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New Promo at Tangerine
September 4, 2014
10:44 am
Rick
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I imagine it is because if everyone just yanked it out and moved it elsewhere several times a year, it would be a nightmare to keep track of. Each institution must report contributions/withdrawals so the govt can make sure you aren't over contributing. Not to mention the penalty they can charge for over contributing. And since it's registered, banks can charge you to move it as a dis-incentive. I remember the first year it came out there were thousands of people that thought you could just move it around and got quite the surprise when they got a tax bill the next year for over contributing (I was one of them). They ended up forgiving the penalty if you applied for a waiver, just because of the volume of people that were ignorant of the rules. Jamie...since the promo ends in November, you could always put it in a regular savings account at Tangerine if the transfer is already initiated and let it sit until Jan 1 when your contribution room will be reinstated and increased, then put it into whichever TFSA account you want. Taxes shouldn't be too bad for 4 months of interest. People Trust is still paying 3% on TFSA HISA, so I don't have to chase rates or lock in to long term GICs (yet)

September 4, 2014
1:30 pm
Loonie
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I don't recall saying it was "so complicated", but it's a design flaw when people who happen to withdraw their money on Jan 1 must wait an entire year to recontribute it whereas someone who needs to withdraw it on Dec 31 can recontribute it the next day. I don't see how that meets the laudable goal of encouraging savings.

I find it quite understandable that people would find this confusing and would get caught in the trap thus posed. The system will seem arbitrary to the average person who is just trying to live their lives and use the tools provided. People have a lot of things on their minds other than dancing around rules that don't really make sense to them. In that respect, the RRSP is much better designed.

September 4, 2014
2:15 pm
james1900
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Rick said

I imagine it is because if everyone just yanked it out and moved it elsewhere several times a year, it would be a nightmare to keep track of. Each institution must report contributions/withdrawals so the govt can make sure you aren't over contributing. Not to mention the penalty they can charge for over contributing. And since it's registered, banks can charge you to move it as a dis-incentive. I remember the first year it came out there were thousands of people that thought you could just move it around and got quite the surprise when they got a tax bill the next year for over contributing (I was one of them). They ended up forgiving the penalty if you applied for a waiver, just because of the volume of people that were ignorant of the rules. Jamie...since the promo ends in November, you could always put it in a regular savings account at Tangerine if the transfer is already initiated and let it sit until Jan 1 when your contribution room will be reinstated and increased, then put it into whichever TFSA account you want. Taxes shouldn't be too bad for 4 months of interest. People Trust is still paying 3% on TFSA HISA, so I don't have to chase rates or lock in to long term GICs (yet)

Nowadays every financial institution has a computer system. I think even most modest computer software can keep track those contributions/withdrawals. It is not a nightmare.

September 4, 2014
3:27 pm
Rick
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Not a problem for the banks...our government on the other hand.

September 4, 2014
4:52 pm
james1900
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Rick said

Not a problem for the banks...our government on the other hand.

I agree. But it would still be feasible to track month by month. Then the withdrawal can be replaced by first day of next month, not next year!

I hesitate to open a new TFSA at People's Trust. They have once a security leakage. We can hope it since then improved. But it still has higher vulnerability than other banks. (Once you find a bug in a piece of computer program, it is more likely find another bug here than else where.)

September 4, 2014
5:48 pm
Rick
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I don't think I would want to track transfers of 15 or 20 million savers on a monthly basis if I were the government. I'm sure they would find a way to waste even more of our tax dollars doing it. Why bother when you can just do it yearly and penalize those that break the rules? Feds aren't exactly known for their simplicity or even common sense. Now that we are all aware of the rules, I can live with them and take advantage of maximums and the December maneuver to make it work quite nicely for me. but that is my situation, others may have different needs. As for PT security, they were a victim and addressed the problem. NO ONE is safe from a hacker that is determined to compromise a system. Banks, stores, credit card companies, even governments have been hacked. I'm satisfied with their response to the issue and feel just as secure as with any other on-line banking I do. I'm more than happy to let my TFS's sit in a HISA that I can convert to cash in hand within 48 hrs, earning more interest (paid monthly) than having it locked into 1-5 year GIC (paid yearly) or shuffling it around chasing the best rate that's lower than what I'm getting at PT. The Target hack was a bigger PITA for me personally than the PT compromise. But that's just me, feel free to do as you please. Good luck and good saving! sf-laugh

