The cost of rolling back the $10,000 TFSA

High-income earners stand to lose $53K over a lifetime

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From the November 2015 issue of the magazine.

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No matter what your political leanings, this year’s federal election has shown there’s one thing the majority of Canadians agree on: you don’t want to see the new $10,000 Tax-Free Savings Account contribution room limit rolled back to $5,500. These are the findings from an Angus Reid survey, which found that 67% of Canadians aren’t in favour of any political party reversing the increase. So what would losing an additional $4,500 a year of extra tax-sheltered savings room in a TFSA cost high-income earners over a lifetime of investing? Plenty, as you can see below.


Screen shot 2015-10-13 at 2.52.35 PMAssumptions: We’ve assumed 5% equity returns and a combined federal and provincial tax rate of 50%.

37 comments on “The cost of rolling back the $10,000 TFSA

  1. Doesn’t this also assume that the 5500 will not be indexed to inflation?


  2. Except that the parties who have pledged to roll back the TFSA limit have also said it would be indexed to inflation, whereas the current limit of $10,000 is not. Did you take that into account? Doesn’t look like it.


  3. So, for the typical working family that couldn’t afford to maximize their TFSA contributions at the $5500 limit, let alone at the $10,000 limit, this little calculation makes no difference whatsoever in terms of tax free savings. What it may do, however, is provide extra revenue to the government that will allow it to fund child benefits and/or government-subsidized daycare, which does benefit working families. This article buys into Conservative rhetoric but I question whether it reflects effective fiscal policy.


    • As a single working stiff, why should I pay to help raise your children? I do not have any children, and what tax breaks do I receive? None!

      I guess everyone will laughingly say just pay your taxes and shut up loser.



  4. I think that if you framed the question like this – i.e. honestly – fewer people would support keeping the higher TFSA limits. “High income earners” to get a massive tax break? That’s a real vote getter. People support this program because they don’t realize who benefits and how.

    My husband and I are in the fortunate position to be able to take advantage of the higher TFSA limit along with maximising our RRSP contributions. I’ve already voted for a party that has promised to get rid of the new higher limits, and I’ll be happy to see the limit go down.


  5. Who pays 50% tax on investment income? I thought most dividends/capital gains are taxed at half the rate of regular income?


  6. As others have noted, your 50% tax assumption is unrealistic especially in light of the assumption the TFSA is holding “equity”. 25% would be much more realistic for typical usage scenarios.

    The article also fails to consider how the lost tax revenue will be handled. Increased taxes and/or service cuts and/or increased national debt are all possibilities, which depending on implementation could be net worse for high-income earners.

    My wife and I both maximize our tax advantaged accounts but would much rather see an equitable program replace the increased TFSA limits.


  7. Good article. That is why I have already voted for the party that increased my TFSA limits and intends to allow it to continue.


  8. To D Graham, I agree completely with you. TFSA’s are the best, most fair, equal playing field savings, investment, retirement and personal finance tool and financial encouragement to help Canadians really be better off financially for themselves and their family.

    What most Canadians fail to realize and don’t understand is that the most important parts of TFSA’s is the first financial discipline teaches Canadians to save, invest, retire, help their families etc. and makes Canada a financially stronger too.

    The second is all the compound interest and TFSA contributions growing which an example of a Canadian contributing $10,000 a year to their TFSA over 35 years which they can get these days a realistic 3.5% annual interest compounded will result in $691,000 by retirement. This will and does encourage millions more Canadians to save and invest making themselves, their families not reliant, dependent on many social income support programs, income benefits from all levels of governments, federal, provincial, municipal and their government agencies like water, hydro etc.

    The growth is $341,000 of compound interest and at realistic 35% income tax rate, it is $119,350 in income tax savings over 35 years or about $3,410. Compare this to someone getting for example the average GIS which is about $740 a month with annual increases of 2.00% a year, it would take only about 12 years not 35 years, $9,000+ a year versus $3,410.

    This is about 3 times the cost to the federal government and Canadian taxpayers and they are likely receiving other benefits, income, support from social programs either federally, provincially or by some municipal government and other government agencies like water, hydro, property tax deferral interest free or property taxes assistance, G.S.T, H.S.T credit etc.

    The money in TFSA is income tax free but remember, it is not sales tax, H.S.T. free, land transfer tax free, property tax free, not cigarette, tobacco tax free, alcohol tax free, not gas tax, excise tax free, not parking fee, taxes free, municipal, regions water, hydro fee, taxes free etc. etc. and all other taxes, fees, levies from federal, provincial, municipal governments and their agencies exist or will exist that are not income taxes.

    Any cap, lifetime maximum or reduction in TFSA contributions will only cost Canadians, Canadian taxpyers and our society much more in the long run and more reliant, dependent on all levels of government.


