MRS Carrying Dealers M.R.S. Inc. M.R.S. Securities Services Inc. M.R.S. Correspondence Corp. Introdu

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MRS Carrying Dealers M.R.S. Inc. M.R.S.
Securities Services Inc. M.R.S. Correspondence
Corp.Introduction to Tax-Free Savings
Accounts(TFSA)
CarryingDealerServices

• November 2008
• Version 2.3

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Contents

• TFSA ? What is it?
• TFSA Strategies ? How to Benefit?
• As a savings account
• As an investment account
• TFSA Case Studies
• Why use TFSA at MRS?
• How to sign-up

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TFSA What is it?

• Announced in the 2008 Federal Budget and
  available in January, 2009
• TFSA is a registered tax sheltered account with
  tax-free gains on any investments in the account
• All unused contribution room is carried forward
  and withdrawals are added back to the
  contribution limit.
• Has an annual 5000 contribution limit in 2009
  thereafter the annual limit is indexed to
  inflation (rounded up the nearest 500)
• Eligible investments include cash instruments,
  mutual funds, publicly traded securities,
  corporate and government bonds, GICs and
  segregated funds (Same as RRSP)

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TFSA Who is eligible?

• Any Canadian resident, age 18 or older
• Need to file a tax return to receive TFSA
  Contribution room
• Investor may hold more than one TFSA account with
  multiple financial institutions
• Need to keep track of contributions - subject to
  CRA over contribution rules

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TFSA Strategies for Saving

• For any savings ? use TFSA as first place to save
• Put savings into TFSA first and invest it for
  highest possible returns
• You have the flexibility to take savings and
  gains out and increase contribution limit
• All tax free
• For retirement saving ? use TFSA to complement
  RSP
• You can save throughout the year to your TFSA and
  then contribute in February to RSP
• If you maximize your RSP contribution, leave the
  remainder in TFSA
• For single income families ? use family
  contribution
• All of the contribution limit (10,000) can be
  used by the income earner
• Attribution rules do not apply
• For Education Savings ? an alternative to RESP
• More flexible then RESP

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TFSA Strategies for Investing

• Use TFSA as part of a balanced portfolio
• Use TFSA for higher risk and higher yielding
  investments
• This will allow you to increase your contribution
  limit
• Move or take out gains and re-invest in RRSP
• Increasing tax bracket ? benefit from lower
  current tax rate
• Deposit at current lower rate and withdraw later
  tax free when at a higher tax rate
• Maximize Investment Income ? use TFSA for
  interest income
• Reduce taxes on investment returns
• Interest income taxed at a higher rate than
  capital gain

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Advantage of TFSA account
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Megan For Flexibility in Savings

• 40 year old mother of two
• Reluctant to lock away assets long-term
• Wants easy access in case of unpredictable ad hoc
  short-mid term expenses (eg. emergencies, vehicle
  repairs, home renovations, etc.)
• Still wants market exposure
• Uses TFSA for savings and then contributes to RRSP

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Jimmy Increasing tax bracket

• New graduate age 22
• New to the workforce junior role in his area of
  study
• Low tax bracket expects employment income to
  grow over time and will withdraw money when in a
  higher tax bracket
• Expenses are low leaving assets to invest
• Uses TFSA to save and will withdraw in the future
  at higher tax bracket

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RSP vs TFSA Low Tax bracket
Low tax rate now ? Increased tax rate in the
future
tax bracket at time of contribution and
withdrawal employment income available to
invest assumes no withdrawals during growth
period
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RSP vs TFSA High Tax bracket
High tax rate now ? Lower tax rate in the future
tax bracket at time of contribution and
withdrawal employment income available to
invest assumes no withdrawals during growth
period
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Alex - RRSP Maximizer

• Business owner - maximizes RRSP each year
• Has additional discretionary funds and is in top
  tax bracket
• Values tax deduction offered by RRSP
• Uses TFSA for excess savings
• Invests in the market
• Tax refund received each year (from RRSP
  deduction) can grow tax-free in TFSA
• TFSA used to complement RRSP Not compete with
  it

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Dwight and Debra Single Income

• Ages 45 and 43 married for 15 years
• Dwight is an electrician Debra volunteers as a
  counselor in her community
• As Dwight earns most of the familys income, he
  is taxed on the majority of the income at his
  high tax bracket
• Dwight looking for ways to split income with
  Debra to benefit from Debras lower tax bracket
• Use combined TFSA for maximum savings
• Both Debra and Dwight receive 5,000 of TFSA
  contribution room each year
• Tax rules designed to prevent income-splitting do
  not apply to TFSA contributions
• Dwight can contribute 5,000 to his TFSA and give
  Debra 5,000 for her TFSA

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Allan A senior with RIF income

• Age 72 RRIF annuitant
• Must begin to receive RRIF income at year-end
• Does not need extra cash flow OAS, CPP and RPP
  income sufficient
• Wants to invest RRIF income BUT, does not want
  to impact OAS benefits
• Automatically transfers minimum RIF payment into
  TFSA (payment is taxable income, however any
  gains (

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Why use MRS TFSA?

• Simple, Safe and Secure
• Single account to hold all investments ? much
  simpler to keep track of contribution limits
• Held by one of the largest financial services
  providers in Canada
• Variety and options of Investments
• Access to mutual funds, GICs, fixed income and
  other investment products
• More then just GICs or single Fund Company
• Suite of Services
• Electronic deposit from any major Canadian Bank
  (Electronic Bill Payment)
• Automated RIF Transfers for RIF minimum payouts
• Statements Any transaction and quarterly and
  online access
• Managed by your financial advisor
• Planned and actively managed as part of an
  overall portfolio of other investments
• Cost Effective
• 35.00 annual fee with optional rebates

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Questions?
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