September 4, 2014
6:04 pm
james1900
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Well said. The government is slow to track the transactions. Usually I saw the TFSA transactions in previous year around April 15 the following year.

As for PT, every one has his/her situation. For me, I only have a few thousands emergency fund. All else are put into mortgage. I'd rather prefer to less interest than be caught by an unknown credit card bill (I didn't say it will happen.). Threat and protection are like racing buddies. The more protection you have, the less being hacked. How to increase protection? The big guys, because they have more money.

September 4, 2014
6:11 pm
Rick
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One could argue they are also a more lucrative target. If you are well under the max contribution, there should be plenty of room to withdraw/transfer TFS within the limits. Just have to be mindful of maxing out before the end of the year.

September 4, 2014
6:13 pm
Rick
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PS...to your point; that's why I have my and my wifes TFSA's in different institutions. Don't want all our eggs in one basket just in case there is an issue.

September 4, 2014
9:15 pm
Jack Manning
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Loonie, TFSA rules at least don't make anyone lose contribution room. RRSP's once withdrawn can never be contributed again unless you have made more income for the following years.

TFSA's can be withdrawn in 2014 say $31,000 and then contributed again $31,000 in 2015. This is not including another $5,500 for 2015 on top of that.

I agree with everyone here that you should be able to withdraw and recontribute in the same year but it can be a hassle for banks, financial institutions and government to track this so I guess they decided once every year is a way to make things easier for them and not for us.

The amount should be higher maybe $7,000 or $8,000 and increase by $1,000 a year until it reaches $12,000 instead of the current $5,500 for a yearly TFSA contribution.

September 5, 2014
4:42 pm
JustMe
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I believe TFSA is meant to be relaxed way of RRSP or retirement saving. If you are to be allowed to deposit/withdraw as you please then this will be just another saving account.
This way, if you withdraw you get sort of 'punishment' not to be able to deposit during the calendar year. In translation - we gave you chance to save but since you cannot - no interest for you.
I believe TFSA rules are fair.

September 5, 2014
8:11 pm
james1900
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I don't agree. I withdraw from a TFSA just for putting it in another higher interest rate TFSA. If it's fair, it should not block this kind of withdrawal.

September 5, 2014
10:29 pm
Rick
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Don't forget these are "registered" accounts. You can take them out and transfer them around, you just have to take the time to fill out the paperwork, pay the fee (if applicable at your particular bank), and wait for the whole process to work its way off some pencil-pushers desk onto another over-worked pencil-pushers desk and back again all through snail mail. I agree with JustMe... work the system within the rules. I still contend that opening it up would be a logistical nightmare for the feds. Jack....I believe the original intention was to slowly raise the yearly contribution to 10,000 per person per year, starting at 5000 and making yearly adjustments for inflation. It took them a few years to raise it to 5500, and expect it will go up to 6000 by 2016 or 17. I'm no economist, but if they raised the limit too high too fast, wouldn't that devalue the dollar and reduce the tax base too significantly if all that money was suddenly tax-sheltered. Let's face it...the program is basically a tax shelter for the more well-to-do. My kids, and I imagine most of the younger middle class families, can't afford to take 11,000 per couple out of their yearly budget to sock away and let lanquish in a TFSA, much less 20K.