    • Halfway through your third paragraph you lose the thread somewhere and you aren’t making coherent sense anymore. I think I can see the argument that you are trying to make, but it is so strange. You seem to be comparing lost tax revenues from the TFSA to the amount we pay people in GIS. But, you fail to take into account the fact that people who save in TFSAs do not get their GIS benefits clawed back – so there is no “savings” to be had by allowing people to have TFSAs in the hopes that we will pay out fewer GIS benefits in the long run. If anything, the enriched TFSAs could – eventually – allow the rich to side-step RRSP and traditional investment accounts in order to retire with rich investment portfolios AND collect maximum government benefits such as full GIS as TFSA withdrawals are not considered to be income.

      As for moving people to the TFSA rather than relying on social supports, this is a bad move and not “fair” at all. Low income people don’t have the cash to sock away $10K of after tax income into TFSAs each year so they would be the losers in a scenario where we got rid of social supports and replaced it with TFSAs. Just because one and all could theoretically access a program that benefits the very rich doesn’t make that program fair. In reality, access to the TFSA program is limited in uptake to those with higher incomes because those are the people who can save $10K worth of after tax money each year. And even among those individuals, most would be better off with a government run pension scheme. Individual investors almost always do worse off than they would with a managed pension. No matter how hot shit you think you are at investing, there is always a chance that you are wrong and your lovingly chosen “safe” portfolio will tank and you’ll be left with nothing. Maybe you like investing and you want to do it yourself, but most people don’t. So they’ll invest in indexed funds – like I do – and hope for the best while wishing that they still had access to a good old defined benefit pension and didn’t have to spend so much time worrying about stock market returns.

      The dismantling of good pension plans and their replacement by RRSPs and these new TFSAs were among the greatest losses for workers in the past forty years. Canadians don’t need a bigger TFSA. They need a better, more comprehensive CPP.


  9. I love the comments so far. Those that have thought and come to the correct conclusion about how misleading the article is vs. the one comment that supports the party who doesn’t want you to think.


  10. This article sucks for a few reasons:

    1. Of course the majority is in favour of keeping the TFSA. Who says ‘no’ to free money? Terrible research question
    2. The examples assume extremely high income (50% tax rate and having $10k/year to save).

    The argument for lowering it back is because only high income people were benefitting from it. A better question to ask the masses is “Do you want the TFSA rolled back? The government will generate $Xmillion extra dollars from people who have enough money to save more than $5500 a year. And we can use this money for X and Y. The downside to you, is that you can only save $5.5k per year, not $10k.”

    Weak reporting – sorry.


  11. To Sarah

    George Hammel makes more sense and what he said is more fair because people that work many years and save, invest and are prudent and responsible should be rewarded and by more Canadians being more prosperous and wealthy, that will save more money for the government then people being irresponsible and looking for the government to take care of them of some company.

    My family would rather have a $800,000 to $1,000,000 TFSA for myself and spouse and a $300,000 RRSP after income taxes then an extra $600 or $700 more a month from C.P.P, GIS or some other government pension or social support program, income etc.

    This gets cut to my spouse as one of us die to 55% and then my children get $0, nothing. This is my and our reward after 30, 35, 40 years of hard work and for our kids futures. It sucks and pensions like C.P.P and OAS are already indexed to inflation 2% a year or so these days so $15,000 a year in C.P.P, OAS paid today will still be $35,000 or so by retirement for most younger Canadians.

    It is already a basic benefit, pension and base for basic expenses in retirement which its intention and implementation all along when they were introduced. Many Canadians have no idea like yourself did not do the math and are going by biased pension plans and those in the pension industry and government that want to keep all the money for themselves.


    • Your definition of “fair” is skewed. Would it be “fair” if everyone who buys a Ferrari worth at least $200K gets free gas from the government for life? Obviously not, because it’s a boutique give away to the very wealthy. $10K after tax savings per person a year is also something attainable only by the upper middle class and wealthy. It’s not equally accessible to all.

      But hey – you’re not a loser who doesn’t make enough to max out your RRSP and TFSA room – so what do you care if people other than you live in poverty in their old age? You’ve got a healthy RRSP and TFSA, and there’s no way that’ll go south before you retire. Because stock markets always go up! And if stocks go down, then bonds go up! So there’s no way to lose.

      Besides, you say, by the time people today get ready to retire CPP will be 35K per year, because it will be indexed to inflation. Riches! Of course, prices will not have increased along with inflation. That 35K will be a huge increase over the low CPP rates of today.

      Of course, that 35K is contingent on receiving the maximum CPP available to you – which most people do not.

      We don’t make more people prosperous by allowing the wealthiest amongst us to hoard more of the wealth and then pass it down to their children in order to ensure that they start with every advantage over their fellow citizens. Working hard and earning money are barely correlated. Most people work hard. How much they are paid is mostly a function of luck and privilege. People need to stop patting themselves on their backs for their own good fortune.


  12. Well said George and Don, I agree that pensions are not the one size fits all solution that many are making to out to be. The money belongs to us workers and families and does not belong to governments, unions and pension plans.

