Is Tax-Free Savings Account (TFSA) right for you?

Way to go Jay!!!! I too think that the best form of wealth is a disciplined use of money and the conscientious handling of debt-load. Being debt-free at age 55 is commendable, as I too see so many young people who barely earn ten dollars per hour constantly travelling, or buying big-ticket items and then when they are 55 they wonder where all their money went, (and then blame it on the Government!!!) And has ANYBODY figured this out yet- your RRSP contributions might be tax-deductible and result in a tax refund where applicable but here's the clincher- when you go to withdraw that same amount of money, YOU GET TAXED MORE!!! They have you by the short-and-curlies no matter what you do. But being debt free at 55... no one can take that from you!!

I'm a single mother, I just opened a TFSA, why wouldn't I??? I read the comments about only the "Wealthy" have extra money. That is just a cop out, I don't have extra money but I want to have a better life so I try to save every little penny that I earn.

If you learn to live within your pay cheque and get yourself a budget then you will have extra money. Or like someone suggested earn more money. I work part time on weekends.. It is do able, only if you want to...

To answer one question "you can set a benefictarys to the TFSA"

$37.50 a year, are you kidding? If you get this account at the right place you don't need a typical savings account. Therefore saving about 2-300 a year on fees and an account that pays no interest. With a simple GIC a 4.25% your savings would be around $215.00/year. Now compound that over 10 - 15 years and you are clearnig your mortgage payment every month. (If you keep contributing) It would be nice to if people would actually research things and make informed comments before they put out silly comments like that one.

Hey It's better than a kick in the pants!!!! I agree with some of the comments about being able to save. I have 5 children and 4 of them are hard working and savers. One so far has put himself through University and is doing awesome. But the others have just applied themselves at there jobs and moved up slowly and are doing well because they live within there means. Sure at some points they were living in places that were not the greatest but it was always within there means. The 5th and oldest child hasn't had any more or less opportunities than the rest but is just plain lazy and underachieving and he spends a lot on electronics with the greatest in t.v.s and computers etc. etc. but lives in a dump and has no car. He also overextends himself and before you know it he owes a lot in interest alone to various credit cards and banks. Yes there are people who are making very little and who are struggling but there are just as many who have put themselves in that position through poor choices and the need to have everything now. Almost everyone through proper management of there lives can save and every little bit saved starts to add up and from my perspective the TFSA is just one more thing to aid me in the achievement of the bigger picture.

For the average Canadian carrying a mortgage and ungodly amounts of consumer debt, it makes much more financial sense to pay down those higher interest mortgage/car/credit card payments first. In the long run, you're going to save way more money than you would earn with either an RRSP or TFSA.

The CPP is currently viable for 75 more years.
http://www.house.gov/apps/list/hearing/financialsvcs_dem/denison030508.pdf
It is not going to go broke soon; this is just more right-wing claptrap to try to make everyone distrustful of government programs.

TFSA is better than RRSP. There is nothing good about RRSP's, except for the first time home buyers plan. In the long run if you are going to invest in the same investments you will make have more money in the end even in non registered investments. Capital gains tax vs. "tax all my money on withdrawal" tax. The TFSA does this one better and eliminates the tax! Don't even pay attention to the capital losses fact..... thats just dumb, shouldn't be investing if you are counting on using capital losses benifit for suvival. I invite you to do a little spreadsheet of your own, see for yourself and don't rely on others to think for you. TFSA is the way to be. Thank you Governmetn of Canada for introducing this

I see in a number of comments GIC interest rates of 2-3% and even a 4.25% (in Jay M's comment). I don't know where one can get such rates today, but I would surely be interested to find out. Today I could only get an offer from my bank of 1.67% for a one-year non-redeamable GIC (the posted rate is 1.2%), which I am considering for my TFSA.

The best part of all this -- all capital gains from your TFSA accounts are tax-free. But at the same time, all losses cannot be reported for tax purposes.

WHAT LOSSES? ITS A TAX FREE SAVINGS ACCOUNT!!!!!!there is no chance what so ever at losing money, its 100% safe you cant lose money.
This guy should get fired for saying this.

JOE LEE=STUPID

It's important to remember the difference between an RRSP and a TFSA, where an RRSP gives you the tax advantage now and the TFSA gives it to you later when you retire. Do you think that the tax rate will be higher when we retire than what it is now? Well, of course it will be! Things such as stocks are an excellent idea for this - if you get 9% return on your stock each year, and you put in 5k per year, you end up investing a total of $180,000 (which you got taxed on), but now you have a total of $1.29 million in your investment, which is a gain of over 1 million and it's tax free!

For the lower-income earner, this is an excellent way to save money, because you'll take out all this money tax free, plus you can still get whatever the government will give out for retirement.

And one other thing - people used to work to the age of 65 and die around 75 - now everyone seems to want to work to 55 and live to 85. No wonder there's a strain on the system! If it's hard to save money at the rate of 5000 per year, put in a little less, but don't settle for lame investments like GIC's. Stick your money in something that has a proven track record for giving good returns, stick to it (even if it takes over 40 years) and you'll be fine by the wonders of compound interest and tax free withdrawls.

do not listen to these people trying to sell you on the TFSA - pay down your mortgage or credit cards or student loans. These savings vessels are created only for the rich who don't have mortgages.

If you use an insurance company product for your TFSA account you can designate a beneficiary in Ontario and bypass probate just like with a segregated fund. You will be limited to GIC or seg fund product offerings but it will work well for estate planning.

There is also a provision for a "spousal rollover" so if you die your spouse does not lose the accumulated tax shelter. The funds do not have to go through probate with the insurance beneficiary designation unless the will states otherwise.

Theo - my understanding is that you can put mutual funds or stocks inside the TFSA, which could mean you'd lose money if the stock/mutual fund went down and you decided to sell.

Harry T.....You should consider switching banks. I work for one, & my posted rate today for a 1 yr non-redeemable GIC is 2.5%. .47% bonus on their posted rate is still way below our redeemable GIC's.

Thanks for keeping it plain and simple, ophelia. Why would anyone carry excess credit debt in order to put money aside in a TFSA. You nailed it. The avereage Canadian lives in debt and the national savings rate is zero (or negative) because of this debt. How many average Canadians hoestly feel ripped of at tax time when they get a T slip for interest income on their savings. I'm sure a lot of you are saying "what T slip?" I know someone who works in the banking industry and apparently there is a lot of confusion over this account. I've heard that people want to borrow to put money into their TFSA. Please, do your homework on this one. It does not offer the same tax deductible incentives that an RRSP does.

Thanks for keeping it plain and simple, ophelia. Why would anyone carry excess credit debt in order to put money aside in a TFSA. You nailed it. The avereage Canadian lives in debt and the national savings rate is zero (or negative) because of this debt. How many average Canadians hoestly feel ripped of at tax time when they get a T slip for interest income on their savings. I'm sure a lot of you are saying "what T slip?" I know someone who works in the banking industry and apparently there is a lot of confusion over this account. I've heard that people want to borrow to put money into their TFSA. Please, do your homework on this one. It does not offer the same tax deductible incentives that an RRSP does.

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If you can spare the cash long term a TFSA account is an attractive way of saying tax free.

The calculator is there for no other reason then to sell people on RRSPs -- if you take the total and subtract the tax owning (35%) from the RRSP it's the same as the total amount for the TFSA -except with TFSA-no headaches- no idiotic inane government interventions-no increased income so clawbacks will be applied to your OAS and GIS.

And Bob is right why always target people making big cash with these programs rather then those just getting by - "with a major increase to the personal exemptions"

frustrated CFP