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TFSA 2015-2016 update
December 18, 2015
10:55 am
Yatti420
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Bill said

JustMe, it's actually pretty straightforward, CRA does the same pretty much every time: it administers the tax law's effective dates based on proposed legislation, even before Royal Assent. Here's a link stating that:
http://www.cra-arc.gc.ca/gncy/.....4-eng.html

Liberals have a healthy majority, Trudeau allows no dissent, so you can consider the new 2016 limit the law. But there are those who sow confusion, like Zoomer mag or "investment professionals", who for their reasons don't like the new reduced limits and maybe even think they can fight them, so up to you who you want to listen to.

Similarly, putting in $10K last year prior to Royal Assent made sense as Harper's majority was sure to pass it.

Definately no discussing Liberal changes lol.. The only reason we're making progress in Ontario on anything (vape ban \ MLTT etc) is because the Liberals messed up in the first place.. The Vape Ban Reversal due to the Medical Marijuana file ( passed a bill and then reversed it in a single day) are most likely a canadian government record.. If not a world record!

TFSA changes are confirmed now - sadly.. Since Liberals have a majority I just go with whatever they announce..

December 18, 2015
1:46 pm
Loonie
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I just about sputtered my coffee all over myself when I read "Trudeau allows no dissent". Memories are short, it seems, and I don't really want to get into party politics here, but something must be said.

It was Harper who did not allow dissent, muzzling both civil servants and MPs. Every party has something called "party discipline" and MPs are expected to tow the party line, whatever it may be. But Trudeau is allowing rookie cabinet ministers and MPs access to the media and has said civil servants are free to speak on their area of expertise, quite the reverse of what we had before.

Now, the Liberals do have a majority, so they will get their way, good or bad. But the changes to the TFSA are not budget matters this time. Harper made it part of the budget. However, in order to get the changes in place for 2016 with minimal confusion, Trudeau made it a separate bill to change the Income Tax Act. The budget requires much more work and won't be ready until February or so.

December 18, 2015
6:23 pm
Bill
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A debate about dissent could go on for a while I guess (e.g. Harper said that though they have to toe the party line Conservatives can have their personal views re abortion, Trudeau said he won't allow people who are personally against abortion to even be a Liberal candidate) but I'm glad the innocuous little phrase I inserted did its job and caused (a few of you anyway) a bit of a jolt! Thanks for reading carefully!
Bottom line: TFSA limits back to $5500 starting in 2016 and indexed to cumulative inflation that results in $500 increases. Has anybody read the legislation to determine if the indexing goes back to 2013, the year the limit first went up from $5000, or does the indexing start all over again in 2016? The increase from $5000 to $5500 took place in 2013, the 5th year of the program. Just wondering if we're due for an increase soon or if we've lost the years 2013 - 2015 for purposes of indexation and we're starting all over with indexing in 2016? From my reading of Norman1's Dec 7 excerpt of the Ways and Means Motion I believe indexing was not paused for 2013 to 2015, so we'd be due for an increase to $6000 maybe already for 2017, i.e. Trudeau has basically restored the limit as if 2015 increase to $10K had never happened - but I'm not sure if my reading is correct.

December 18, 2015
9:17 pm
Norman1
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Bill said
...
Bottom line: TFSA limits back to $5500 starting in 2016 and indexed to cumulative inflation that results in $500 increases. Has anybody read the legislation to determine if the indexing goes back to 2013, the year the limit first went up from $5000, or does the indexing start all over again in 2016? The increase from $5000 to $5500 took place in 2013, the 5th year of the program. Just wondering if we're due for an increase soon or if we've lost the years 2013 - 2015 for purposes of indexation and we're starting all over with indexing in 2016? From my reading of Norman1's Dec 7 excerpt of the Ways and Means Motion I believe indexing was not paused for 2013 to 2015, so we'd be due for an increase to $6000 maybe already for 2017, i.e. Trudeau has basically restored the limit as if 2015 increase to $10K had never happened - but I'm not sure if my reading is correct.

I would concur with that reading. I think indexing will be resumed from 2010, as before.

This was the definition in the Income Tax Act before the TFSA limit increase amendment:

“TFSA dollar limit” for a calendar year means,

(a) for 2009, $5,000; and

(b) for each year after 2009, the amount (rounded to the nearest multiple of $500, or if that amount is equidistant from two such consecutive multiples, to the higher multiple) that is equal to $5,000 adjusted for each year after 2009 in the manner set out in section 117.1.