    The way the Canada Pension Plan, OAS, GIS and other pension, social support and income benefits work today are just fine and are there to meet the basics only. I would not like that the government forces me or mandates a law that I have to put all my RRSP’s, TFSA’s, other non-registered money into an annual inflation indexed annuity or any annuity or a pension plan run by the government or private, public pension plan.

    This would really be a disaster and only a fool would agree to that.


    • Ridiculous. Only a fool would give away a good defined benefit pension plan for a defined contribution one. With TFSAs and RRSPs you are responsible for all of the risks. You could win big! Or you could end up with nothing.

      There may be a small percentage of the population who is truly interested in actively managing their own investments. The rest of us would be relieved to have a defined benefit pension plan that we could pay into and get a good pension out of when we retired. That’s why everyone is jealous of public sector pension plans. The employer match isn’t unheard of (I think they match dollar per dollar, which is what my private sector employer does in my RRSP – although my husband gets a less generous 50% match), but the lack of having to worry about the damn thing is priceless.

      In the end, I may end up a winner in the big gamble and die with my bank accounts full, and my friend who is a teacher may drop dead two days before retirement and get nothing. But, I’d still trade off having to worry and fret about investing – which interests me not at all – for 40 years over my “big win” any day of the week. Because the flip side of that coin is that I could go on investing 30% of my salary in various investment accounts and watch it all stagnate to inflation or lose half of it to some financial “adjustment” just before I retire and there’s basically nothing I can do about that.

      And I’m someone who’s playing by your rules. Our family saves diligently. We have no debt. Paid off the mortgage before we turned 40. We make good salaries.


  13. To Sarah

    You don’t get it. It is not your money or the government’s money. It is Canadians earnings and hard work. If you worked really hard for your money you would not allow a pension plan or the government to control your life, My family comes first so sorry if that bugs you but it is why I go to work everyday and not to support other Canadians who could care less and don’t know me.

    They have their own families and problems and should tale care of their own and not believe that the government and their employer, workplace should be responsible for their own retirement and family.

    I want to know when it will be enough taking other people’s income and property. Is it 50%, 60%, 70%, 80%, 90% or all 100%. You can try to ignore people’s opinions or dismiss them but the facts are the more socialism and social programs, support income and benefits, pension plans get too much and out of hand, this is ruinous to a nation and Greece is just a perfect example of 25 years of socialism in a democratic, !st world country.

    Greece still has not learned its lesson and their people never will. Once again, others that actually do the right thing, take care of their family and don’t want handouts from government will ruin it for everyone.

    Canada already has one of the best taken care of seniors, retirees and other low income Canadians in the world and you Sarah and others that embrace socialism to the extreme are going to make Canada equally poorer for everyone. Equally poor is the result.


  14. Correction, people that take care of their families and do the right thing being responsible financially and don’t ask for government handouts will not ruin it for everyone.

    Poverty comes mostly from bad life choices like smoking, gambling, playing the lottery like $20, 30 plus a week, divorce, having kids without a real family and stable home, spending and living beyond their means, debt accumulation year after year, refinancing their property, not having any or a good amount of life insurance, disability insurance, auto insurance, a savings etc. etc.

    If people were really educated and informed on financial matters, they would know they are getting ripped off by their government and their neighbors.


    • There is little evidence that poverty comes from bad life choices. (Lots of people make bad life choices, and the wealthy and upper middle class are certainly no angels). Poverty as a moral failing is an idea that the right likes to perpetuate because it makes it easy for them to turn their backs on the neediest amongst us.

      Most people who do well enough in life, and I count myself in this group, are lucky. Lucky in birth, lucky in opportunities, lucky that the bad decisions they made didn’t bite them as badly as they could have. That’s not to say they don’t work hard, but many people work hard. The thing you have to remember about luck is that it can change. You may believe that you are too smart, too prudent, and too hard working to ever need the social safety net – but that’s an illusion. It’s a nice story we tell ourselves to make the world easier to live in. It would be lovely if we lived in a world where hard work was rewarded and cheating and idleness didn’t pay off, but you must know from experience that we don’t live in that world. I sure know plenty of hard working people who are just scraping by and a number of high-flyers who spend considerably less effort at work than they do trying to cheat the tax system. We don’t live in a fair world. So let’s stop pretending otherwise.

      You can point to Greece, and I’ll point to the Scandanavian social democracies who seem to have managed just fine with higher taxes and broader social programs. It’s a question of what a nation wants to prioritize: individual wealth, or collective well-being.


  15. By the way, the $2,000 a year increase plus annual increases in ORPP soon to be C.P.P plus $4,500 annual TFSA rollbacks and many other tax increases, canceling tax credits, tax savings from income splitting by the Liberals will cost a family with 2 workers earning average annual salaries at least $2,000,000 and at least $80,000 a year in income by retirement.

    A measly $15,000 a year extra ORPP or C.P.P, plus annual inflation is peanuts that they will receive at retirement. Who knows when, age 65, 67, 70, 75 etc.


