Category Archives: Money Tips

Will a $11,000 TFSA Limit Balance the Senate Spending Scandal?

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I have a relative who says “Don’t vote: it only encourages them,” but I still vote in every election, generally for a candidate who doesn’t win. So I watch and listen to the news when elections are looming but more for the entertainment value than out of any belief that it’s easy to change the course of the country with a simple ballot. I thought it was interesting timing how an “official rumour” of an increase in the TFSA contribution limit surfaced at the same time as the Mike Duffy trial started.

We Will Not Touch Income Trusts

Is anyone else out there old enough to remember hearing the Conservative party promise that during the electioneering in the winter of 2005/2006?

Then, after the Conservatives won the election, on Hallowe’en in 2006 the federal Finance Minister Jim Flaherty reversed that decision and imposed a new tax system on income trusts’ distributions. It stopped BCE from converting Bell Canada into an income trust and forced many other companies to change back to more conventional business structures. Real Estate Income Trusts, REITS, were one of the few businesses not affected by the changes.

This change had a huge impact on many Canadian seniors. They had bought into income trusts because the distributions were very generous and provided much needed income at a time when the returns from fixed income products were not great. Many of these seniors felt betrayed that the same party which had promised to leave the trusts alone almost immediately changed its mind and government policy. The decision cost them real income dollars.

So Will the Government Double the TFSA Contribution Limit?

One way that TFSAs are better, currently, than RRSPs is that they are a predictable amount of money for retirement. While there is no tax refund for contributing to a TFSA, there is also no tax due when making a withdrawal from a TFSA. So if a person is planning for retirement, they don’t have to guess what their tax rate will be in retirement and apply that rate against their expected income from their RRSP/RRIFs.

So for some people, the attraction of a higher TFSA limit is that they can decide to invest for retirement in their TFSA instead of in their RRSP if they don’t have enough money to max out both.

There are, currently, some other benefits to TFSA income versus RRIF income. For example, TFSA income does not affect OAS payments.

The Conservative federal government has not actually announced a plan to double the TFSA contribution limit to $11 000. All we know at this point is that “sources” claim it is likely.

But even if the intention to double the limit is announced, can we count on it happening?

I saw what happened to income trusts. I won’t believe it until the bill is passed by the Senate and read into law by the GG.

What’s Happening With the Senate?

Meanwhile, the trial of Senator Mike Duffy has begun.

Regardless of the actual charges, he is accused of spending taxpayer money for personal expenses while acting as a Senator. He says this is not true.

What the trial and discussions around the charges are revealing is just what types of expenses have been charged in recent years by Senators. And also just how far a political party may decide to go to avoid negative publicity.

I have no idea whether the Conservative party did anything wrong when they provided a large amount of money to Mike Duffy to pay back some expenses he had charged as a Senator. But I do find it interesting listening to more informed sources discuss the topic.

Regardless of whether Mr. Duffy is found guilty or innocent, his trial is stirring up a lot of sediment and it will be interesting to see if the Conservative party can emerge from the swirling waters unstained by mud.

It’s also interesting to see what, if anything, they announce in the hope that the media will start discussing it instead of discussing the Senate.

Perhaps it’s just a coincidence that there’s “talk” about TFSA limits at the same time as there is talk about Mike Duffy.

It doesn’t seem that coincidental to me, though.

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What do you think? Will we be hearing about a variety of interesting financial and tax topics from the federal government parties while the Senate Scandal is trying to stay in the central spotlight?

How to Buy a GIC Online from Oaken Financial

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I keep some of our emergency fund in 12 one-year-term GICs. Each month one matures and could provide cash needed to pay the bills and buy some food. The interest rate for each GIC varies and is certainly not great but it generally is close to or slightly higher than inflation. I’ve found using an online bank like Oaken gives me a better rate than using one of the Big Five Canadian banks like BMO or CIBC. Recently, Oaken Financial upgraded their online offerings and now I can buy a GIC directly online: here’s how.