This is the current definition after the TFSA limit increase amendment:

“TFSA dollar limit” for a calendar year means,

(a) for 2009 to 2012, $5,000;

(b) for 2013 and 2014, $5,500; and

(c) for each year after 2014, $10,000.

This will be the definition after the proposed amendment in the Notice of Ways and Means Motion:

“TFSA dollar limit” for a calendar year means,

(a) for 2009 to 2012, $5,000;

(b) for 2013 and 2014, $5,500;

(c) for 2015, $10,000; and

(d) for each year after 2015, the amount (rounded to the nearest multiple of $500, or if that amount is equidistant from two such consecutive multiples, to the higher multiple) that is equal to $5,000 adjusted for each year after 2009 in the manner set out in section 117.1.

December 20, 2015
2:12 pm
JustMe
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Thank you for clarification.

I will get ready 11K for Peoples Trust. Unless somebody else has better alternative?

December 20, 2015
2:33 pm
kanaka
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JustMe said

Thank you for clarification.

I will get ready 11K for Peoples Trust. Unless somebody else has better alternative?

If you are looking for a 5 year rate, there are better options.
http://www.globeinvestor.com/s.....ndicator=N

I have money at PT but their system is lacking and Iam sitting on the fence wether or not to continue with them. Their phone service is usually, but not always, very good. :)

December 22, 2015
4:40 pm
JustMe
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Thank you 'kanaka' for advice. 5 years is a little bit long period for such lousy rates. 'What-if' in 2018 rates go to 8%. Yes, this is a pipe dream even though I do not smoke...
Will PT drop their rate to 1.80? Who knows and my crystal ball is little bit muddy these days. I will take what they offer...
As for the phone service, you are correct. I have feeling they hire some spinsters who hate life and come to work because they can browse porn sites for free. Even e-mail communications is so lousy, there is no 'Hello' or 'Hi', just answer to questions - when I had them...

December 22, 2015
8:45 pm
Rick
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kanaka said
If you are looking for a 5 year rate, there are better options.
http://www.globeinvestor.com/s.....ndicator=N

I have money at PT but their system is lacking and Iam sitting on the fence wether or not to continue with them. Their phone service is usually, but not always, very good. :)

I am also seriously considering pulling out of PT with a December maneuver. Their track record this year was disappointing as they dropped rates in step with increasing contribution limits. It was a nice run while it lasted, but there is a big enough amount to split into 5 and start a ladder at CDF. I use CDI so the .25% bonus rate actually makes it enticing, until next April anyway. . Taking into account the 2017 contribution, I can start a ladder with just over 11K per year, adding another 5.5K every year as each one matures. Delay the wife's ladder until July and we will have a GIC maturing every 6 months to cover any rise/drop in rates.

December 23, 2015
3:39 am
2of3aintbad
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PT 2, 3, & 4 rates at 2.30, 2.35, 2.40% look to be better than CDF. Why not put your target amount in each of these so you will have something maturing in December 2017, 2018, 2019?

December 23, 2015
6:33 pm
Rick
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2of3aintbad said

PT 2, 3, & 4 rates at 2.30, 2.35, 2.40% look to be better than CDF. Why not put your target amount in each of these so you will have something maturing in December 2017, 2018, 2019?

With the CDI bonus, CDF 2,3 & 4 are currently 2.25, 2.35 & 2.45. Not really interested in keeping it in 2 different institutions for .05% on the 2 year, equal on the 3 and .05 less on the 4. And the five year @ CDF is @ 2.83 compared to 2.45 @ PT. I am befuddled as to what to do with our TFSA's this year. PT has got me gun-shy with their rate reductions over the last year, but I don't really want to lock it all in to GIC's, just in case I need it. Maybe I'll just take it out of TFSA savings in the last week and keep it in regular savings until I see what everyone does with rates in the new year. With the talk of BoC reducing prime lending rate, US raising theirs, negative interest rates, oil, CDN $, housing bubble bursting, jobs, GDP, economy, unemployment, national, provincial, civic and personal debt....(*sigh*). Tough times. Maybe all in a 5 year GIC is the way to go

