June 17th, 2009

On January 1, 2009, Computershare Trust Company of Canada began offering Group TFSAs for employee share purchase plans (ESPP). Share purchase plans offered within the framework of a TFSA enable employees to acquire equity and share in their company’s success while tax sheltering the dividends earned and capital gains realized from their investments.

“We know that the average annual investment in an ESPP per employee is usually less than $5,000,” says Dave Nugent, Senior Vice President of Computershare Plan Managers, “We also know that the ESPP is a contributionbased, mediumterm savings vehicles for people. Both of these features make the Group TFSA a great fit for members of ESPP programs.”

Within an ESPP, employees make small deposits through payroll contributions that are normally matched at some level by the employer. The taxes that become payable on dividends and capital gains erode the earnings in an ESPP. Offering the TFSA within share purchase plans provides a tax shelter for that growth.

Generally ESPPs only attract a portion of employees to invest in the company stock depending on the employer match. Computershare expects that offering this taxsheltering benefit within a share purchase plan will appeal to employees and increase their participation in company plans. How could you use the TFSA creatively with your employees?

June 12th, 2009

Investment planning is typically modified through the course of an investor’s lifetime, as their investment goals and time frames change. During your 20’s, your investment goals are typically different than they are in your 30’s and so on. With the new TFSA becoming available in 2009, it is important to understand how many investors plan to utilize this account for their financial futures.

TFSAs in your 20’s

Many 20 year olds are in the beginning stages of their financial lives. This decade is often filled with college graduation, new homes, new vehicles, marriages and potentially the beginnings of a family life with the birth of children. So, how does a 20 something use the TFSA to meet their financial needs? Most individuals within this age bracket are planning to use the TFSA for 2 primary purposes; as a tax free short term savings account, and as a seed for their future retirement plans. So, some money will be redirected into these TFSA accounts to fund the short term goals while the funds that are unused during the short term will be left to compound for retirement.

TFSAs in your 30’s

If someone during their 30’s has not yet purchased a home, vehicle or has not started to save for their children’s education, these are the primary short term purposes for saving into a TFSA. Towards the latter part of someone’s 30’s, they are often focused on the accumulation of wealth. During the wealth accumulation stage, many individuals will be trying to back fill their TFSA accounts. Any withdrawals that have been made and any room that is left within the TFSA accounts should be filled when financially possible. The ability to take advantage of both tax deferred growth and tax free withdrawals during retirement is a tremendous advantage that should be taken advantage of, especially during the peak earning years of a 30 something year old.

TFSAs in your 40’s

Many financially savvy individuals have the goal to retire during their 50’s, so the decade before is the time frame where many begin to focus on the accumulation of wealth. And, most individuals in their 40’s have already accomplished many of the traditional financial goals such as building a cash reserve, buying a home, purchasing vehicles and sending their children to college. So, the 40’s is the time frame where individuals will begin to maximize their contributions into their TFSA accounts for retirement.

In addition to taking advantage of the full annual contribution amounts, individuals will be re-contributing funds that they have withdrawn as well as any room that was not utilized during their 20’s and 30’s. The funds that are invested into the TFSA accounts are a great compliment to pensions and the RRSP accounts when creating an income stream during retirement.

So, no matter what age bracket you currently fall into, the TFSA is a useful financial tool.

June 6th, 2009

Canadians are Catching on to the TFSA.

According to a survey by a global market information and insight group, the introduction of the new Tax Free Savings Accounts or TFSAs has caught the attention of many Canadians. ”The combination of advertising by government and financial institutions has translated into a high awareness of the new investment vehicle and good initial uptake,” said Rhonda Grunier, vice-president of TNS Canadian Facts and director of the market research firm’s TFSA study. The survey found that 79 per cent of Canadians are aware of TFSAs, and this is only somewhat behind awareness of the longer running RRSP (94%) and RESP (84%) accounts. There is also little reported confusion between TFSAs and RRSPs. Only 27 per cent say that they do not understand the difference between the two.

Who’s Most Likely to Take Advantage of the TFSA?

When it comes to opening a TFSA, already 14 per cent of Canadians have already jumped on the savings wagon. Another 36 per cent of Canadians are either very likely (18%) or somewhat likely to do so (18%) in 2009. Adding those statistics and subtracting from 100 leaves 48 per cent who are not likely to open an account this year.

Not everybody is jumping on the savings wagon.

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