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By Robert D (anonymous) | Posted April 28, 2011 at 17:26:42
I agree with the OP that TFSAs reward the rich much more than the poor.
First of all, consider that the vast majority of RRSP contribution room goes UNUSED by Canadians - because most can't afford to put any money into their RRSP.
Similarly, while many Canadians have opened TFSA accounts, the vast majority of contribution room remains unused.
The only people who can contribute to both, are those wealthy Canadians who have enough to pay for all their expenses, and max out their RRSP, and have at least $5,000 left over.
Borrelli is also correct when he talks about the optimum use of the TFSA - it is not putting $5,000 in every year in a 5 year GIC, or even in a mutual fund. The true beauty of the TFSA is that you can put $5,000 inot a HIGH RISK investment, and gamble it. Sure you might lose, this is a high risk investment after all, but if you win, the tax free shelter and the contribution room you free up is worth more than enough to cover your losses. Of course this strategy is limited to people who are already comfortably maxing out their RRSP and don't mind gambling $5,000 - or rather, would gamble it anyways, just not in a tax free manner.
Let's not forget the government altered the rules regarding TFSAs in the last year or so, in response to sophisticated tax minimization schemes that were dreamed up by wealth management experts as a way of sheltering the investments of their wealthy clients.
I'm not saying the TFSA is entirely bad - it serves a purpose, but the good that it does for the vast majority of Canadians is nothing compared to the good it does to the top 10% of income earners.
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