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[ursula]

Does anyone know anything, or even have anecdata, about the Tax Free Savings Accounts?  Our bank lady was trying to sell us on one this morning. 

For my part, if our current government is telling me something is good and good for me, my first inclination is to run quickly in the other direction. 

[obprof]

No -- these are actually a very good idea. I would definitely look into them. Some things to keep in mind:

-The contribution room rolls over automatically. So if you can't use up your $5K this year, you can buy $10K next year.

-Depending on the tax bracket you will be in when you retire, these can be a better bet than RRSPs, because TFSA money is not taxed when you withdraw it (the way that RRSP money is).

-Be very careful with your withdrawals. A lot of people had to pay penalties because they were withdrawing and repaying their TFSA funds continuously (e.g., they were using it like a savings account). When you make a withdrawal you need to wait to the next year to pay it back.

All in all, I think this is a great option for planned spending (e.g., save for a house or a cottage) and is especially nice for folks who don't have much RRSP contribution room.

[llanfair]

-Be very careful with your withdrawals. A lot of people had to pay penalties because they were withdrawing and repaying their TFSA funds continuously (e.g., they were using it like a savings account). When you make a withdrawal you need to wait to the next year to pay it back.

Actually, that only applies if you've already put in the maximum ($5K) for the year.  Say you put in $4500 in January, and withdraw $500 in June, leaving yourself with $4000.  The maximum amount you can still put in before Dec 31 at midnight is now $500; that is, you can't bring the total back to $5000.

The SO just drew up an accounting of how much room each of us still has for depositing in this calendar year, just to make sure we don't get burned this way.  We did make some pretty big withdrawals to finance our England trip this summer.

But these are great, and a good way to earn interest tax-free, while still keeping some flexibility that you don't get with RSPs.  Ours are through ING Direct.

[anon99]

As the others said, they are a good idea.  Some where I heard that $40K is the income level above which RRSPs are better than TFSA from a tax savings point of view.  Having said that if you max out your RRSP contribution, TFSA are a good way to save more.  That and the interest rates for TFSA are higher than RRSP (in general).

[llanfair]

<giggling>

I'm sorry, Anon99, but it just breaks me up when someone suggests the possibility of maxing out my RSP contribution.

[airball]

You can put beaver pelts in the bank? Man, you Canadians are a resourceful crew!

[llanfair]

And moose pies.  It's a proud part of our Canadian heritage.

[history_grrrl]

For my part, if our current government is telling me something is good and good for me, my first inclination is to run quickly in the other direction. 

Now, now, urs, don't cut off your nose to spite your face. After all, let's not forget the Stephen Harper home renovation tax credit, for which I am most grateful despite the fact that I can't stand him.

[janewales]

Yes, that one's a guilty pleasure for me too, H_G (as I contemplate my nice new floors...)

[grasshopper]

I love that he made scholarships non-taxable.

[llanfair]

Yes, that one's a guilty pleasure for me too, H_G (as I contemplate my nice new floors...)

And I my new siding and shutters.  And yes, Grassy, that tax-free scholarship made my grant go a lot farther.  (But I can't wait for a chance to vote the man out.)

[history_grrrl]

Jeez, we're practically making a commercial for the guy here. Scary.

I thought I'd be eligible for citizenship last month but it looks like it won't be until the end of the year. When do I get to vote him out?

[llanfair]

The word is that there probably won't be any serious moves till the budget, which will be in the new year.  So hopefully you'll get your chance ...