New TFSA limit for 2019 - $6,000

[Gerbs]

The $500k is a major outlier haha. I think the TFSA is more utilized by the middle class as well. Maybe they'll start mandatory financial literacy classes in high school to educate people about TFSA/RRSP/RESP.

[Ferra]

Originally Posted by Gerbs

@Radioman. When I worked at the bank. I've seen tons of TFSA's with $150k+ likely from the Bull Run we had in the last 10 years. Some people had like $500k+ most likely from picking individual tech/weed stocks.

I also had the same discussion at work on whether TFSA will be capped one day. Cause once you hit about $500k - $1MM in TFSA. You'll have a solid passive income for the rest of your lift + future generations. So that sparked the talk about if the CRA will ever remove the TFSA account or limit it to a maximum tax savings.

One of the portfolio managers mentioned that less than 2/3rd of Canadians save more than $10,000. Let alone max out a TFSA. Of those who max a TFSA probably less than 20 - 30% of them actually invest in something other than a GIC or just a regular savings account. So not many people actually have a lot of money saved thus he doesn't see the government changing the TFSA anytime soon.

https://yourfinanciallife.bmo.com/ar.../#.W_RKsuhKiUk

Regarding people with 500K+ TFSA...

I remember when TFSA first started, many smart (and brave) people would over contribute their TFSA on purpose.
CRA rules was simply 1% penalty per month on over contribution.
So you can over contribute $500,000, and pay $5,000/month penalty.

Some active trader would use that $500K and make 20%+ gain in a month.
Pay CRA $5000 penalty, remove $500K from the TFSA after a month.
And now they are left with an extra $100K+ in their TFSA account that is tax free and will be tax free for eternity.

Keep in mind $1 in TFSA is worth a lot more than $1 outside of TFSA since all future income from that $1 will be tax free. So if you think about it, it would be worth while to do the above even if they didnt' made 20%, but only 1% profit in a month...

they were basically gaming the system, but it wasn't illegal
I think after 1-2 years CRA crack down on it and added rules regarding tax advantage and 100% tax on any investment from intentional over contribution.

I think those who did the intentional TFSA over contribution get to keep their money tho because they didnt' break the rules at the time.
That's how you end up with many people who has $500K+ in their TFSA.



That or some lucky bastard put all their eggs in 1-2 baskets and got ten folds returns.

[!LittleDragon]

I'm not sure what the threshold is but if you trade a lot in the TFSA, the CRA may see that as taxable income. You're basically not investing, you're trading.

[PeanutButter]

I'm weary about the outlook of the financial markets as interest rates continue to rise... I've been slowing rebalancing my portfolio because I think the market is going to slow down quite a bit. I've made enough during this last bull run i'm okay with smaller yields.

Current Portfolio:
- 80% equities
- 20% fixed income

Converting Portfolio to:
- 50% equities
- 50% fixed income

And if the next big downturn happens, i'll have tons of cash to pick up positions. Though, if the market continues to bull run, i'll be happy with my 50% position in the market.

I'm okay with the risk to benefit on this one. Still, i'll have major fomo if the market recovers from this little dip and continues to run, but I just can't see that happening. US govt. stimulus is set to stop 2019/2020, so there's no way the market can continue to climb. Higher interest rates, no more stimulus = nerfed market.

[Gerbs]

I've also met people who put all $57,500 into speculative investments and now their account only has about $12 - 15k + the $6k contribution next year. So YMMV if you wanna hit the 10 baggers.

Originally Posted by PeanutButter

I'm weary about the outlook of the financial markets as interest rates continue to rise... I've been slowing rebalancing my portfolio because I think the market is going to slow down quite a bit. I've made enough during this last bull run i'm okay with smaller yields.

Current Portfolio:
- 80% equities
- 20% fixed income

Converting Portfolio to:
- 50% equities
- 50% fixed income

And if the next big downturn happens, i'll have tons of cash to pick up positions. Though, if the market continues to bull run, i'll be happy with my 50% position in the market.

