[...] of the perks of the new tax free savings account (TFSA) is that the higher income spouse can contribute to the lower income spouses TFSA without any tax [...]

[...] I get too far ahead of myself, lets get back to basics.  A tax free savings account (TFSA) is an account where investments can compound tax free.  Tax refunds are not offered on deposits, [...]

[...] Tax Free Savings Account (TFSA) [...]

[...] soon as the TFSA was introduced, we thought it made the most sense max out our TFSA with our ‘retirement [...]

[...] http://www.milliondollarjourney.com/federal-budget-2008-tax-free-savings-account-tfsa.htm [...]

[...] pre-tax income automatically going for retirement (either through TFSA or RRSPs depending on their [...]

[...] In our house, I do it all. I pay all the bills. I track all the spending. I manage the investments, TFSAs, RESPs and RRSPs. I am not, however, controlling about it. I do it because I enjoy it and Brian is [...]

[...] that Canada has the Tax Free Savings Account (at a current rate of 3% at ING) this would be a way better plan for your short term savings [...]

[...] Direct is currently offering the highest interest rate on a TFSA in Canada – 3% until October 1, 2009.  This is a regular savings TFSA, not like a trading [...]

[...] With the new Tax Free Savings Account (TFSA), these high interest rate savings accounts will be able to grow tax free.  As of Nov 2008, here [...]

I totally agree, for any MTR < 32%, max. your TFSA.
Heck, if you can, max. your TFSA and then your RRSP!

Thankfully, my spouse and I have no debt, only the mortgage.

My spouse and I also have Defined Contribution plans at work, but the funds are crap. Hence, we’re going “safe” at work and going equities elsewhere.

I think next year, I’m going to throw my $5 K at a bond index fund. It will produce some meagre distributions, but will grow all the same. Long term, TFSAs have lots of power, simply, not enough contribution room now to do anything significant. I guess I’ll have to wait…

Cheers,
Mark

I think if you are in a lower tax bracket, let’s say an MTR < 32%, then you should maximize the TFSA before RRSP’s typically. If you have non-deductible debt running more than 4 or 5% you may want to look at putting your money there first.

As for what you should own in a TFSA, I don’t subscribe to only holding interest income securities. My wife and I have group RRSP Defined Contribution plans at work and the choices of mutual funds we have is severely limited. Thus, we tend to use that to put our more conservative investments and let our SDRRSP’s and everything else hold our investments weighted to the equity side.

For my TFSA I’ve been just playing around with some of the betapro ETF’s and holding them for days or weeks at a time. There isn’t enough room in a TFSA to play with too many direct equities because the commissions will eat you alive. I also don’t feel comfortable enough with options yet.

As time goes on and my TFSA gets larger (due to organic growth as well as annual contributions) I believe my TFSA will morph into a more stable investment portfolio rather than a more speculative bent that it has right now.

Question for you…for higher income earners (>$75,000), what would you do with a TFSA? What would be your first, second, etc. option for this account and its holdings?

I would be interested to know your perspective. (I’m trying to save for 2010!)

Cheers!

[...] looking for tax free growth and think you have a few years, the money would best be put in a TFSA. At least that way, you still have the control over how the money is invested and it’s there when [...]

[...] Tax Free Savings Account (TFSA) [...]

There are many differences including:
i) $5000 capped contribution room per year (regardless of income),
ii) no tax deductions on contributions made
iii) money taken out of the account is not taxed