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tax free savings account
February 15, 2009
2:58 am
bert
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JUST A HEADS UP FOR EVERYONE. THE INTEREST EARNED ON A TAX FREE ACCOUNT DOES NOT AFFECT FEDERAL GOVT SUPPLEMENTS SUCH AS G.I.C PAYMENTS. EX.G-IF YOU HAVE $150.00 INTEREST YOUR GIC WILL BE REDUCED BY ABOUT $75.OO BUT IF IT IS IN ATAX FREE ACCOUNT NO REDUCTION. SAME APPLIES TO OAS.

February 15, 2009
1:33 pm
Doug
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Thanks, bert, although your CAPS LOCK key appears to be stuck. 🙂

You are correct. Interest earned in a Tax-Free Savings Account does not affect the Guaranteed Income Supplement or Old Age Security clawback rules. This is why a TFSA is ideal for retired folks who, for years, have kept large balances in their chequing accounts that pay like 0.05% interest because they don't to earn much interest that affects the tax they pay or the government income they receive.

Cheers,
Doug

December 27, 2021
7:42 am
Bobbyjet11
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TFSA decision time this week. I know many different strategies have been discussed in various threads but I'd be interested in hearing some strategies folks are employing this week in a single thread.
When it comes to "safe" investments there are quite a few options such as Motus, EQ, Tandia, Tangerine etc ... all with their own enticements. Does anyone care to share their strategy as 2021 comes to a close?

December 27, 2021
9:09 am
Loonie
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This isn't much of a strategy, but a reminder to close any small TFSAs you may have lingering about that you have no further use for, so that your deck is clear in January.

For example, spouse opened a TFSA with $100 in it at RBC earlier in the year because it was a requirement for a worthwhile promo on HISA there.
The TFSA was utterly ridicuous as it earned nothing whatsoever. We remembered to close it and did so a few weeks ago.
There may be others who used this promo but still have the TFSA open.
There is no fee for closing this TFSA, but there is a fee for transferring it out.
I don't know if it is possilbe to do this on the phone or online. Spouse went into branch to close it but needed an appointmetnt. You may have trouble getting an appointment before year's end, so be willing to go to a branch you don't normally use if you can.

December 27, 2021
10:39 am
LK
British Columbia, Canada
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Bobbyjet11 said
TFSA decision time this week. I know many different strategies have been discussed in various threads but I'd be interested in hearing some strategies folks are employing this week in a single thread.
When it comes to "safe" investments there are quite a few options such as Motus, EQ, Tandia, Tangerine etc ... all with their own enticements. Does anyone care to share their strategy as 2021 comes to a close?  

Same strategy as usual, detailed at this thread: https://www.highinterestsavings.ca/forum/tax-free-savings-accounts/the-december-manoeuver-question/

December 27, 2021
11:30 am
Dean
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Bobbyjet11 said

. . .

When it comes to "safe" investments there are quite a few options . . .

. . .

Unfortunately, with Inflation now @ ~5%, our so-called "Safe'" investments are taking us nowhere, but 'Backwards'. sf-frown

Sadly, once again HISA's & GIC's have turned into a Losers' Game. During the market dips, I'm moving even more of my TFSA $$$ into dividend paying Blue Chips ... where they probably should have been, in the first place.

    Dean

sf-cool " Live Long And Prosper " sf-cool

December 27, 2021
11:57 am
Bobbyjet11
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Dean said

Bobbyjet11 said

. . .

When it comes to "safe" investments there are quite a few options . . .

. . .

Unfortunately, with Inflation now @ ~5%, our so-called "Safe'" investments are taking us nowhere, but 'Backwards'. sf-frown

Sadly, once again HISA's & GIC's have turned into a Losers' Game. During the market dips, I'm moving even more of my TFSA $$$ into dividend paying Blue Chips ... where they probably should have been, in the first place.

    Dean

  

Quite true. It is always very difficult to beat inflation with fixed rates, especially lately. The FI's have their rates at a level for a reason.... but investing in such can essentially allow one to avoid from losing your shirt; which could happen at any time if you're invested in stocks, even Blue Chip, dividend-yielding stocks can be big losers in the event of a major market correction. And no one knows when the inevitable correction will occur but it's overdue in these Covid times. Sometimes (particularly in your retirement years) it's better to lose a little at a time until inflation calms down rather than risk big losses.

