 3 and 4 years GIC.

January 5, 2015
4:05 pm
Rick
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Keeping mine liquid in PT, but wife's contribution for this year is locked in for 5 years with CDF @ 2.65% + the bonus .25% for Cdn Direct Ins customers = 2.9%. Yes...that promo is ongoing and still active. Second rung of her TFSA ladder. 1st rung is at 3.1%

January 5, 2015
4:11 pm
Peter
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Rick said

Keeping mine liquid in PT, but wife's contribution for this year is locked in for 5 years with CDF @ 2.65% + the bonus .25% for Cdn Direct Ins customers = 2.9%. Yes...that promo is ongoing and still active. Second rung of her TFSA ladder. 1st rung is at 3.1%

Sounds familiar :) By the way, thanks again for pointing out the Canadian Direct Insurance bonus last year: https://www.highinterestsavings.ca/forum/gic/cdf-just-raised-gic-rates/

January 5, 2015
5:46 pm
Greg Franklin
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Koogie, thanks for the reference about tax efficient investing. I'm sure it will be helpful for others as well. This is true especially for younger, longer term investors.

We have reached a point in our lives that capital, principal preservation, lowering risk in our investments and maximizing longer term income is more important than saving maybe $3,000 to $3,500 a year in annual income taxes in our case.

This only works out to be about 0.35% to 0.50% a year from all our investments. It is not a big tax savings at all.

I am eligible for the disability tax credit saving us about $1,600 a year in income taxes, my C.P.P. disability is almost $15,000 a year which about $11,500 a year is not taxed because of the personal amount everyone gets Federally and $9,800 in Ontario.

This means I am only paying about $1,000 a year in annual income taxes on my first $28,500 to $29,000 a year in annual income.

About $10,000 each, $20,000 combined of our income is from interest and compound interest for this year but grows every year and is in our RRSP's and TFSA's currently attracting no income taxes, tax deferred, tax free.

The rest is about $9,000 from non-registered joint accounts from interest income paid out from GIC's, bonds like our RRSP's, TFSA's and is taxed at about $2,150 a year between us.

My wife still works but this will end soon and her income taxes will drop by at least 85% since she will getting some early C.P.P in 2015 and some RRIF income or annuity income depending on what we do with her RRSP from work so she will not pay more than $1,500 a year in income taxes.

When she turns 65 in about 3 years, she will have $7,000 more from OAS but will likely pay no more than $700 in annual income taxes because she will have the personal amount, age amount making about $18,000 a year that is not taxed.

Like I said, we have no debts and max out our TFSA's making more income tax free.

We would have to have all our investments non-registered investments in dividend paying shares, ETF's etc. because RRSP's, TFSA's would not help having them there tax wise, no dividend tax credit in registered plans, to save maybe $15,000 to $18,000 in total income taxes in 5 years.

In our official retirement of 65 years old and older, I am 56 and my spouse is around 62, we will have about a $85,000 total income and be paying at most $8,700 to $10,700 a year.

This is only about 10.23% to 12.58% of our total income gone in annual income taxes. This is modest total income taxes considering our total income.

Currently as my wife retires and she gets her early C.P.P, some other retirement income of about $16,000 a year, RRIF or annuity income maybe both, we will have about a total $60,000 retirement income in 2015.

Our total income taxes are at most $4,700 a year on all this retirement income in 2015. This leaves us with about $3,000 a month to add to $11,000 annually to ourTFSA's, compound interest growing within our RRSP's, TFSA's and adding to our non-registered investments, savings accounts, cashable GIC's etc.

We currently only need $18,500 a year to live modestly since I got rid of my car as we only have her car now, saving about $4,300 a year in car insurance, gas, repairs and maintenance, registration etc. as this was a debt free vehicle.

If we had to finance it, that would of added another $300 to $400+ a month on top of that. We really worked the numbers for months now and it will save is close to $9,300 a year. It is a no brainer.

We have $50,000 in short term savings that is used for bigger expenses, costs that will come over the years which we don't count as income and investments as we know we will use it up in the next 10 to 12 years.

We have been always prudent, cautious and planning because you never know what can happen. Just like my losing 75% of my working income due to my back injury at work.

Take care and let's hope 2015 is going to be just fine.sf-smile

January 11, 2015
4:13 am
Save2Retire@55
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I should thank PT for their consistent 3% which was there in the past couple years but it's time to move on :) No new TFSA deposit in PT. I am opening a new TFSA with Qtrade to invest on bonds and stocks and see how this goes.

January 11, 2015
8:29 am
kanaka
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Yas said

I should thank PT for their consistent 3% which was there in the past couple years but it's time to move on :) No new TFSA deposit in PT. I am opening a new TFSA with Qtrade to invest on bonds and stocks and see how this goes.

Yas what parameters does Qtrade have for minimnim purchase of bonds?

January 11, 2015
10:15 pm
Save2Retire@55
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Available to everyone.
Equities (including ETFs) $8.75
Options $8.75 + $1.25 / contract
Mutual funds Free
Fixed income / Exchange traded debentures $1 per $1,000 face value ($24.99 min / $250 max)

Administration Fee:

CDN$ Registered Accounts — RSP, RIF, LIRA, LIF, TFSA and RESP Free
US$ Registered Accounts — RSP, RIF and TFSA US $15 / quarter / account

More about fees can be found here: https://www.qtrade.ca/investor/en/aboutus/services/fees.jsp

However, for TFSA, CIBC Investor's Edge looks better as it offers better trading rate of $6.95 and same with no administration fee for TFSA

January 14, 2015
4:57 pm
Yatti420
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I've jad some cash at PTC for awhile.. This will lead me to move it eventually though..

January 14, 2015
5:08 pm
JustMe
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It will be nice to meet people like Greg Franklin and exchange thoughts face to face as I always thought (and my calculations confirmed every time) you do not need big bucks to live even in expensive country like Canada.
You do not have to move out to Albania or Montenegro or some other 'poor' country to stretch your retirement income. Just live modest and enjoy life.

Please write your comments in the forum.