In addition, investors can withdraw money from the TFSA at any time — tax free — without reducing their contribution room. For example, they can withdraw $5,000, and that $5,000 can be put back into the plan later. This makes the TFSA more appealing to use as a savings plan to fund the purchase of big-ticket items.
Lower-income investors will not have to worry about having their guaranteed income supplements (GIS) rolled back if they withdraw investment income from the TFSA. Currently, RRIF withdrawals reduce the amount of GIS benefits a retiree is eligible for.
John McGuire, vice-president and product manager of registered products and pensions at BMO Nesbitt Burns, doesn’t see the TFSA really solving the problem of RRSP contribution short-falls. He views the RRSP as a preferable savings solution for many investors because of its income tax deduction. If Canadians aren’t adequately saving for retirement with the RRSP deduction, he doesn’t see how this will improve with the TFSA, since they would first have to save the money regardless.
“The investments that can be used for this are the same as those that can be used for an RRSP. Product-wise I can’t think right now of anything that would be appropriately unique other than what is already available to invest in an RRSP,” McGuire says. “The RRSP appeal is universal because of the tax deduction, and a lot of people are not using their RRSP fully. A lot of Canadians are [instead] paying off debt, or they are living paycheque to paycheque perhaps. If they can have a deduction from their income tax, the likelihood is they would take advantage of that first.”
BMO suggests that Canadians try to correct their savings habits by utilizing some other financial strategies such as setting up a continuous savings plan (CSP) or maybe taking out an RRSP loan.
It is a lot easier to come up with a biweekly or monthly contribution to a CSP than one lump sum — especially if you have it automatically taken out of your account, BMO notes. Also, by investing regularly, investors can benefit from dollar-cost averaging.
The RSP loan or RSP catch-up loan is also a viable option for investors having troubles with cash flow, because it generates a near-instant rebate from the government. However, they do need to be able to service the interest on the loan. McGuire strongly suggests that investors who do go forward with an RSP loan do so with a financial advisor to ensure they can in fact service the debt load.
Assuming the budget it passed, Canadian investors will be able to put $5,000 in a TFSA each year, starting in 2009. Contributions to TFSAs will not be tax deductible as they are for RRSPs, but investment income earned within them, including capital gains, will not be taxed.
In addition, investors can withdraw money from the TFSA at any time — tax free — without reducing their contribution room. For example, they can withdraw $5,000, and that $5,000 can be put back into the plan later. This makes the TFSA more appealing to use as a savings plan to fund the purchase of big-ticket items.
Lower-income investors will not have to worry about having their guaranteed income supplements (GIS) rolled back if they withdraw investment income from the TFSA. Currently, RRIF withdrawals reduce the amount of GIS benefits a retiree is eligible for.
John McGuire, vice-president and product manager of registered products and pensions at BMO Nesbitt Burns, doesn’t see the TFSA really solving the problem of RRSP contribution short-falls. He views the RRSP as a preferable savings solution for many investors because of its income tax deduction. If Canadians aren’t adequately saving for retirement with the RRSP deduction, he doesn’t see how this will improve with the TFSA, since they would first have to save the money regardless.
“The investments that can be used for this are the same as those that can be used for an RRSP. Product-wise I can’t think right now of anything that would be appropriately unique other than what is already available to invest in an RRSP,” McGuire says. “The RRSP appeal is universal because of the tax deduction, and a lot of people are not using their RRSP fully. A lot of Canadians are [instead] paying off debt, or they are living paycheque to paycheque perhaps. If they can have a deduction from their income tax, the likelihood is they would take advantage of that first.”
BMO suggests that Canadians try to correct their savings habits by utilizing some other financial strategies such as setting up a continuous savings plan (CSP) or maybe taking out an RRSP loan.
It is a lot easier to come up with a biweekly or monthly contribution to a CSP than one lump sum — especially if you have it automatically taken out of your account, BMO notes. Also, by investing regularly, investors can benefit from dollar-cost averaging.