    • I’m not sure what you mean by the “$2000” a year increase. Increase in what?

      The annual TFSA rollbacks will cost Canadian workers earning “average” salaries nothing, as the average salary for a Canadian worker is on the order of $50K a year. The idea that such a worker will be putting away $10K of that money after tax is not credible.

      Same for income splitting, which again saves average Canadian workers basically nothing.

      Increased CPP is forced savings, needed to bring up the CPP so that it actually covers the cost of living. (The average Canadian gets somewhere around $7K from CPP currently).

      And again with you people and this idea that investments are 1) completely safe and 2) truly accessible to all.

      Many people know squat about investing. I know, because I know squat about investing and I’ve made myself read many books about it because I have to know about it. It’s a topic that bores the crap out of me, but it’s either read and learn or go in and trust the yahoo at the bank with a High School degree and some two week adviser course who’s trying to sell me some high MER mutual fund that he’s getting a kick-back for. And I’m a math person. I work in the hard sciences. I still can’t stand this stuff. To state that two Canadians making “average salaries” would be able to get $80K a year of income in retirement from their investments of a few thousand a year of diverted taxes and CPP contributions is ludicrous. We invest many times that each year for our retirement and I have zero confidence that we’ll be able to withdraw $80K per year from that fund when we retire.


  16. Sarah, I can see your points but people should have a choice what they want to do with their own retirement and personal finances. I am a great proponent of RRSP’s, RRIF’s, RESP’s, TFSA’s and other investments like higher interest savings accounts, cashable and redeemable GIC’s, 1-7 year GIC’s, bonds, strip bonds, residuals, zero coupon bonds, term deposits, ETF’s, stocks, REIT’s, foreign bonds, stocks, ETF’s, dividend paying investments, dividend reinvesting, gold and silver coins, gold and silver ETF’s and many other investment choices. Life insurance, annuities, disability insurance, home, car insurance, critical insurance, supplemental medical, long term care insurance and other types of protection for oneself, family and income can be very empowering and important for their personal finances. It gives us security, peace of mind and brightens our future.

    Choice and freedom are the name of the game for me and my family to depend on government C.P.P., OAS and other workplace or government pension plans is not enough choice. It is too dependent on one or two sources of income.

    As for retiring and being scared of a 50% market crash or downturn, there are safer investments held to maturity like GIC’s, term deposits, government bonds, government strip bonds that are in the 2.5% to 3.6% range these days. If someone is concerned about having all their money in stocks, mutual funds, ETF;s etc, they can take advantage of RRSP’s, RESP’s, TFSA’s that will grow tax deferred and tax free.

    I know many people that have their investment portfolios in 33% in stocks or stock, equity type investments, 33% in GIC’s,term deposits and 33% in government bonds, government strip bonds, some corporate bonds, corporate strips and over the last 10 years even during the financial crisis and big declines in stock markets worldwide have gained 75% total or a 5.75% total return compounded over 10 years.

    The key is diversification, choice, money spread over many ways and being conservative but not too much. Remember, this is when some stock markets crashed 40%, 50%+ and they still came back and gained 75% over 10 years which is not bad considering all the turmoil in the world.

    Another key aspect of their success is they keep debt low or have no debt at all and make sure their real estate which was only their primary residence, home was not more than 20% by retirement of their net worth. They also made sure that they had 4 years separately in actual living expenses in 1, 2, 3, 4 year GIC’s and some cashable GIC’s. This way they had many years for their equity investments to recover and grow. They did not need to sell any investments, bonds, stocks, strip bonds etc. This protected them.

    Most Canadians that have most of their net worth in a house or condo and have not much in savings accounts, investments, RRSP’s etc. are taking too risk.
    If we see and when is the more possible result a 10% to 20% decline in real estate prices they have 70% or more of all their wealth tied up in one illiquid, asset, their house.

    Borrowing against it costs interest of 2.5%, 3.00% these days but what happens if they have to pay more interest, 3.5%, 4.0%+ or they can’t get as much money as they need as the real estate market goes down and lenders don’t give out as much loans, credit or none at all like what happened in the U.S. 2007 to 2008 real estate crash.

    I know many people that have combined $70,000, $80,000 a year defined pension plan income but don’t have much more than $10,000, $20,000 in other financial resources or savings and not much more than $100,000 in investments but have a $700,000 home that is eating all their money like a monster.

    Yes, it takes time, patience, planning and experience to take care of ones money, finances and family’s money, finances but if people would get more educated, experienced, research and take more time planning their financial future than their vacation, they will be much better off than relying on pension plans that are not the one size, fits all the solution that many are trying to force Canadians through workplace unions and governments.

    Let people choose and don’t force everyone to do something they don’t want to. Financial freedom is good for all. Afterall, it is our money that we earn for ourselves and our family and not the policymakers that may look like they are trying to do good on our behalf but cause many negative consequences when choice is not given to Canadians.


