If we judge by reader questions, the new tax-free First Home Savings Account is generating a lot of interest from people who want to get into the housing market.
Banks and investment companies have been slow to introduce FHSAs, as noted by my colleague Salmaan Farooqui in a recent Globe and Mail story. But the flow of reader questions since the April 1 launch of FHSAs suggests there’s quite a bit of interest in them.
Here’s a quick guide to FHSAs that I wrote on their launch. To quickly summarize, they combine the best of tax-free savings accounts and registered retirement savings plans in a way that results in a very appealing way to save for a home down payment for people 18 and older. You get a tax deduction on your contributions, as with the RRSP, and you get the TFSA’s tax-free withdrawals when using the account to buy a home. As with both RRSPs and TFSAs, investment gains earned in an FHSA are tax-sheltered.
One of the specific questions from readers about these new accounts concerns married and common-law couples. Can they each have their own FHSA to use on a house they buy together?
The answer is yes. As long as both partners are first-time buyers, they can each contribute to their own FHSA and use it to buy the same home. This is significant because the maximum contribution to FHSAs is $8,000 a year to a lifetime ceiling of $40,000. Multiplied by two, these accounts become much more of a factor in building a down payment.
Spousal FHSAs are not available, so one spouse cannot directly contribute to a partner’s account. However, a spouse can give money to a partner for use as an FHSA contribution with no tax consequences for the giver.
Subscribe to Carrick on Money
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob’s personal finance reading list
When the invitation says ‘no gifts’
How to navigate those situations when an invitation to a wedding, milestone birthday or shower says “no gifts.” Do buy a gift anyway?
Bye bye, adviser
A Reddit discussion on moving your investment account from an adviser to a much cheaper robo-adviser. A pro tip covered here: Ask your robo-adviser to cover any transfer-out fees from your current advisory firm.
Would you sacrifice returns to invest ethically?
A survey of more than 1,000 people finds that 70 per cent are willing to make a lower return if investing in a company that produces tangible social good. I’m not sure you have to sacrifice returns if you invest in companies that score well on an ESG basis – environmental, social and governance factors.
She’s 67 and moving in with three strangers
Meet Katherine Goodes. She’s 67 and moving in with three strangers so she can get her monthly rental costs down to more affordable levels. This is such a common problem that a Facebook group has been created to link up senior women who want to share housing to keep costs manageable.
Ask Rob
Q: I just read your column on RRIF withdrawals. It mentions using an in-kind withdrawal. I have been told twice by my financial advisor that I could not do that and I had to convert to cash before making the withdrawal. Have I been given misinformation?
A: Here’s the lowdown from the Ontario Securities Commission’s Get Smarter About Money website: “If you don’t need the income from your RRIF right away, you don’t have to take your minimum withdrawal amount in cash. Instead, you may be able to transfer the investments directly to a non-registered account or TFSA (provided you have contribution room remaining in that year). This is known as an ‘in kind’ withdrawal.”
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
A helpful guide to getting started as an ETF investor, including some funds to look at.
The money-free zone
Crunchy psychedelics from Italy: Dark Love by the New Candys. For an Icelandic spin, try Dead Mantra by Dead Skeletons.
From the Twitterverse
Why do so many people who have investment advisers also have DIY online brokerage accounts?
In case you missed these Globe and Mail personal finance-related stories
- Air Miles, Aeroplan – the golden age of loyalty points is done, but it can return
- If you think car repair is expensive now, just wait until most people are driving EVs
- Agency says car insurance in some Ontario cities has spiked since 2021, may keep climbing
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be child-free or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You’re not bad at money – you’re suffering from money shame • Retirement might look different for Gen Z and millennials. Here’s how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn’t special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home down payment in Canada’s big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here’s how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
Rob Carrick