Skip to main content
carrick on money

vchal/Getty Images/iStockphoto

Tax-free savings accounts and registered retirement saving plans are supposed to encourage people to save more. But one of the fathers of the TFSA questions whether this is happening. Rhys Kesselman, now the Canada Research Chair in Public Finance at Simon Fraser University, said the tax breaks available from TFSAs and RRSPs don't seem to be motivating middle-income people to ramp up their saving.

As a result, it's arguable that the benefit of these programs flows mainly to higher income people. "A lot of it is tax reduction without necessarily significant – in the aggregate – additional saving," Mr. Kesselman said in interview with CBC.

Mr. Kesselman and a colleague first proposed the TFSA back in 2001. Today, he warns that changes may be ahead for the program. For example, he said it's likely the government will address a rule allowing people to accumulate huge TFSA balances and then make withdrawals in retirement that don't trigger Old Age Security clawbacks.

TFSAs were introduced in 2009 and the cumulative annual contribution room over the years totals $52,000. However, the Canada Revenue Agency has confirmed that there are already some million-dollar TFSAs. The more success people have in building their TFSAs, the more pressure may build for the government to make them less generous.

Subscribe to Carrick on Money
Click here to have my newsletter e-mailed to you twice weekly.

Cut those wedding costs
Please don't go into debt for your wedding. It's bad personal finance and so unnecessary when you have tips like this – a guide to people you don't have to invite to your wedding.

Comparing what Canadians and Americans pay for advice
No surprises here – we pay more. But there's some useful context here on how the two markets differ.

Mental tricks for mastering money
How to get your mind right to handle money more effectively. Some good ideas here for helping you live within your means.

Black swans and robo-advisers
Financial advisers speak out on what worries them most. A good range of concerns raised here.

Dollar-cost averaging? Don't do it
Got a lump sum of money to invest? A persuasive argument is made here to put it to work in one go rather than making multiple small investments.

Bring on the cashless society
Warning: This description of the contaminants that can be found on paper money is just gross.

Today's featured financial tool
Here's a tool that can help you find the best chequing account for your needs. Youth, student and senior accounts are covered, as well as mainstream accounts.

Ask Rob The question: "I wonder whether a laddered GIC strategy is worth considering as an alternative to the variability of a bond fund."

My reply: "Yes, provided you get those guaranteed investment certificates from alternative banks, trust companies or credit unions offering premium rates compared to the big banks. GICs can't easily be sold before maturity, but they don't fluctuate in value in your account. You won't see losses in the value of your holdings if interest rates rise, but you also won't see gains if rates fall. Here's a website to compare GIC rates. By the way, laddering generally means dividing your money evenly into GICs maturing in one through five years. When a GIC matures, you reinvest the money in a new five-year term."

Featured video
Why people should stop obsessing over their credit rating.

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.

More Carrick and money coverage
For more money stories, follow me on Twitter and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.

Send us an e-mail to let us know what you think of my newsletter.