    • I agree, most Canadians are taking on too much risk. They aren’t saving appropriately. An enhanced CPP is one way of addressing that problem.

      If you are super into investing and want to be very involved in exactly how your money is invested, go ahead. But the idea that most Canadians are going to learn about zero coupon bonds and strip bonds is not realistic. And it’s not the way we used to run things. You didn’t used to have to be an expert in REITs and the finer points of RRIFs in order to have a decent retirement.

      As for just putting money into “safe” 2.5-3.6% investments, well, you better be making a heck of a lot of money because after inflation that isn’t a very big return so you’ll have to be saving at an extremely high rate in order to be able to retire with those kinds of returns.

      It’s naïve to say that picking an investment mix that is appropriate is as easy as researching a vacation. It isn’t. I’ve done both. Investing is far more confusing. You can read ten different sources and they recommend ten different approaches. If you go to the bank, they’ll only sell you what makes sense for them. You can pay for advice but at the balance amounts saved by average Canadians this translates into the equivalent of a very high MER.

      You can say that “financial freedom is good for all” but there is no evidence that this is true. Are people truly better off now that they don’t have employer pensions and have to save on their own for retirement? A few people probably are, but the majority appear not to be. As you pointed out, most people have overly invested in real estate and have ignored their retirement accounts. Our savings rate is abysmal. The real retirement crisis is going to be in about 25 years when my generation retires and realizes that $300K in RRSP savings isn’t going to last them that many years.


  17. Sarah, ask those people in Greece, Argentina, Zimbabwe, Venezuela, Bolivia, Cuba, U.S.S.R. now Russia etc. etc. what happened to their social safety net. Socialism destroys jobs, destroys opportunities, destroys countries, destroys lives, destroys lives, destroys economies. and it never works. Socialism to the extreme that you propose ruined it for all of them.

    There are more countries that have socialism and are destroyed. You just named Scandinavian countries with total of only 26 million people. All the countries that failed from U.S.S.R. to Zimbabwe are total population of close to 300 million people. It does not work and it will fail every time.

    Sarah, you are so misinformed about tax policies by any political parties and the new C.P.P. or ORPP $2,000 a year taken from employees, employers, taxes, investing and compound interest and compound returns and just basic math. I am not surprised, low information, inexperienced voters do not make wise, financial choices when it comes to their pocket books. The other poster mentioned about choice and financial freedom and having our own power to make informed and educated decisions.

    Those that want pension plans and social programs above the generous ones we already have should pay for it with 100% all their money and not get government subsidies, matches, partial contributions etc. because you guys want them and you get them, Our families will get squat as we already paid many times over with no social safety net.

    Leave people alone because those that save, invest and want to take care of our their families and ourselves do not want to pay for others bad choices and mistakes over and over.

    Also, Sarah, you did not answer another poster’s question.about how much is enough that the government must take for your socialistic utopia. Is it 50%, 60%, 70%, 80% or all of it. We are getting close to government taking everything so what is it.

    Socialism is a form of confiscation and forced taking away of ones property and hard work, time and this the deceptive, false promise that it brings. It divides people’s money, property with others that are entitled and never think they have enough. The government is the middleman who facilitates it and makes it look okay but it is still theft.

    Society will continue to decay as this gets more out of hand and desperate people think that there are no limits in life when taking from others that what they have taken does not belong to them in the first place.


    • We can all play the failed state game. Are you trying to claim that modern day capitalist Russia is a model you’d like to follow? How about Haiti, Paraguay, Portugal under Salazar, Zaire …. that’s without getting into the ravages income inequality (especially on a global scale), and environmental degradation.

      I disagree that an average payout of around $7K for CPP is “generous”.

      Thanks for calling me a low-information voter. That’s the first time I’ve gotten that particular moniker. Also the first time in my life I’ve been called bad at math.

      I understand compound interest, I just didn’t get the rose coloured glasses that were apparently handed out to everyone else here. Do you all just ignore the adage “Past performance is no guarantee of future returns” and instead decide that future returns will be better than past performance? Y’all also tend not to state your assumptions. You just jump from $A a year to $X million in retirement to $Y per year withdrawn in retirement in one easy step. I would hope that if somebody gave you numbers like that you’d be asking some questions too. Otherwise, your portfolio might not be as well put together as you think it is. Because while the “miracle of compounding interest” can make some pretty graphs if you plug the numbers into a simple calculator a statistical analysis of how things actually behave is not nearly so straight forward and the actual range of what your portfolio can end up at – even with an “average” rate of return of X% over Y years – is really very large.

      As for what percentage of income tax is “enough”, I don’t think that there is one set number that is the amount of income tax people should pay. We have a progressive system of taxation for a reason. And we are nowhere close to government taking all of your money. Lets not get hyperbolic. If your question is “what should be the highest possible marginal income tax rate” that would be a different question. It would depend on the budgetary needs of the country. But a highest marginal tax rate of the order of 60% wouldn’t bother me if we would be able to obtain better services for all.