December 23, 2015
7:08 pm
kanaka
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Rick said

kanaka said
If you are looking for a 5 year rate, there are better options.
http://www.globeinvestor.com/s.....ndicator=N

I have money at PT but their system is lacking and Iam sitting on the fence wether or not to continue with them. Their phone service is usually, but not always, very good. :)

I am also seriously considering pulling out of PT with a December maneuver. Their track record this year was disappointing as they dropped rates in step with increasing contribution limits. It was a nice run while it lasted, but there is a big enough amount to split into 5 and start a ladder at CDF. I use CDI so the .25% bonus rate actually makes it enticing, until next April anyway. . Taking into account the 2017 contribution, I can start a ladder with just over 11K per year, adding another 5.5K every year as each one matures. Delay the wife's ladder until July and we will have a GIC maturing every 6 months to cover any rise/drop in rates.

Good point...when the TFSA allowable went to $10,000 the 3% took a couple of dives! So now we are back to $5,500 will it leap back?

December 23, 2015
9:20 pm
Loonie
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What's CDI?

December 24, 2015
10:27 am
2of3aintbad
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Rick, if indeed you can get the higher rates you quote, then agreed. However, definitely do not put everything in a 5 year gIC as opposed to a ladder. I'm not sure why you want to keep everything in one institution. Every December you can withdraw the one maturing

December 24, 2015
10:33 am
kanaka
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JustMe said

Thank you 'kanaka' for advice. 5 years is a little bit long period for such lousy rates. 'What-if' in 2018 rates go to 8%. Yes, this is a pipe dream even though I do not smoke...
Will PT drop their rate to 1.80? Who knows and my crystal ball is little bit muddy these days. I will take what they offer...
As for the phone service, you are correct. I have feeling they hire some spinsters who hate life and come to work because they can browse porn sites for free. Even e-mail communications is so lousy, there is no 'Hello' or 'Hi', just answer to questions - when I had them...

The "what if" will always do you in. I was told years ago by an adviser to not to watch my stock and mutual funds day by day....maybe every few months. A similar approach is to a 5 year ladder of GICs taking the best you can every year and forget about it and let interest work for you. I am well into retirement and when I review what interest rates I could have had for GICs (6-18%) vs mutual funds going up and own and make little to nothing over 20 years. Letting my adviser sell this and buy that. It only money being made with a guarantee is the MER and the front end, back end, or trailer fees. One needs to reconsider sure steady gain vs the stock market. In hind sight I wonder......

Merry Christmas Everyone!!

December 24, 2015
11:59 am
Rick
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Loonie said

What's CDI?

Canadian Direct Insurance. I insure house and cars through them. They give a bonus at CDF and Cdn Western Bank if you insure at CDI as they own them. That will be ending next year as CDI was sold to another company. I seem to follow them around...they used to be owned by HSBC, then CWB, and now the have been sold again.

December 24, 2015
12:12 pm
Rick
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2of3aintbad said

Rick, if indeed you can get the higher rates you quote, then agreed. However, definitely do not put everything in a 5 year gIC as opposed to a ladder. I'm not sure why you want to keep everything in one institution. Every December you can withdraw the one maturing

I agree. My wife has hers at another institution and mine is at PT. Even if I delay so that we have something maturing every six months, I hesitate to lock everything up in GIC's as I would like to keep at least half liquid for unexpected purchases or emergencies. On the other hand, all this doom and gloom talk of lowering prime rate even further and negative interest has me thinking grabbing a 5 year rate now would be the most profitable... but not liquid. I'm going back and forth...had a transfer set up to move it out of PT, then canceled it next day before it went thru. I think, for now, I will transfer it out of TFSA savings and into reg savings @ PT, let it sit for a week or two into the new year, and see what develops.

December 24, 2015
12:35 pm
Loonie
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thanks for explanation of CDI, Rick. Great deal on 5yr in particular.

I have 2 suggestions, apart from wait-and-see what January brings, which is valid. Hopefully the competitive spirit will bring forth new options.

1. Put some of the money in "emergency fund" TFSA 1-yr cashable GIC at Hubert or elsewhere. Hubert currently at 2.05 if you don't need to cash it (and less if you do) but it's there if you really need it. Put the rest in CDF ladder.