The RSP loan or RSP catch-up loan is also a viable option for investors having troubles with cash flow, because it generates a near-instant rebate from the government. However, they do need to be able to service the interest on the loan. McGuire strongly suggests that investors who do go forward with an RSP loan do so with a financial advisor to ensure they can in fact service the debt load.
The announced creation of the TFSA adds another retirement savings incentive program without some of the deterrents that have kept some investors, particularly those with lower incomes, from investing in RRSPs.
Assuming the budget it passed, Canadian investors will be able to put $5,000 in a TFSA each year, starting in 2009. Contributions to TFSAs will not be tax deductible as they are for RRSPs, but investment income earned within them, including capital gains, will not be taxed.
In addition, investors can withdraw money from the TFSA at any time — tax free — without reducing their contribution room. For example, they can withdraw $5,000, and that $5,000 can be put back into the plan later. This makes the TFSA more appealing to use as a savings plan to fund the purchase of big-ticket items.
Lower-income investors will not have to worry about having their guaranteed income supplements (GIS) rolled back if they withdraw investment income from the TFSA. Currently, RRIF withdrawals reduce the amount of GIS benefits a retiree is eligible for.
John McGuire, vice-president and product manager of registered products and pensions at BMO Nesbitt Burns, doesn’t see the TFSA really solving the problem of RRSP contribution short-falls. He views the RRSP as a preferable savings solution for many investors because of its income tax deduction. If Canadians aren’t adequately saving for retirement with the RRSP deduction, he doesn’t see how this will improve with the TFSA, since they would first have to save the money regardless.
“The investments that can be used for this are the same as those that can be used for an RRSP. Product-wise I can’t think right now of anything that would be appropriately unique other than what is already available to invest in an RRSP,” McGuire says. “The RRSP appeal is universal because of the tax deduction, and a lot of people are not using their RRSP fully. A lot of Canadians are [instead] paying off debt, or they are living paycheque to paycheque perhaps. If they can have a deduction from their income tax, the likelihood is they would take advantage of that first.”
BMO suggests that Canadians try to correct their savings habits by utilizing some other financial strategies such as setting up a continuous savings plan (CSP) or maybe taking out an RRSP loan.
It is a lot easier to come up with a biweekly or monthly contribution to a CSP than one lump sum — especially if you have it automatically taken out of your account, BMO notes. Also, by investing regularly, investors can benefit from dollar-cost averaging.
The RSP loan or RSP catch-up loan is also a viable option for investors having troubles with cash flow, because it generates a near-instant rebate from the government. However, they do need to be able to service the interest on the loan. McGuire strongly suggests that investors who do go forward with an RSP loan do so with a financial advisor to ensure they can in fact service the debt load.
“The first couple of months in the year can be hard on your wallet, with holiday and other household bills needing to be paid. Contributing to an RSP can often fall off the list, especially when left to the last minute,” says Judy Thomson, director of BMO Retail Investments. “Our message to Canadians this RSP season is, make this your final last-minute RSP contribution and get into the habit of saving for retirement on a regular basis.”
The announced creation of the TFSA adds another retirement savings incentive program without some of the deterrents that have kept some investors, particularly those with lower incomes, from investing in RRSPs.
Assuming the budget it passed, Canadian investors will be able to put $5,000 in a TFSA each year, starting in 2009. Contributions to TFSAs will not be tax deductible as they are for RRSPs, but investment income earned within them, including capital gains, will not be taxed.
In addition, investors can withdraw money from the TFSA at any time — tax free — without reducing their contribution room. For example, they can withdraw $5,000, and that $5,000 can be put back into the plan later. This makes the TFSA more appealing to use as a savings plan to fund the purchase of big-ticket items.
Lower-income investors will not have to worry about having their guaranteed income supplements (GIS) rolled back if they withdraw investment income from the TFSA. Currently, RRIF withdrawals reduce the amount of GIS benefits a retiree is eligible for.