      However, I am happy to report that we live in a democracy, and I have one vote just as you do. My low-information math-is-hard self will continue to vote for the policies that I believe in, as I have in every single election I have been eligible to vote in since I turned 18, and I encourage you to do the same.


  18. As a senior who has carefully saved his money all his life and carefully invested it, the TFSA is the only vehicle I can use to save my earnings without having them taxed. I, of course, have no job so there is no possibility of putting my savings in an RRSP or pension. About 60% of seniors use the TFSA with many maximizing their TFSA contribution. Granted, those seniors who never saved during their working life have little income so have little TFSA contribution funds. Why penalize the seniors who worked and saved carefully because of those who did not.


  19. JDonScott, this is the problem with taxing people more and more and using means testing, cutting benefits that many seniors, retirees worked for and paid for like OAS and other medical, healthcare benefits.

    They penalize you because you were careful, diligent and smart to prepare for the future. Another poster here said it is luck and not from your hard work and savings, investments and being responsible.

    I don’t see any good news with the the new Liberal government and Trudeau’s taxing polices and cutting tax relief for seniors, retirees and especially younger Canadians that could benefit from compound interest and compound returns for decades.

    I understand that this will cost many thousands of dollars a year. It will probably cost you $500 or more to by your next income tax return and cost more every year.


  20. My husband gave me a calculation about the current C.P.P. contributions of $5,000 a year being paid to the federal government. This is based on a $50,000 a year worker and in their late 20’s to early 30’s. This same $5,000 plus $1,650 annual RRSP deduction over the working life amounts to about $1,300,000 at age 65 in an RRSP.

    In retirement, this would generate a modest $48,000 to $50,000 a year in income but C.P.P. currently pays maximum $12,780 a year and by retirement decades from now a younger worker making $50,000 a year would receive around $38,000 a year in C.P.P. benefits.

    Imagine now paying another $2,000 a year towards C.P.P. or ORPP for the rest of your life.


    • 1) The maximum amount any worker puts into CPP is $2425.50 per year, not $5000 per year. The employer does match this amount, but if you think that if they cancel CPP your employer will give you a $2500 dollar per year raise ….

      2) Again with the calculations assuming a 7% rate of return after fees. Because why?

      3) I don’t know why you are adding an extra $1650 to your total for putting the money into an RRSP. You aren’t taxed on CPP contributions either. You could put the tax rebate you get for making CPP contributions into your RRSP right now if you wanted to. Do you?

      OK, I’m imagining paying an extra $2K a year towards CPP for the rest of my life. For that $2K a year, I get a tax rebate of whatever that I can invest in my RRSP if I so desire, and I get almost $13K a year in retirement. (Which, using the methods your husband seems to be using is equivalent to a 6% rate of return after fees with a 4% withdrawal rate during retirement.) Indexed to inflation. Indefinitely. Guaranteed.

      Sounds pretty good to me. I’ll sign up for that.


  21. I am not surprised how misinformed people are how much income taxes they pay and C.P.P., and E.I. etc. The bottom line is the federal government gets from $2,479.95 from an employee, $2,479.95 from the employer so the total take of $4,959.90 on a maximum pensionable earnings of $53,600.

    The average Canadian annual gross income which is what all income taxes, health taxes, non-refundable tax credits and all other tax calculations like surtaxes and others are based on. There are some instances where net income is used but this is mostly once again socialist polices like E.I., OAS, G.S.T. H.S.T., medical expenses, GIS, age amount, survivor benefits and more and more taking away more money so the more someone works, the less they have.

    If someone where to add up all the income taxes., C.P.P., E.I., G.S.T,, H.S.T., liquor, alcohol, beer taxes, tobacco, cigarette taxes, gasoline taxes, excise taxes, land transfer taxes, income surtaxes, health taxes, OAS, E.I., age amount clawbacks, social benefit repayments, tax recoveries, property taxes, garbage taxes, eco fees, taxes, smart meter fees and tripled electricity rates for Ontario, B.C. entertainment, hotel, higher alcohol, restaurant taxes, taxes, other special fees and taxes on water, sewage, vehicle and auto registration, license fees, taxes, air conditioning taxes on auto purchases and so on and so on and so on, the governments take more than what is left over to taxpayers.

    This is going to add up even more with newer taxes coming from infrastructure taxes, road tolls, new sales taxes, new liquor, beer, tobacco taxes, new carbon taxes, cap and trade and carbon pricing, higher energy and food cost of green, environmental government tax, fee, levies and policies, higher G.S.T., H.S.T. to 15% and but mostly likely to 17% as federal government, provinces both increase, new income tax brackets, rates, lower income thresholds due to not indexing fully to inflation also known as bracket creep, cancelled tax credits, income splitting, cancelled TFSA contributions by $4,500 maybe more, higher C.P.P., new ORPP contributions and so on and so on and so on.