I'm okay with the risk to benefit on this one. Still, i'll have major fomo if the market recovers from this little dip and continues to run, but I just can't see that happening. US govt. stimulus is set to stop 2019/2020, so there's no way the market can continue to climb. Higher interest rates, no more stimulus = nerfed market.

I considered rebalancing as well. But I am still in the super early years of my investing time frame. So I am moving from 100% equities to 80/20 balance. What did u buy for Fixed Income? Bond ETFs? US T-bills looking attractive atm.

[josayeee]

I need to renounce my US citizenship before I can use my own TFSA which really sucks. I have to use my wife's TFSA for now.

[PeanutButter]

Originally Posted by Gerbs

I've also met people who put all $57,500 into speculative investments and now their account only has about $12 - 15k + the $6k contribution next year. So YMMV if you wanna hit the 10 baggers.

I considered rebalancing as well. But I am still in the super early years of my investing time frame. So I am moving from 100% equities to 80/20 balance. What did u buy for Fixed Income? Bond ETFs? US T-bills looking attractive atm.

$57k to $15k? DAMNNN. That's got to hurt. They must have been in like mining stocks or something, that's crazy.

I'm fairly early into my investing timeline as well (I'm 30), but we're saving up for a down payment, so it's probably prudent I reduce my risk and realize my profits.

For fixed income, i'm actually just holding cash in a savings account inside my TFSA. I'm open to buying back in, but only if the market corrects a lot more then it is now. I've learned that it's always good to take profits, I learned that from the last crypto run...

[PeanutButter]

Originally Posted by Gerbs

The $500k is a major outlier haha. I think the TFSA is more utilized by the middle class as well. Maybe they'll start mandatory financial literacy classes in high school to educate people about TFSA/RRSP/RESP.

This is definitely an outlier. I've helped my parents invest their TFSA and their account is sitting just over $70k right now

5% Cash
20% RBC
25% TD US Equities TDB902
25% TD Dow Jones TDB903
25% TD Nasdaq TDB908
^ TD e-series is a great lower cost index fund that doesn't charge fees for buying or selling. Great for making monthly contributions as the minimum buy is only $25.

The Canadian market and international market has been such a poor performer, that I don't even bother. For Canada, just pick one bank and one energy company and be done with it.

I completely agree with you in regards to teaching finance in high school. Everyone should be learning basic finance and how to do their taxes. Every child should be filing their own income tax or a mock income tax in high school so they learn.

[Gerbs]

Originally Posted by PeanutButter

I'm fairly early into my investing timeline as well (I'm 30), but we're saving up for a down payment, so it's probably prudent I reduce my risk and realize my profits.

I'm trying to save for a down-payment too. Which means I should probably hold a more conservative portfolio if I am trying to purchase in the next 4 - 6 years. Ideally when I hit 26 - 28ish.

I didn't know TD had free ETF's as well if you buy the e-series. That's a lot easier than using a 3rd party brokerage. I use Questtrade to manage my parents ETF's. They are free to buy, $5 to sell. I purchased Vanguard ETF's at 60% Equity / 40% FI. Then split by the following countries:
30% Canada
40% USA
30% Emerging markets

I'll likely toss the Canada Market and just pick one Resource + Bank + Utility. I talked to a VP at RBC and he mentioned that Emerging markets has the most alpha currently if your going to choose an actively managed fund that can bet an index. Since emerging markets is still relatively new.

[Mr.HappySilp]

Lol most people living in Vancouver are living pay cheque to pay cheque maybe don't think they even have money save up in case they lose their job let alone put in retirement funds.

[PeanutButter]

Originally Posted by Gerbs

I'm trying to save for a down-payment too. Which means I should probably hold a more conservative portfolio if I am trying to purchase in the next 4 - 6 years. Ideally when I hit 26 - 28ish.