Buying a GIC from Oaken Financial, the Online Presence of Home Trust

  1. Sign in to your Oaken Financial accounts.
  2. Check whether you have enough money in your account to pay for the GIC. (If not, you may have to make a transfer or mail in a cheque.)
  3. If you want to check what interest rate is being offered, click on the Current Interest Rates link on the left side and read the details.

To Buy the GIC

  1. Click on the Open New Account tab.
  2. Ensure that the Online tab is selected and read the info about what you’ll need to know to buy the GIC. (Generally, you’ll need your Oaken client account number and if you’re paying using it, your Oaken savings account number.
  3. Click on the button: Let’s get started

The Online Application Page

  1. Click to select the radio button
    • beside whether the account or investment is
      Personal or
      Commercial.
    • beside GIC to answer the question: What account or investment interests you?
    • beside Yes to answer the question: “Are you an existing customer?”
    • beside No to answer the question: “Were you referred by a broker?”
  2. Click on the Next button.

The Investment Details Page

  1. Click to select the desired term for the GIC.
  2. If applicable, click to select your interest payment frequency, such as annual pay, semi-annual, or monthly.
  3. If you do not like the suggested dates for the start and maturity of the GIC, you can change them by selecting the month, day or year from the drop-down lists. Note: this could affect your interest rate.
  4. In the Amount text box, type the cash value of the GIC you wish to purchase.

In the Select Your Instructions Section

  1. Click to select whether you want the interest payment sent to
    * another Financial Institution by direct deposit
    * you by cheque
    * your Oaken Savings Account If so, you will need to enter your Oaken Savings Account number.
  2. Click to select what to do with the GIC when it reaches maturity. You can choose to
    * renew it
    * direct deposit the value of it to another financial institution
    * send you a cheque for the amount
    * deposit the amount to your Oaken Savings Account If so, you will be asked whether to use the same savings account. If you select Yes, it will fill in the account number for you based on what you typed earlier.
  3. Click to select whether you would like to buy another GIC right now.
  4. Click to select where to get the cash to buy the GIC. You can choose
    * to mail in a cheque.
    * to take the money from your Oaken Savings Account. If you do, it will ask if you want to take the money from the same savings account you identified earlier. If you select Yes, it will fill in the account number for you based on what you typed earlier.
  5. Click to select whether you wish to register this GIC/account as an informal trust.
  6. Click on the Next button.

The Customer Details Page

  1. In the Oaken Client Number field, type your number.
  2. Select your title such as Mr. Ms. or Dr.
  3. Type the relevant information in the fields
    * First Name
    * Last Name
    * Email Address
    * Please Confirm your Email Address
  4. Click to answer Yes or No to the questions
    * “Are you a U.S. Citizen or U.S. Resident for tax purposes?”
    * “Has your personal information changed?”
    * “Would you like to add a joint-owner?”
  5. Click on the Next button.

The Legal Statements Page

  1. Click to answer Yes or No to the questions
    * “Does any owner(s) or any of their family members hold or have ever held, or is a close associate to, one of the following offices or positions in or on behalf of a domestic or foreign state?”
    * “Are any owners acting on behalf of an individual or entity other than the account holder or those authorized to give instructions about the account or who directs what happens to the account?”
  2. Read the Acknowledgement and Authorization statement carefully. If you agree, click to select Yes.
  3. Click on the Submit form button.

It will say Submitting and soon respond with the Online application – Thank you page.

Make a note of your reference number.

You should also receive a confirmation email. They state it should be received within two hours on business days during working hours.

Nothing was received within the first few minutes after sending in the request. No change was visible to my savings account balance either. However, sometime in the next 22 minutes, a message was sent to my email account. According to the email, no further action is required by me.

The cash has not been taken out of my Oaken savings account yet, though, within the first half hour after sending in the application. Ah, now at 7:30 p.m. the same day, the money is out of my Oaken savings account.

I will wait to receive the usual GIC investment confirmation in the mail.

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Do you keep your emergency fund in cash in a savings account? Or do you keep some of it in GICs to try to get a slightly higher interest rate? Please share your views with a comment.