Archive for 'TFSA Thoughts And Opinions'

The Best TFSA Plans So Far

So I was asked by a few people on what I personally think the best banks to open up a tax free savings account plan with is so far. In my personal opinion, based on what I see I would say the Bank of Montreal and ING Direct seems like the best choices overall so far.

The reason is pretty straight forward. Both of these financial institutions actually offer the same interest rate at 3%. When you compare that to others overall, it is a very good rate as most others that have a higher rate currently will drop it after the promotional period as its regular rates are say 2.75%. While that doesn’t guarantee that these two places won’t drop its rates too, 3% is the regular rate for them.

Another big reason for selecting these two is that they both indicate that they do not have fees associated with the account including not having a transfer fee should you decide to use a different bank/provider. That way, you can be more assured that you won’t have to go through a costly process should you decide that you would like to change it up with a different provider.

While there may be different and better incentives coming in the future for those who are still holding out, in my opinion the best choices for a tax free savings account plan right now based on rates and fees is the Bank of Montreal and ING Direct.

Government Proposed Changes To TFSA Accounts

There hasn’t been too much news and happenings when it comes to tax free savings accounts since its launch. I would say the highlights would be how the interest rates took a huge dive which kind of killed the excitement of it for many.

However, I was just browsing around and reading a piece about the government of Canada proposing to add the following amendments to the income tax act in regards to how TFSA’s work:

-Make any income attributable to deliberate overcontributions and prohibited investments subject to existing anti-avoidance rules in the Income Tax Act.

-Make any income attributable to non-qualified investments taxable at regular income tax rates.

– Ensure that withdrawals of deliberate overcontributions, prohibited investments, non-qualified investments or amounts attributable to swap transactions, or of related investment income, from a TFSA do not create additional TFSA contribution room.

– Effectively prohibit asset transfer transactions between TFSAs and other accounts.

I suppose it is a direct attempt to prevent intentional abuse of the plan where one can avoid paying income taxes on their investments. An example would be someone intentionally over contributing to their account where the investment would then generate more money than the actual 1% penalty fee you would have to pay.

This doesn’t really affect the average person though that simply uses the account more as a savings account. Basically, I’m sure most people just want higher interest rates.

BC Dental TFSA Contest

I recently saw on a tv commercial that the British Columbia Dental Association is holding a $1000 TFSA contest. By visiting its site, here is a little quiz that you can take at

The quiz is basically a true or false test about your dental health. After completing it, you can enter your contact information for a chance to win $1000 towards your TFSA contribution. Something simple for people to do if you are looking for money to place in your account.

TFSA Contribution Room Question

I got a message from Matty recently who sent in the following question:

I’ve heard conflicting replies to the following question.

Does your contribution room accumulate in years where you have not yet opened a TFSA account? For example, if I don’t open an account until 2010, will I have $10,000 in contribution room (from 2009 and 2010) or will I only have $5,000 of contribution room (from 2010 only)?


Based on the information available, if you don’t open an account until 2010 then your contribution room should be the $10,000 as you will get the $5000 boost every year (Assuming you meet all the requirements such as you are over 18 as that is one of the requirements of a TFSA). This should also be displayed on your notice of assessment each year as it will tell you how much you can contribute too.

That $5000 Bank Thing

Well this was kind of funny. I was talking to a person today about a tax free savings account and at first he had no idea what it was. I started explaining a bit about how it is kind of like an RRSP that worked a little differently as you can earn interest and not be taxed for it.

Immediately, he then responds by saying “Oh, you mean that $5,000 a year thing”. Kind of interesting I thought as it made me wonder how many people actually think that a TFSA is an RRSP. Maybe that commercial didn’t get through to a lot of people in the way that it intended.

Based from my experience though, not many average people are really taking advantage of a TFSA from what I noticed. With responses like the above, the information about it isn’t really penetrating enough I seems.

Withdrawing TFSA Funds Instead of Transferring To Avoid Fees

As expected I have been hearing a lot of negative vibe about the business/marketing practices of certain financial institutions that have suddenly dropped its tax free savings account interest rates. As a result, many people do not want to move their funds out of the account as well as their provider charges a fee to do so.

One way to avoid these transfer fees is to just simply withdraw your money when your term is up. Example, if you wanted to move $5000 from Financial institution A to Financial institution B, instead of requesting a transfer just withdraw all of our funds before the maturity date and manually deposit it into your new bank of choice.

PC Financial is a great example as they charge a hefty $50 transfer fee and this way you can avoid it.

Tax Free Savings Account Launch

So today is the launch date for TSFA accounts. The official TFSA site at was also updated. I thought this blurb of words used in a graphics on its page was interesting as you can see here:

“Accumulate, Access, Tax-Free Earnings, Tax-Free Withdrawals, Savings, Flexible, Stability”. I guess that is pretty much the entire pitch from most financial intuitions on why you use open up a TFSA account.

I will be updating the site once I try and rally up as much information as possible from various banks and will place it in the appropriate banks. In the meantime, feel free to send any useful information or leads that you think may be useful to others.

As well, if you actually signed up with a bank already the TFSA Canada Bank Review section is available for some banks for people to post their comments and experiences with. I know there are a lot of smaller institutions that I am missing, but again feel free to let me.