December 27, 2021
12:21 pm
Bobbyjet11
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LK said

Same strategy as usual, detailed at this thread: https://www.highinterestsavings.ca/forum/tax-free-savings-accounts/the-december-manoeuver-question/  

Thank-you for the link but I am more concerned about grabbing one of the various enticements. For example, right now I am leaning toward going with Motus TFSA high interest (@2.25 %) but when that time period runs out in 4 months, what then? Transferring out is $50 plus the waiting period. Or do I leave my money in a regular HIS like Tangerine and wait for another Institution to come up (in 2022) with something better for TFSA? These are the questions running through my little brain. 🙂sf-smile

December 27, 2021
1:06 pm
Loonie
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I have not documented this, but, in general, my experience with seasonal TFSA promos is that they often don't appear until at least mid-January and can come as late as mid or late February.

Of course, with covid, everything is more unpredictable than usual. But, personally, I would wait. I would not take the motus offer or any short term offer with a transfer fee unless it was spectacular.

It's a personal decision whether to put this money in blue chips or other stock market instruments, based on a number of factors. I will say though that desperation and "following the herd" are poor motivations and might set you up for disappoitment.

Despite concerns over inflation, I've personally made more money in interest this year than ever, and significantly so. I'm not unhappy. No, it doesn't match this year's inflation, but, as others have pointed out, inflation was very low for a few years, so, on average, I'm OK. The thing is, even though I personally think inflation is here to stay, we simply never know what is coming, whether it's stocks or interest rates. Who would have thought, last December or January, that we'd be looking at a 5 year GIC at 3% by now? I'm guesing none of us. But Hubert is offering one, and GICWeath has 2.92%. Go figure!

December 27, 2021
1:18 pm
Alexandre
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I am going to use Motus TFSA 2.25% offer. I do not have meaningful TFSA contribution window left in 2021, so I opened TFSA with Motus and deposited $10. Just to make sure I locked that rate. On January 1st, 2022, $81,490 will be added to that account.

When bonus offer expires, Motus currently has 1.25% on that TFSA, which is one of the highest TFSA and HISA rates currently.

As long as there is no other HISA offering more than 1.25% + my expected income tax rate for 2022, I'll keep my TFSA money with Motus. If other banks increase HISA rates to over that, I'll withdraw everything from Motus TFSA and move it to that other bank HISA.

That's quite simple plan, but I like living simple life when it comes to finances.

December 27, 2021
1:34 pm
Bobbyjet11
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That's pretty much my thought process as well, Alexandre.

December 27, 2021
1:41 pm
pooreva
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Not much choices for TFSA.
If you go for GIC, pick decent company with good insurance and $0 transfer fee. Hubert for example. 2% 1-year GIC with quarterly compound interest. 1.25% monthly.
Transferring TFSA is PITA. Or you wait until end of the year and do withdraw - deposit next year.

Another option is stock market. Wealth Simple. Buy/sell stocks with no fee. Do research, pick 'winners', buy few, get dividends, reinvest. Use Googlesheets and googlefinance functions to pull stock value for any day. I created handy sheet to track prospective stocks and decide what to buy in a few days...

December 27, 2021
1:55 pm
Loonie
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When you have a relatively large amount, as Alexandre does, risking a transfer fee has less impact than if it's just $6000.

But I don't understand why people would keep large amounts in cash in TFSAs, with their annoying rules about when you can redeposit funds. I think of HISAs as accounts one might want to use in the shorter term and then replenish, so I would do that outside of a TFSA, where there are no rules to contend with.
Can someone explain this strategy?

December 27, 2021
3:19 pm
phrank
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If you don't have a enough free money to both max out your TFSA with terms/investments and keep a high enough balance for your emergency fund or an upcoming purchase in an unregistered HISA, then I think keeping cash in your TFSA is the prudent move.

I also think it's a great idea to keep your "extra" money as difficult to access as possible. Makes it less available to impulse.

December 27, 2021
6:21 pm
Loonie
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Those reasons make sense, but it would be so easy to get contribution room mixed up. It requires excellent bookkeeping!

