You Would Think a TFSA Would Be a No-brainer….

But you would be wrong.

The TFSA (Tax Free Savings Account) has been lauded as the best financial savings/investment tool to come out since the introduction of the RRSP (Registered Retirement Savings Plan).

In my humble opinion, it is about the only thing the sitting government has done right.

Did I just write that? I need a shower to wash off the filth.

My apologies, I digress.

In a recent survey for Mackenzie Investments, the majority of people have heard of it but a whopping 76% haven’t opened one yet. I had to read that a couple times because that is CRAZY!!!

I mentioned this to some colleagues at work and one fessed up that she hadn’t opened one up yet. I had to reign in my disbelief. I didn’t want to embarrass her and I don’t want them to think I am totally nuts.

You don’t get a tax deduction when you contribute to a TFSA but every dollar earned is a dollar you keep. That is huge!!! Withdrawals from the TFSA are tax free and that amount becomes additional contribution room the following year. This is a fantastic option for those who do not earn high incomes (and therefore will not be able to maximize the benefits of an RRSP).

Of those tested/surveyed, only 36% knew the remaining contribution is not lost if one did not contribute the maximum amount that year. Only 44% of those who opened an account have maxed their contributions (about 11% of those surveyed), one third of those who have opened an account contributed $1000 or less while the average contribution is about $3000. That is certainly better than nothing but we should be doing better.

No one is going to care more about our finances than ourselves so why not take every advantage?

I’m not saying that one should invest on your own. It may not be your inclination, interest or even something you like to think about but at the very least, set up the account, contribute as much as you can and talk to someone qualified to help you make the right decisions for you.

This is the only thing I can think of brought in by the Conservatives in the four years they have been “in power” that is beneficial to everyone who is eligible. $5000 sounds like a lot of money but it is just $96.15 per week. Some people will spend $20  (conservatively) on lunch and a couple of coffees at Starbucks a day. If that is too much, anything is better than nothing.

I bug people about the TFSA about as much as I bug people to vote in elections. Each gives you a direct say in areas that affect your life but for most people it is too much of a bother. It is too easy to abdicate responsibility.

I know few people are in as privileged a position as I am (mortgage-free, full-time job for now, enough saved to retire if I lived VERY frugally) but I did not get to this point overnight. Of course I don’t wish to subsist on discounted produce from Chinatown and dented canned goods so I intended to take full advantage of this gift to investors and continue to pad my retirement.

After all, who knows what will happen at my workplace, the economy, the CPP, all I can control is what I do with the extra dollars at my disposal when all the “necessities” have been taken care of.

Would I prefer to  go shopping at Anthropologie?

Of course I do, but I am going to make sure I max out those contributions before playing with what is left over.


~ by angryegg on May 20, 2010.

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