    It already adds up to 55% to 60% for average to modestly higher income earners and it is much worse for single higher income earners with a spouse that does not work and those with or without children to raise which for them would add up to about 70% to 75% depending which province, municipality they live and work.

    I am a CA and do this stuff all day for 25 years now and have seen how taxes by a thousand cuts is really adding up so I know what I am talking about. A poster who insists that taxes are not high has no idea what they are talking about.

    This is another reason why more people are getting more and more into debt because they want to have the same, higher quality lifestyle but they have less and less in net income after paying so many taxes of all types.

    What people don’t realize is that if it was not for a the last few tax sheltered, tax savings government legislated plans, RRSP’s, RESP’s, TFSA’s, RRIF’s, LIRA’s, LRIF’s, and very low mortgage rates of around 1.85% to 2.25% to 2.75%, all these higher taxes, fees would already caused more financial hardship, bankruptcies, job losses, lower wages, lower income, a lower standard of living and make it impossible for governments to have all these taxes that we have.

    Most Canadians don’t know about taxes and income tax returns but they do know that it is getting harder and harder to keep more of their hard, earned income and savings, investments, properties.


  22. I read the other poster’s comments and he I understood as people take so much time for instance planning vacations and other things that they don’t take a decent amount of time say even a few hours a month, maybe 3, 4 hours to make sure they are getting ahead financially.

    I looked at the figures of some of these posters and have found that someone that is in their 20’s and 30’s would have millions in 30, 35, 40 years by retirement and there are conservative and safer investments that could easily generate over $150,000 to $200,000 a year in 3.5% to 4.0% dividend, interest income.

    Even those that retire

    Even by retirement decades from now, with inflation, purchasing power, they would see be equivalent to $60,000 to $75,000 dollars today. This is just the investment income so appreciation would add another 1% to maybe 1.6% a year and immediate loved ones, other family members would have that money unlike pension plans that run out and give nothing $0 to their loved ones, family members.

    This is what is wrong with pension plans and certain types of annuities, they fail to look at the big picture and seem like they payout so much more income but in reality they take 100% of your principal, capital away and leave loved ones, other family members with a financial hardship of lost money, could be hundreds of thousands or millions in the future.

    Also, pension age eligibility will not be 65 but most likely 72 to 75 in the next 15, 20, 25 years or so. This scares us alot because it seems that my future is being determined too much by government, bureaucrats pension boards, pension administrators etc.


  23. The annual C.P.P contributions plus $2,000 ORPP or new C.P.P. contributions would add up to about $7,000 a year per average worker in Canada. A two income household would pay $14,000 a year.

    This $14,000 a year in C.P.P and or C.P.P. and ORPP contributions does not stay the same. It increases if not every year but over time. Over the last 17, 18 years or so they were around $900 a year each for the employer and employee, so $1,800 a year now it will be around $7,000 a year.

    This is a 288.88% total increase or about a 7.9% annual increase on increase, basically compounded year after year. Now, I looked at this very carefully and to be more cautious and realistic, a 4.00% or about a little more than half that increase is probably what will happen in the future.

    This same $14,000 with 4.00% annual increases that would of been paid to the government plus a modest 3.6% annual compound interest today available in government bonds, would add up to a big nest egg.

    Making many calculations over and over, there is a TFSA amount or an RRSP amount. The TFSA would be $1,243,411 for a single household worker but $2,486,822 for a 2 income worker household.

    This would be income tax free so using 3.6% annual interest income, $89,525.59 but is equivalent to about $128,000 in taxable interest income for average Canadians.

    The RRSP equivalent is $1,616,427 for a single income earner and $3,232,854 for a 2 household income earner. This would get about $116,382.74 annual household interest income.

    Today, C.P.P. pays maximum $12,775 a year so double that for a 2 household income to $25,500, indexed with inflation over 40 years, this would be about $70,000 plus the ORPP or C.P.P. equivalent of $7,500 paid for each average income in 40 years, this is what the ORPP currently shows, $15,000 on top of $70,000 C.P.P. income, it is $85,000 a year.

    The income from TFSA’s or RRSP’s is anywhere from $31,000 to $43,000 more a year for 2 worker household plus has left in their pocket $2,000,000 to $2,486,822 after income taxes for themselves and family.

    When a spouse passes away, he or she will still have about $89,525 income tax free income, or $116,000 To $128,000 equivalent taxable income and $2,000,000 to $2,486,822 in total investments net after income taxes paid.

    C.P.P. or C.P.P., ORPP income is only $85,000 a year and when a spouse passes away, a 45% cut to $46,750 a year. Even with indexed inflation and one spouse passes away 16 years in retirement to 86 years old, a 70 year old retirement age likely in 40 years being overly optimistic, would have $127,000 annual C.P.P, C.P.P., ORPP income but the remaining spouse’s C.P.P. or ORPP yearly income is cut to $69,850.