I didn't know TD had free ETF's as well if you buy the e-series. That's a lot easier than using a 3rd party brokerage. I use Questtrade to manage my parents ETF's. They are free to buy, $5 to sell. I purchased Vanguard ETF's at 60% Equity / 40% FI. Then split by the following countries:
30% Canada
40% USA
30% Emerging markets

I'll likely toss the Canada Market and just pick one Resource + Bank + Utility. I talked to a VP at RBC and he mentioned that Emerging markets has the most alpha currently if your going to choose an actively managed fund that can bet an index. Since emerging markets is still relatively new.

Wow, you're only in your early 20's. That's amazing that you're so involved financially. You definitely are ahead of your peers for sure.

I was looking at Questrade because the ETFs are free to buy, but I don't trade that often, so I don't mind paying TD's $10 commission. I like the TD UI the best, so it's nice seeing all of my financials in one place.

Interesting that he said the emerging markets has the most alpha... I didn't think that was the case. Which Emerging Market ETF are you in? I know people say you should have emerging/intl markets in your portfolio to balance out, but from what I have seen, the US market is the only market that matters. Everything follows the US economy, no point in wasting time outside of that.

Canadian banks have been really solid, Enbridge has been my dog for awhile, at least their dividend is high.

[Liquid_o2]

I had a bunch of money in my TFSA which I withdrew for grad school back in 2012... sort of sucks because of the gains I missed out on. But I got that degree!

The past year I have been building it back up. 70% equities and 30% bonds. Mixture of Canadian, US, and International index funds. Yes the markets aren't doing great right now, but I'm in my early 30's, so this is a longggg play. Can't really worry what is happening in the market today.

I've been focusing on TFSA this year, and will likely slow it down a bit next year, as I need to start putting money into RRSP as well.

From what I have read, TFSA and RRSP over the long term come out very similar. They are both good savings vehicles.

[DragonChi]

Originally Posted by josayeee

I need to renounce my US citizenship before I can use my own TFSA which really sucks. I have to use my wife's TFSA for now.

Isn't a Roth IRA the same thing as a TFSA?

[Gerbs]

Originally Posted by PeanutButter

Wow, you're only in your early 20's. That's amazing that you're so involved financially. You definitely are ahead of your peers for sure.

Hopefully I can retire early by starting early.

Originally Posted by PeanutButter

Interesting that he said the emerging markets has the most alpha... I didn't think that was the case. Which Emerging Market ETF are you in? I know people say you should have emerging/intl markets in your portfolio to balance out, but from what I have seen, the US market is the only market that matters. Everything follows the US economy, no point in wasting time outside of that.

I'm currently running XAW.TO which is the entire world - Canada. It has USA exposure as well. However, I want to look for an actively managed fund if it consistently beats an index. The reason that there's more alpha in emerging markets(Japan,China,Taiwan,Austrialia, EU) is because they are less researched compared to the US Market. Apparently Canada's mining market has some good value picks as well. But finding alpha is beyond my knowledge at the moment.

[Gerbs]

Originally Posted by DragonChi

Isn't a Roth IRA the same thing as a TFSA?

Yup, Roth IRA is the same the TFSA equivalent. However, it taxes you when you withdraw the investment. So it only lets you compound your gains tax-free.

[PeanutButter]

Originally Posted by Liquid_o2

...
From what I have read, TFSA and RRSP over the long term come out very similar. They are both good savings vehicles.

I've looked at similar research as well. The nice advantage of putting money into your RRSP is that once you put money into the RRSP, you can calculate how much money you get back in a refund. And you can just put that refund money into your TFSA, so it's like you're double dipping, and you come out on top.

ie. put $5k into your RRSP and depending on your tax bracket that could be like $1500 back in a refund, take that $1500 and put that into your TFSA. Winning!!!

[!LittleDragon]

You can also withdraw your earnings from your TFSA with no penalty and put that in your RRSP... You're basically taking money that you earned tax free from your TFSA and putting it into your RRSP to reduce your income and pay less taxes.

Take the refund and put back into your TFSA. Don't forget that because you withdrew from your TFSA, you've increased your contribution room for the following year. If you withdrew $5k of earnings this year to plow into your RRSP, next year you can deposit $11k.