Who's opened a Tax-Free savings account?
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  1. #1
    Registered User mommy4ever's Avatar
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    Default Who's opened a Tax-Free savings account?

    I don't have a lot to contribute to it right now, I started with $65. But the $5000/yr is cumulative, meaning if I only deposit $1000 this year, I could up to $9000 next year. If I do $$1000 next year, then I can do $13000 the year after.

    They don't pay much interest, if you put them in GIC you could earn more, but I don't want my money locked up and have to pay huge fees to use it. Maybe in a few years I'll be open to it.

    But I'm see this as a great thing. The money is being taxed at my current income rate essentially $0 this year, maybe a little next year. And will not be taxed later when I use it! Imagine some tax free moneys to take out for a trip, house renovations, or retirement!

    I'm only 35 now. So I will be able to invest up to $150000 (when I turn 65), then it can earn all the interest all it wants! I think a nice little subsidization. Even with the meager 2.55% interest, if $5000 is deposited every year, the earnings on that money is potentially $71,000,(ALL TAX FREE) add that to rrsp savings, it could pay for a nice vacation or two in my golden years! YAY~

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    Other than you don't earn a lot of interest, I think it's one of the best things our government has done. It's all tax free too which is even better.

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    Registered User mommy4ever's Avatar
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    CIBC has a 5 year GIC that has a changing rate, the 5th year being 8%. Average of 5.54 so some what better. But for now I'll take my savings maybe there'll be a better one to transfer to later.

    The rate, and the fact that you it isn't tax deductible like the rrsp. But take what you can get I guess.

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    Registered User MomToTwoBoys's Avatar
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    I've been perusing this through Scotiabank because that's whom I normally bank with. We're not in a position to do it now, but it would be great to get started. At the moment, my Money Master account nets me way less than it was when I first started.

    Perhaps once we get the slush fund going and can put money into savings to not be touched, I'll take part in it.

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    Registered User mommy4ever's Avatar
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    Open one this year, so even if all you can put is in $50, you have the option to put the 4950 in a future year.

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    Registered User monkeywrangler71's Avatar
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    I haven't gotten around to it yet, but really need to get it done because the money for both of our accounts is sitting in the bank earning taxable interest right now.

    Just a couple points worth mentioning:

    - the $5000 contribution limit is just what it is currently set at, this amount is indexed, similar to RRSPs, and will go up with the rate of inflation. So you will actually be able to put in a lot more over your lifetime than $150000.
    - you are allowed as many different accounts as you want and as many different types of eligible securities as you want, provided you do not exceed your contribution limit. You aren't limited to a low interest savings account - stocks, bonds, GICs, mutual funds, are all allowed, and you can spread your investments around as many different banks as you want.

    On that note, there are two TFSA options at ING direct that are paying sign up bonuses. $13 bonus for a savings account (min. $100 deposit) and $25 bonus for mutual fund account (min $1000 deposit). http://www.ingdirect.ca/hugthetaxman/
    You are allowed to do both.

  8. #7
    Registered User rachelMcK's Avatar
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    These accounts confuse me. I tried to research them. I get the $5k limit a year and the carryover and what not. But what happens when you need the money and have to take some out? Is it then taxed?

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    Registered User Ebbie's Avatar
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    No Rachel, if you have the money in an account where you can withdraw it (ie. savings instead of a GIC which is locked in) then you can withdraw it at any time without paying tax.

    I opened two accounts. One with Scotiabank, but their website is so confusing I couldn't figure out how to contribute to it, so I said screw this and opened one at President's Choice Financial instead. Scotia, you snooze you lose! Anyway, the one at PC Financial is paying 2.55%, not great but it's a start. I don't really want to tie up the money in a GIC or other investments right now. I made a lump sum deposit of $5000 so I'm done for the year.

