May 2nd, 2009

Would you like to find out how to fund your home purchase with a Tax Free Savings Account?

Did you know that young couples struggling to save money for their first home will find the tax free savings accounts (TFSAs) an immense help towards becoming owners.

The Financial Posts Jonathan Chevreau has been a reliable go-to financial guru, wrote the following about building equity with the TFSA.

Consider that if both spouses each put aside the $5,000 annual maximum amount, they’d have $30,000 saved within three years–plus any growth–all free of tax.

It’s possible that a risk-tolerant couple willing to put stocks into their TFSAs while values are depressed could see that $30,000 rise to $40,000 or $50,000 in a few years time, if stocks roar back.

Of course, those who want the certainty of a down payment by a set time frame should settle for more conservative interest-bearing investments such as GICs, Canada Savings Bonds, money market funds or high-interest savings accounts.

Either way, the TFSA provides a good alternative to the previous route of borrowing from RRSPs. Under the Home Buyer’s Plan introduced in 1992, a first-time home buyer can borrow $20,000 ($40,000 for a couple) from an RRSP interest-free. The catch is this loan must be repaid within 15 years or suffer the tax hit. Such withdrawals, of course, will reduce your retirement nest egg, defeating the main purpose of RRSPs.

Find out more information by reading the rest of the article here.

May 29th, 2008

The Honourable James M. Flaherty, P.C., M.P. Minister of Finance

Discusses Tax-Free Savings Account at Budget 2008—Responsible Leadership

This is how it works:

• First, Canadians can contribute up to $5,000 every year to a registered Tax-Free Savings Account, plus carry forward any unused room to future years;
• Second, the investment income, including capital gains, earned in the plan will be exempt from any tax, even when withdrawn;
• Third, Canadians can withdraw from the account at any time without restriction. Better yet, there are no restrictions on what they can save for; and
• Finally, the full amount of withdrawals may be re-contributed to their Tax-Free Savings Account in the future, to ensure no loss in a person’s total savings room.

An RRSP is primarily designed for retirement. In many ways, a Tax-Free Savings Account is like an RRSP for everything else in your life.

It is a powerful incentive to save:

• To help young people saving for their first car;
• To help couples saving for their first home;
• To help seniors stretch their retirement savings further; and
• To help every Canadian set aside a bit of cash each month for a special project, to help their kids, or to simply treat themselves.

To make it easier for lower- and modest-income Canadians to save, there will be no clawbacks. Neither the income or capital gains earned in a Tax-Free Savings Account nor the withdrawals from it will affect eligibility for federal income-tested benefits, such as the Guaranteed Income Supplement.

March 21st, 2008

Savings for Post-Retirement Needs