    Remember, they would also have no remaining investments, $0 in their TFSA’s or RRSP’s for their immediate family or other family members. The government gets it all and they are left with 80 years of work and nothing to show for it. They are net losers.


  24. My husband and I are now retired just last year and have no government, public sector or company pension plan. We started late in life saving in our early 50’s and now we are both 67 years old. We wished we started much earlier and we are not financially well off people. I worked 25 years and my husband worked 32 years. We have 3 adult children taken care at home with me when they were babies.

    We do just fine with C.P.P., OAS every month which is $32,000. The current C.P.P. OAS, GIS and other federal, provincial social programs are adequate. We take a few hundred dollars a month and put it in a contingency savings account which is about $6,000. We do not get the maximum C.P.P. either. We are a little above average. A voluntary contribution program for C.P.P. should be available for those that think it is a good thing for them. Please don’t force one more thing on Canadians that all do not want.

    By the way, to a previous poster I believed named Sarah, seniors and retirees at 65 years and older pay no income taxes on their first combined income is $36,000 a year. So all their C.P.P. OAS is 100% not taxed. It is essentially tax free.

    I have $135,000 in RRSPs and my husband has $185,000 in RRSPs. We took advantage of the maximum TFSAs and have $85,000 now. We transferred some RRSP’s, paid a taxes and topped up our TFSAs. We don’t understand why so much attacking about TFSAs and how it is for the rich. This is not true. TFSAs are for people that are responsible and want to improve their financial future and their kids, grand kids etc. This is especially true with retirees and seniors that paid so much taxes over the years and continue to do so.

    We never understood investing and stocks, ETF’s, bonds, REIT’s and anything else but we simply have our RRSPs, TFSAs in GICs, 1-7 years in banks, credit unions, trust companies. We have rates of 2.5% to 2.75% as we had them at different times. I don’t think I’m alone here and looking at a simple RRIF chart I got from my credit union, we can withdraw maximum $23,000 a year from our RRIF’s at ages 71 and it will last us until we are 95 years old. We can take less if we don’t need $23,000 a year which will leave us with much more money.

    People today have debt like it is a pet. They have no shame. They seem quite entitled like someone else will pay off their debt as if it is not theirs. We did not save much until our later years but we were responsible in making sure we were not in debt to our eyeballs. Our mortgage was paid off after 17 years being married which we just celebrated our 40th anniversary this year and we have no debts at all. We have a modest house worth $350,000 and that is it.

    The major problem in retirement in Canada is not pensions but an unrealistic lifestyle built on debt mostly from past years and even now in retirement. People are not taking retirement and their debts seriously.


  25. By the way, I checked Service Canada’s website and the maximum C.P.P. is $1,065 a month and the maximum OAS is $569.95 a month. So the maximum C.P.P., OAS combined for 2 spouses is $1,634.95*2=$3,269.90 a month or $39,238.80 a year.

    Income taxes are only about $800 combined on this so it is only 2.038% taxes paid or 97.96% not taxed, essentially 97.96% tax free. Also, I looked at the Ontario income tax credits and at least $1,000 to as high as $2,000 tax credits for lower to modest income seniors.

    Basically, $40,000 a year in net pension income without income taxes, tax free. This is the same as to 2 Canadian workers making $25,000 a year each after paying their income taxes, C.P.P., E.I., Ontario Health taxes or a single Canadian worker making $54,000 a year and after paying C.P.P., E.I., Ontario Health taxes.

    I would agree that with the current C.P.P. pension laws towards widows should be made whole by having the same income as when both spouses were still alive. There should be no cut to the deceased spouse’s C.P.P. or the surviving spouse’s C.P.P. disability either or just C.P.P.


  26. I did not type some information. A single Canadian worker making $54,000 a year would be left with about $40,000 to $40,500 after paying C.P.P., E.I., income taxes, Ontario Health taxes.


  27. The one thing nobody talks about when it comes to income taxes is the fact that the personal amounts for Ontario is $10,011 but is higher for Canada, federally, $11,474.

    This means $73.88 more income taxes per taxpayer per year, so 2 working income household no matter what income, minimum wage or high income earner will lose this money.

    The fact that the personal amount should be much higher and this would benefit more the working poor and middle income, lower income workers.

    The personal amount should be around $15,000 as the Chretien, Martin Federal Liberals did not index for inflation for about 8 years. This is costing every Canadian with taxable income $706.93 more income taxes per year so a 2 worker household is now paying $1,413.86 more income taxes just because government benefiting from inflation, cost of living.

    In our case, we are all working in our family, myself, spouse, 3 adult kids working full time, this is costing us $3,534.65 per year. This is the problems these days, nobody looks as their income taxes as a family and how they are losing alot of money from past years of tax polices gone wrong.


  28. I forgot to mention that the $3,534.65 in overpaying of annual income taxes will cost about $250,000 of TFSA money decades from now and by around retirement and about $10,000 a year in annual TFSA income.

    This is for all Canadians regardless of low, middle, high income.


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