I would think that, for those who can, getting a better tax free return, such as from a GIC, would be preferable.

December 27, 2021
7:00 pm
mechone
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pooreva said
Not much choices for TFSA.
If you go for GIC, pick decent company with good insurance and $0 transfer fee. Hubert for example. 2% 1-year GIC with quarterly compound interest. 1.25% monthly.
Transferring TFSA is PITA. Or you wait until end of the year and do withdraw - deposit next year.

Another option is stock market. Wealth Simple. Buy/sell stocks with no fee. Do research, pick 'winners', buy few, get dividends, reinvest. Use Googlesheets and googlefinance functions to pull stock value for any day. I created handy sheet to track prospective stocks and decide what to buy in a few days...  

I play the stock market and have held on thru dips and bought more dividend paying stocks . Unless your buying 5000 dollars of a stock it doesn't make sense . I see all these youtube guys buying 5 ,10 stocks and owning 50 different stocks ,in my opinion a total waste of time . When the market crashed in 2008 it took me until 2014 to recover over 125,000 lost. During that time I made nothing on my money ,GIC's looked good. Now I have about 75% in GiC's and 25% in the market and make some good dividends about 12,000 a year. As I age ,59 now I learned time is an important factor , I can afford to lose 25% ,however maybe not the time for it to recover. A crash will come ,and is a good time to buy stocks ,but never keep and your eggs in one basket

December 27, 2021
7:02 pm
Bobbyjet11
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Another option is investing in index funds such as those offered by Tangerine.

Historically, January is a good month for investing - until interest rates begin their inevitable rise, investing in stocks should theoretically be the way to go. That said, Covid has thrown a hitch into everything that is considered normal.

December 27, 2021
7:41 pm
ronjoh
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"I play the stock market and have held on thru dips and bought more dividend paying stocks . Unless your buying 5000 dollars of a stock it doesn't make sense . I see all these youtube guys buying 5 ,10 stocks and owning 50 different stocks ,in my opinion a total waste of time . When the market crashed in 2008 it took me until 2014 to recover over 125,000 lost. During that time I made nothing on my money ,GIC's looked good. Now I have about 75% in GiC's and 25% in the market and make some good dividends about 12,000 a year. As I age ,59 now I learned time is an important factor , I can afford to lose 25% ,however maybe not the time for it to recover. A crash will come ,and is a good time to buy stocks ,but never keep and your eggs in one basket"

I hear you. I've been playing the stock market for many years. It has been a tough lesson. I 've now decided to go to ETF portfolios. I had a good investment year in 2021 and now decided to go XEQT for my equity portion and EQ Bank for the fixed income. I'm satisfied where my savings are at now (i'm 75 years young). XEQT will rebalance my equities and i will manually rebalance my equity/fixed income portfolio. I've mentioned this before, but my plan is to go with HIS until interest rates stabilize and then I will probably go with an ETF balanced portfolio. I have spent many hours (and years) trying to beat the market with different strategies. Now that i have gone to one fund portfolio concept, believe me it like getting a monkey off my back. No more BNN and G&M every day trying to figure out the next big thing. Now that I've made this decision, I sleep much better (even though I thought I really enjoyed the research and challenge). Now my only decision is HIS or bonds.

December 27, 2021
7:48 pm
ronjoh
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Forgot to mention. I'm 50/50 equity and fixed income. My plan is to rebalance the equity /fixed in income when necessary (the free lunch - buy low - sell high). Finally
I can sleep at night .

December 28, 2021
5:11 am
canadian.100
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ronjoh said

I've mentioned this before, but my plan is to go with HIS until interest rates stabilize and then I will probably go with an ETF balanced portfolio. I have spent many hours (and years) trying to beat the market with different strategies.  

You plan to wait until interest rates "stabilize" and then go with your ETF strategy. How would you know that interest rates have stabilized any more than you would know the stock market has "stabilized"? XEQT (an ETF) is still a "stock market" equity investment.
That is why people use a ladder for GIC purchases and why people diversify in the stock market when creating a portfolio. Don't shop endlessly for a multitude of strategies to "beat the market". Bouncing around to "different strategies" is not a good strategy. As you say you have spent many hours and years trying to "beat the market" without success. Again, use discipline and keep it simple. It works!

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