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TFSA Retirement Welfare Bums

I wrote this in 2014 in reaction to Mr. Harper’s doubling of the TFSA limit to $10,000 per year and thinking of raising it to $11K.

I am borrowing an expression that David Lewis made about Canadian Corporations getting far too many tax breaks (his phrase was “Corporate Welfare Bums“). However, I feel it is correct, given the furor in the media about Rich Canadians getting fat off Retirement Welfare.

Ottawa Fat Cat
That is a fat cat

It all seems to be a reaction to The Harper Governmentâ„¢ proposing (or maybe only socializing) a doubling of the current TFSA yearly limit to $11K, and thus the fear of “Rich Fat Cat Canadiansâ„¢” taking advantage of this unfair change to hide income and possibly end up getting paid the Guaranteed Income Supplement if they retire (GIS is really to help those who are retired with lower-income if you have a higher income it typically is clawed back). It is diabolical. Someone who could save $11,000 a year until they retire might appear to be a pauper and attempt to get government handouts? How dare they exploit this “tax loophole” ! #OMG.

Now let’s all calm the heck down, given  I have just whipped you into a fury of moral indignation about the Rich Fat Cat Canadiansâ„¢ out there. I would guess that the government (as part of announcing the doubling of the TFSA limit (possibly)) will force folks applying for GIS to report their TFSA holdings, and that will then disqualify them from getting the GIS. Still, if you believe the statement, it is happening right now, and the Harper Governmentâ„¢ is doing nothing about it! #OMG

Of course, it is not the case, but having a higher TFSA limit does make for some fascinating questions about where to put your retirement funds, especially if you are younger (for someone like me, I have about ten years before retirement, if they DID double the rate and I DID max out my TFSA’s I could have about $140K or so (with growth) in my TFSA). I have seen many compelling arguments on both sides, and I am not entirely sure which is better. However, I will be proposing tomorrow (teaser) an exciting hybrid solution (that is neither brilliant nor new, just me rehashing old ideas (as usual)).

So all you Rich Fat Cat Canadiansâ„¢ can thank the Harper Governmentâ„¢ for yet another break being given to you, you oppressors of the proletariat.

Full Disclosure: I believe if I use the definition of Rich Fat Cat Canadiansâ„¢, I must disclose that I am (most likely, depending on the income line used) a member of this club too, and yes, I wrote this (a little) tongue in cheek.

Feel Free to Comment

  1. RICARDO – TFSA isn’t for rich people. You can open one with $50. Its a way to invest in something other than bank investment products without having to have an RRSP or pay tax. It’s fairly simple.

    1. @ Jeff
      Agreed that it is not “only” for rich people and that you do not have to be “rich” to contribute, whatever rich is. None the less it takes either serious budgeting or quite simply more money to max out the TFSA. Not every one can do that. Circumstances vary such as single, couple (both working), family with kids (how many kids) etc. etc.
      So while $50 can get you started, some people may have a hard time to find that spare change. I hope they can find it. Best thing to come along.
      Of course the CRA is now getting in to the act to make sure that your “tax free” savings are not too big because you were a smart cookie and invested wisely. I just gotta say it “I Told You So”. I just knew that once the investments grew someone in government would be drooling over them. Now if they could only get their heads around that the actual problem is that the government is spending more than it takes in there just might be something accomplished other than taxing us more.

  2. The TFSA limit won’t be increased to $11,000 yet, although it might be a 2015 budget surprise 🙂

    The reality is, those that can afford to contribute to their RRSPs and TFSAs do both, although anyone at any salary level should have a TFSA. I would argue RRSPs are for rich fat Canadians, they should only apply to folks with a high income level.

  3. Be careful if you have a tongue in cheek. If you bite down it will hurt.
    But seriously, the TFSA is only for those who can afford it. It has changed the landscape as to where to put your “extra” money depending on how much you make over and about your living expenses and frivolous, but fun, spending.
    Someone earning $40K a year probably can not afford to put money away unless you are single and eat soup every night.
    So upping it to $11K per year IS only for the fairly well off. I am too close to retirement to make any difference but for those who are able to contribute for twenty or more years it will be a significant lump of money. I have no doubt that once which ever finance minister sees all this taxed but now “untaxable” money they will find some way to dip in to your pocket. to help with yet another government deficit. You know, like a deficit in the ministers or government employees pension fund.

  4. I’m sure the government would close any tax loopholes. If the Harper government decides to double the TFSA limit to $11k that’d completely change the RRSP vs TFSA landscape. Looking forward to you post tomorrow. 🙂

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