Where would you invest if you had extra money
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Location: carl sagan's universe
Posted on: 16-10-08 11:16:00
Quote:
Originally posted by bc2on
Under what circumstances can one cash out from the account?
Can one invest in anything else or is it just cash deposit with 3% interest, remember it maybe less than inflation?
What happens when you are cashing it? Do you pay tax then?
Thanks
No you don't pay tax when it is withdrawn because you are contributing AFTER TAX DOLLARS to this account.
Location: carl sagan's universe
Posted on: 16-10-08 11:24:21
Quote:
Originally posted by irock
bc2on
Just imagine every year you contribute $5000 to this account & at the end of 10 years you might be earning an interest of $1500 tax free with your total savings of $50000 in 10 years. Same with every member of the family.
1. If you deposit $5,000 initially at 3% and assuming the interest is 3% annually, then the accumulated sum at end of 10 years is approx $6,719 based on compounding interest.
2. If you are contributing $5,000 annually, as your statement suggests. then you have to add the 9 years of compounding interest of the 2nd contribution and the 8 years of the 3rd contribution and so on, giving you more than the $1,500 you have mentioned.
Just trying to give a clearer picture, though I might have mucked it up.
you are right Investpro
I forgot to include the compounding interest funda into the calculations
I did the new calculation & it comes out to be $59038 after 10 years if you deposit $5000 every year on 1st of January.
So its $9038 without tax interest income after 10 years.
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i..........rock........!!!!!
Thanks, it make sense now. I believe this will boost the stock market at least if people can invest in the market. 3% is not even inflation so I am sure most will invest in the market.
Quote:I don't think that will happen.
Originally posted by bc2on
Thanks, it make sense now. I believe this will boost the stock market at least if people can invest in the market. 3% is not even inflation so I am sure most will invest in the market.
People taking advantage of this program will be mostly middle-class, fixed income wage earners who just want to put some money away for security and out of the hands of the Govt.
The ultra rich couldn't care less for the TFSA - they anyway don't pay proportionate taxes.
Most small retail investors will not see the TFSA as a stock investing opportunity, esp. in such times.
Even in good times, most people would have stuck with guaranteed, income producing holdings within such an account.
Almost everyone I have spoken to are simply going to use the TFSA as a tax-free extension of their savings account.
In other words, hold short-term Govt. debt, GICs, high interest savings accounts, etc.
Even if folks decided to go shop the equity markets in their TFSA, the contribution limits are so small and the investors so few that it would barely make a difference to the stock market.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
I will say you are right since most of us will just keep money around in the account and may need to use it in the near future and will refrain from long term investment. Hpwever, I do see some affect on the market over the long term as most of the invester may just be transferring their long term 5K per year adn over time accumulate some long term investemnt dough in the account.
Now that we are talking about TFSA. Can someone please logically explain me where should one put money TFSA or RRSP?
I am sure it cannot be as simple as one might think ? People like me , with not much knowledge about this, may think TFSA is a better that RRSP.
I am sure CD's like invespro, Pratickm can shed some light on this.
If you think I am hijacking this thread, please let me know.
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