2. Put all of it in CDF ladder and get a line of credit for emergencies. The recently-arrived Moneysense magazine suggests that people do away with "Emergency funds". This is more specifically directed towards people with mortgages, but the principle could still apply. They suggest that over the long run one would be much better off financially to put the "Emergency fund" into the mortgage and take out a line of credit instead for emergencies. If you need the LOC, fine, and you pay the interest; but if you don't, you have saved a lot on the interest you would otherwise have been paying on the mortgage.

Your decision may depend in part on your assessment of how likely you are to need to access emergency funds.

December 24, 2015
1:25 pm
kanaka
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Rick said

2of3aintbad said

Rick, if indeed you can get the higher rates you quote, then agreed. However, definitely do not put everything in a 5 year gIC as opposed to a ladder. I'm not sure why you want to keep everything in one institution. Every December you can withdraw the one maturing

I agree. My wife has hers at another institution and mine is at PT. Even if I delay so that we have something maturing every six months, I hesitate to lock everything up in GIC's as I would like to keep at least half liquid for unexpected purchases or emergencies. On the other hand, all this doom and gloom talk of lowering prime rate even further and negative interest has me thinking grabbing a 5 year rate now would be the most profitable... but not liquid. I'm going back and forth...had a transfer set up to move it out of PT, then canceled it next day before it went thru. I think, for now, I will transfer it out of TFSA savings and into reg savings @ PT, let it sit for a week or two into the new year, and see what develops.

You might want to check both PT and Oaken as I believe they do RRSP and TFSA transfers fee free.

December 24, 2015
1:30 pm
kanaka
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Loonie said

thanks for explanation of CDI, Rick. Great deal on 5yr in particular.

I have 2 suggestions, apart from wait-and-see what January brings, which is valid. Hopefully the competitive spirit will bring forth new options.

1. Put some of the money in "emergency fund" TFSA 1-yr cashable GIC at Hubert or elsewhere. Hubert currently at 2.05 if you don't need to cash it (and less if you do) but it's there if you really need it. Put the rest in CDF ladder.

2. Put all of it in CDF ladder and get a line of credit for emergencies. The recently-arrived Moneysense magazine suggests that people do away with "Emergency funds". This is more specifically directed towards people with mortgages, but the principle could still apply. They suggest that over the long run one would be much better off financially to put the "Emergency fund" into the mortgage and take out a line of credit instead for emergencies. If you need the LOC, fine, and you pay the interest; but if you don't, you have saved a lot on the interest you would otherwise have been paying on the mortgage.

Your decision may depend in part on your assessment of how likely you are to need to access emergency funds.

Good ideas for sure. I built an excel program that tracks how effective my laddering process is doing and will tell me where Iam over/short and allows me to invest or re-invest accordingly. This allows me to use any institution that has the best rate. Unfortunately for TFSA is a bit more complex if you trying to exit from an institution and do the December withdrawal and January deposit. .

December 25, 2015
1:19 pm
rqs
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kanaka said

Loonie said

thanks for explanation of CDI, Rick. Great deal on 5yr in particular.

I have 2 suggestions, apart from wait-and-see what January brings, which is valid. Hopefully the competitive spirit will bring forth new options.

1. Put some of the money in "emergency fund" TFSA 1-yr cashable GIC at Hubert or elsewhere. Hubert currently at 2.05 if you don't need to cash it (and less if you do) but it's there if you really need it. Put the rest in CDF ladder.

2. Put all of it in CDF ladder and get a line of credit for emergencies. The recently-arrived Moneysense magazine suggests that people do away with "Emergency funds". This is more specifically directed towards people with mortgages, but the principle could still apply. They suggest that over the long run one would be much better off financially to put the "Emergency fund" into the mortgage and take out a line of credit instead for emergencies. If you need the LOC, fine, and you pay the interest; but if you don't, you have saved a lot on the interest you would otherwise have been paying on the mortgage.

Your decision may depend in part on your assessment of how likely you are to need to access emergency funds.

Good ideas for sure. I built an excel program that tracks how effective my laddering process is doing and will tell me where Iam over/short and allows me to invest or re-invest accordingly. This allows me to use any institution that has the best rate. Unfortunately for TFSA is a bit more complex if you trying to exit from an institution and do the December withdrawal and January deposit. .

Kanaka..
Any possibility of you sharing your excel template (without your data, of course)?

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