September 5, 2014
11:33 pm
Loonie
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I think that the banking system ought to be under a legal obligation to fulfil requests for transfers in a timely fashion. There is no earthly reason, in this day of electronic wizardry, for it to take weeks, let alone months. They're already charging for it in most institutions, and people have a right to a reasonable expectation as to what will happen when they make the request. There are reports on the internet of this process sometimes taking many months, occasionally a year or more, although I can't verify them. I expect the latter are the exceptions, but, still, there is no penalty for them dragging their feet.

I believe the increases in contribution limits are provided for in the legislation. As I recall, they can only increase it in $500 increments and only after inflation has cumulatively reached a specified point. Thus, it is not at the whim of the govt; neither can it be anticipated in the absence of stats about inflation.

It seems to me that it's entirely up to the individual if they want to do frequent transfers. Everyone needs to weigh all the factors in their situation.

I agree that TFSAs , like all registered plans, work best for people with bigger incomes, as they are discretionary expenses. Younger adults might do well to use them as a vehicle for saving up to buy a house etc. Unlike with RRSPs, you are not required to pay it back, let alone on a particular schedule which may prove onerous. You can always recontribute to TFSAs whenever you are able to do so. You don't really lose anything by postponing your contributions if the reason you are not contributing is simply because you don't have the money. A person in that situation doesn't need to shelter any interest because they don't have any.

September 6, 2014
8:55 am
Norman1
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Loonie said

I don't recall saying it was "so complicated", but it's a design flaw when people who happen to withdraw their money on Jan 1 must wait an entire year to recontribute it whereas someone who needs to withdraw it on Dec 31 can recontribute it the next day. I don't see how that meets the laudable goal of encouraging savings.

I find it quite understandable that people would find this confusing and would get caught in the trap thus posed. The system will seem arbitrary to the average person who is just trying to live their lives and use the tools provided. People have a lot of things on their minds other than dancing around rules that don't really make sense to them. In that respect, the RRSP is much better designed.

I think it is more of a limitation in the reporting from TFSA issuers to CRA.

According to RC4477: Tax-Free Savings Account (TFSA) Guide for Issuers, TFSA issuers only file TFSA information once a year, by February of the next year for a given calendar year. So, CRA doesn't learn of any TFSA withdrawals until next February.

Again, the next-year lag only affects indirect TFSA transfers done by doing a withdrawal from one TFSA and contributing to another. There's no impact on direct transfers from one TFSA to another TFSA without doing a withdrawal.

September 6, 2014
9:23 am
james1900
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Direct transfers usually involve fees and paper work. TFSA rules are not a problem for me. I am quite happy with that.

November 25, 2014
9:30 am
rhvic
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Well, November 30 is rapidly approaching, so my strategy is to pull the bulk of my money out from Tangerine today, so that my balance is quite small again come the start of December. That way, I am poised to take advantage of any new offer they may make as of that date, and simply transfer the money back in again as 'new deposits' to take advantage of any such offer.

I'll do the same with my funds in President's Choice as December 15 approaches.

I'm quite happy to move my money (up to the insured limit) to whichever institution is willing to pay top interest rates.

November 25, 2014
1:32 pm
james1900
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rhvic said

Well, November 30 is rapidly approaching, so my strategy is to pull the bulk of my money out from Tangerine today, so that my balance is quite small again come the start of December. That way, I am poised to take advantage of any new offer they may make as of that date, and simply transfer the money back in again as 'new deposits' to take advantage of any such offer.

I'll do the same with my funds in President's Choice as December 15 approaches.

I'm quite happy to move my money (up to the insured limit) to whichever institution is willing to pay top interest rates.

Where do you park your money after withdrawal from Tangerine/President's Choice?

November 25, 2014
4:01 pm
Jon
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CDF will be a good choice, for CDIC insurance and free unlimited transaction.

Otherwise, the 3 CU with highest rate (2%).

November 26, 2014
5:35 am
xxxx
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Jon - why wouldn't you just go with the CUs you suggest since they have higher interest rates and you can exceed the CDIC limits, since such limits appear to be a non issue with the Manitoba CUs.

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