John McGuire, vice-president and product manager of registered products and pensions at BMO Nesbitt Burns, doesn’t see the TFSA really solving the problem of RRSP contribution short-falls. He views the RRSP as a preferable savings solution for many investors because of its income tax deduction. If Canadians aren’t adequately saving for retirement with the RRSP deduction, he doesn’t see how this will improve with the TFSA, since they would first have to save the money regardless.
“The investments that can be used for this are the same as those that can be used for an RRSP. Product-wise I can’t think right now of anything that would be appropriately unique other than what is already available to invest in an RRSP,” McGuire says. “The RRSP appeal is universal because of the tax deduction, and a lot of people are not using their RRSP fully. A lot of Canadians are [instead] paying off debt, or they are living paycheque to paycheque perhaps. If they can have a deduction from their income tax, the likelihood is they would take advantage of that first.”
BMO suggests that Canadians try to correct their savings habits by utilizing some other financial strategies such as setting up a continuous savings plan (CSP) or maybe taking out an RRSP loan.
It is a lot easier to come up with a biweekly or monthly contribution to a CSP than one lump sum — especially if you have it automatically taken out of your account, BMO notes. Also, by investing regularly, investors can benefit from dollar-cost averaging.
The RSP loan or RSP catch-up loan is also a viable option for investors having troubles with cash flow, because it generates a near-instant rebate from the government. However, they do need to be able to service the interest on the loan. McGuire strongly suggests that investors who do go forward with an RSP loan do so with a financial advisor to ensure they can in fact service the debt load.
More than half of Canadians will not contribute to their RRSPs for the 2007 tax year, according to a new survey conducted by BMO Financial Group and Leger. But will Tuesday’s announcement of a new tax-free savings account (TFSA) do anything to help more Canadians save?
According to the poll of 1,500 Canadians, contribution rates are the lowest among respondents aged 55 to 64 — the group closest to retirement — with two out of three choosing not to contribute this year.
In addition, one-third of Canadians made or will make their RSP contributions after February 15 this year. BMO says this is a growing trend it has noticed over the past few years. Last year, 25,000 BMO customers made RSP contributions on the deadline date, up 20% from the previous year.
“The first couple of months in the year can be hard on your wallet, with holiday and other household bills needing to be paid. Contributing to an RSP can often fall off the list, especially when left to the last minute,” says Judy Thomson, director of BMO Retail Investments. “Our message to Canadians this RSP season is, make this your final last-minute RSP contribution and get into the habit of saving for retirement on a regular basis.”
The announced creation of the TFSA adds another retirement savings incentive program without some of the deterrents that have kept some investors, particularly those with lower incomes, from investing in RRSPs.
Assuming the budget it passed, Canadian investors will be able to put $5,000 in a TFSA each year, starting in 2009. Contributions to TFSAs will not be tax deductible as they are for RRSPs, but investment income earned within them, including capital gains, will not be taxed.
In addition, investors can withdraw money from the TFSA at any time — tax free — without reducing their contribution room. For example, they can withdraw $5,000, and that $5,000 can be put back into the plan later. This makes the TFSA more appealing to use as a savings plan to fund the purchase of big-ticket items.
Lower-income investors will not have to worry about having their guaranteed income supplements (GIS) rolled back if they withdraw investment income from the TFSA. Currently, RRIF withdrawals reduce the amount of GIS benefits a retiree is eligible for.
John McGuire, vice-president and product manager of registered products and pensions at BMO Nesbitt Burns, doesn’t see the TFSA really solving the problem of RRSP contribution short-falls. He views the RRSP as a preferable savings solution for many investors because of its income tax deduction. If Canadians aren’t adequately saving for retirement with the RRSP deduction, he doesn’t see how this will improve with the TFSA, since they would first have to save the money regardless.