    To the person with the Scotia Money Master account...I too was disappointed with how low their savings rate dropped. Scotia just started a new account called Power Savings and if you have over $5000 to deposit the rate is much higher. You can compare the two accounts here:

    http://cgi.scotiabank.com/rates/savings.html

    It's the first two listed. Money Master is at 1 to 1.75 percent and Power savings is 2.6 (if you meet the minimum requirement).

    ps. someone else mentioned opening a TFSA account now so that your contribution room will accumulate even if you don't deposit in a given year. That confused me...I wondered if you HAD to have an account in order for the contribution room to accumulate, so I researched it and from what I can tell you DON'T need to start an account in order for the room to grow. Your contribution room will be calculated on your T1 tax forms and they'll let you know your room on your tax assessment, but it is independent of you having opened an account already (much like your RRSP room accrues even if you haven't opened an RRSP yet). So it you don't open an account this year, you can open one next year and have $10,000 in contribution room. (at least that is my understanding as I read it...not a professional here).
    Last edited by Ebbie; 01-23-2009 at 09:02 AM.

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    Registered User Kaos Kitty's Avatar
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    I just opened a Tax Free account with ING Direct. Very easy on-line. I'm going to have Dh open one in his name too.

    If anyone wants to be referred to ING to open a tax-free account just PM me your email. All that happens is you'll receive an email with my referral code, you can choose if you want to use it or not. If you do sign up we'll both get a $13 bonus. The current interest rate is 2.7%, and you only need to deposit a $100.

    I've had ING accounts for the past 5 years and I like the customer service and that I can have as many savings accounts as I want (to separate EF savings, education savings, ect.).

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    Registered User monkeywrangler71's Avatar
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    Quote Originally Posted by Ebbie View Post
    ps. someone else mentioned opening a TFSA account now so that your contribution room will accumulate even if you don't deposit in a given year. That confused me...I wondered if you HAD to have an account in order for the contribution room to accumulate, so I researched it and from what I can tell you DON'T need to start an account in order for the room to grow. Your contribution room will be calculated on your T1 tax forms and they'll let you know your room on your tax assessment, but it is independent of you having opened an account already (much like your RRSP room accrues even if you haven't opened an RRSP yet). So it you don't open an account this year, you can open one next year and have $10,000 in contribution room. (at least that is my understanding as I read it...not a professional here).
    This has been confusing me as well because it is the second time I have heard someone say it. I couldn't find anything on the gov. website that either confirmed or denied it, although it did say if you were 18 in a province where the minimum age is 19 you would start accumulating room even though you couldn't open an account until the following year. I would be interested in knowing where people are getting the information that an account is necessary to accumulate contribution room.

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    You know, we bank through the Royal. Their website doesn't even give the interest rate for the TFSA. We aren't biting until we see it actually is a better deal for us than we're already getting.

    Jean

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    Registered User rachelMcK's Avatar
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    I bank with CIBC and they don't list their interest rates either. It didn't really make me want to bank with them (not a TSFA anyway) so I'm considering ING.

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    Registered User monkeywrangler71's Avatar
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    Quote Originally Posted by peanut View Post
    You know, we bank through the Royal. Their website doesn't even give the interest rate for the TFSA. We aren't biting until we see it actually is a better deal for us than we're already getting.

    Jean
    Savings deposits second item down:
    http://www.rbcroyalbank.com/RBC:[email protected]/rsp.html

    GIC rates:
    http://www.rbcroyalbank.com/rates/gic.html
    http://www.rbcroyalbank.com/rates/rgic.html

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    The ING TFSA is paying 3% interest right now. I'm considering this my EF/sinking fund account.

    Next year I'll probably open up an investment TFSA so I can hold some ETFs in there.

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    thanks MonkeyWrangler. I wondered where they had it on the site. I went under "Rates" and couldn't find it. Guess I didn't go deep enough. Still...will have to think about it...Hmm...I was obviously not looking closely or on a different page. I must admit, I like INGs rate better.

    Jean
    Last edited by peanut; 01-24-2009 at 09:36 PM.

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