Scotiabank’s Video Explanation of a TFSA

Here is a TFSA related video which describes the basics courtesy of Scotiabank that I found:

ING Direct Goes To 3% For The New Years

Happy new years everyone! This was kind of a good change as I saw today that ING Direct has decided to increase its tax free savings account rate to 3%.

As indicated on the fine print too, “Rate as at January 1, 2010 and (like the weather) is subject to change. Interest is calculated daily and paid monthly.” This is currently the highest interest rate offered to my knowledge though. Not a bad way to start 2010.

Free $50 Fee Credit For Transferring Your TFSA To Ally

I was just sent this e-mail about an offer from a financial institution called Ally. From what I read, they are offering TFSA account holders with other banks up to $50 to switch to them in order for you to recoup any transferring fees that your bank may charge for the switch.

I suppose the biggest incentive is that if you were thinking of switching it looks like they offer one of the highest interest rates at 2% atthe moment. I have personally never tried this company myself. However, I figured there are probably a lot of people that are looking for options and this may be one of them.

I’m not sure if someone in-the-know wants to clarify this too, but to my understanding the $50 is to simply recoup any transferring fees as opposed to simply getting a free $50 for transferring the account.

Apparently the offer ends at the end of this month:
http://learn.ally.ca/transfer/

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.

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)?

Thanks!

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.

RBC TFSA Interest Rate Drop

This one was to surprising to me as I expected the bigger banks to drop its interest rates sooner or later. I guess you can add RBC to the mix as its new rate is 2.25% compared to its original 2.5%

The rate is kind of interesting as it is in-line with Outlook Financial’s change that I posted today as well. Makes you wonder if there is a certain reason why financial institutions or banks would be favoring that number.

Outlook Financial TFSA Interest Rate Drop

Looks like this financial institution has recently had a significant drop in its interest rate. Outlook Financial originally had a pretty high 2.8% offering and as you can see here that has dropped to 2.25%.

That’s a loss of 0.55%. This is the first credit union I have seen where the interest rate has taken a dive so far.