“The investments that can be used for this are the same as those that can be used for an RRSP. Product-wise I can’t think right now of anything that would be appropriately unique other than what is already available to invest in an RRSP,” McGuire says. “The RRSP appeal is universal because of the tax deduction, and a lot of people are not using their RRSP fully. A lot of Canadians are [instead] paying off debt, or they are living paycheque to paycheque perhaps. If they can have a deduction from their income tax, the likelihood is they would take advantage of that first.”
BMO suggests that Canadians try to correct their savings habits by utilizing some other financial strategies such as setting up a continuous savings plan (CSP) or maybe taking out an RRSP loan.
It is a lot easier to come up with a biweekly or monthly contribution to a CSP than one lump sum — especially if you have it automatically taken out of your account, BMO notes. Also, by investing regularly, investors can benefit from dollar-cost averaging.
The RSP loan or RSP catch-up loan is also a viable option for investors having troubles with cash flow, because it generates a near-instant rebate from the government. However, they do need to be able to service the interest on the loan. McGuire strongly suggests that investors who do go forward with an RSP loan do so with a financial advisor to ensure they can in fact service the debt load.
More than half of Canadians will not contribute to their RRSPs for the 2007 tax year, according to a new survey conducted by BMO Financial Group and Leger. But will Tuesday’s announcement of a new tax-free savings account (TFSA) do anything to help more Canadians save?
According to the poll of 1,500 Canadians, contribution rates are the lowest among respondents aged 55 to 64 — the group closest to retirement — with two out of three choosing not to contribute this year.
In addition, one-third of Canadians made or will make their RSP contributions after February 15 this year. BMO says this is a growing trend it has noticed over the past few years. Last year, 25,000 BMO customers made RSP contributions on the deadline date, up 20% from the previous year.
“The first couple of months in the year can be hard on your wallet, with holiday and other household bills needing to be paid. Contributing to an RSP can often fall off the list, especially when left to the last minute,” says Judy Thomson, director of BMO Retail Investments. “Our message to Canadians this RSP season is, make this your final last-minute RSP contribution and get into the habit of saving for retirement on a regular basis.”
The announced creation of the TFSA adds another retirement savings incentive program without some of the deterrents that have kept some investors, particularly those with lower incomes, from investing in RRSPs.
Assuming the budget it passed, Canadian investors will be able to put $5,000 in a TFSA each year, starting in 2009. Contributions to TFSAs will not be tax deductible as they are for RRSPs, but investment income earned within them, including capital gains, will not be taxed.
In addition, investors can withdraw money from the TFSA at any time — tax free — without reducing their contribution room. For example, they can withdraw $5,000, and that $5,000 can be put back into the plan later. This makes the TFSA more appealing to use as a savings plan to fund the purchase of big-ticket items.
Lower-income investors will not have to worry about having their guaranteed income supplements (GIS) rolled back if they withdraw investment income from the TFSA. Currently, RRIF withdrawals reduce the amount of GIS benefits a retiree is eligible for.
John McGuire, vice-president and product manager of registered products and pensions at BMO Nesbitt Burns, doesn’t see the TFSA really solving the problem of RRSP contribution short-falls. He views the RRSP as a preferable savings solution for many investors because of its income tax deduction. If Canadians aren’t adequately saving for retirement with the RRSP deduction, he doesn’t see how this will improve with the TFSA, since they would first have to save the money regardless.
“The investments that can be used for this are the same as those that can be used for an RRSP. Product-wise I can’t think right now of anything that would be appropriately unique other than what is already available to invest in an RRSP,” McGuire says. “The RRSP appeal is universal because of the tax deduction, and a lot of people are not using their RRSP fully. A lot of Canadians are [instead] paying off debt, or they are living paycheque to paycheque perhaps. If they can have a deduction from their income tax, the likelihood is they would take advantage of that first.”
BMO suggests that Canadians try to correct their savings habits by utilizing some other financial strategies such as setting up a continuous savings plan (CSP) or maybe taking out an RRSP loan.
It is a lot easier to come up with a biweekly or monthly contribution to a CSP than one lump sum — especially if you have it automatically taken out of your account, BMO notes. Also, by investing regularly, investors can benefit from dollar-cost averaging.
The RSP loan or RSP catch-up loan is also a viable option for investors having troubles with cash flow, because it generates a near-instant rebate from the government. However, they do need to be able to service the interest on the loan. McGuire strongly suggests that investors who do go forward with an RSP loan do so with a financial advisor to ensure they can in fact service the debt load.
More than half of Canadians will not contribute to their RRSPs for the 2007 tax year, according to a new survey conducted by BMO Financial Group and Leger. But will Tuesday’s announcement of a new tax-free savings account (TFSA) do anything to help more Canadians save?
According to the poll of 1,500 Canadians, contribution rates are the lowest among respondents aged 55 to 64 — the group closest to retirement — with two out of three choosing not to contribute this year.
In addition, one-third of Canadians made or will make their RSP contributions after February 15 this year. BMO says this is a growing trend it has noticed over the past few years. Last year, 25,000 BMO customers made RSP contributions on the deadline date, up 20% from the previous year.
“The first couple of months in the year can be hard on your wallet, with holiday and other household bills needing to be paid. Contributing to an RSP can often fall off the list, especially when left to the last minute,” says Judy Thomson, director of BMO Retail Investments. “Our message to Canadians this RSP season is, make this your final last-minute RSP contribution and get into the habit of saving for retirement on a regular basis.”
The announced creation of the TFSA adds another retirement savings incentive program without some of the deterrents that have kept some investors, particularly those with lower incomes, from investing in RRSPs.
Assuming the budget it passed, Canadian investors will be able to put $5,000 in a TFSA each year, starting in 2009. Contributions to TFSAs will not be tax deductible as they are for RRSPs, but investment income earned within them, including capital gains, will not be taxed.
In addition, investors can withdraw money from the TFSA at any time — tax free — without reducing their contribution room. For example, they can withdraw $5,000, and that $5,000 can be put back into the plan later. This makes the TFSA more appealing to use as a savings plan to fund the purchase of big-ticket items.
Lower-income investors will not have to worry about having their guaranteed income supplements (GIS) rolled back if they withdraw investment income from the TFSA. Currently, RRIF withdrawals reduce the amount of GIS benefits a retiree is eligible for.
John McGuire, vice-president and product manager of registered products and pensions at BMO Nesbitt Burns, doesn’t see the TFSA really solving the problem of RRSP contribution short-falls. He views the RRSP as a preferable savings solution for many investors because of its income tax deduction. If Canadians aren’t adequately saving for retirement with the RRSP deduction, he doesn’t see how this will improve with the TFSA, since they would first have to save the money regardless.
“The investments that can be used for this are the same as those that can be used for an RRSP. Product-wise I can’t think right now of anything that would be appropriately unique other than what is already available to invest in an RRSP,” McGuire says. “The RRSP appeal is universal because of the tax deduction, and a lot of people are not using their RRSP fully. A lot of Canadians are [instead] paying off debt, or they are living paycheque to paycheque perhaps. If they can have a deduction from their income tax, the likelihood is they would take advantage of that first.”
BMO suggests that Canadians try to correct their savings habits by utilizing some other financial strategies such as setting up a continuous savings plan (CSP) or maybe taking out an RRSP loan.
It is a lot easier to come up with a biweekly or monthly contribution to a CSP than one lump sum — especially if you have it automatically taken out of your account, BMO notes. Also, by investing regularly, investors can benefit from dollar-cost averaging.
The RSP loan or RSP catch-up loan is also a viable option for investors having troubles with cash flow, because it generates a near-instant rebate from the government. However, they do need to be able to service the interest on the loan. McGuire strongly suggests that investors who do go forward with an RSP loan do so with a financial advisor to ensure they can in fact service the debt load.
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