Canadian Finance and Investing Thread - Paying More is our National Pastime

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Canadian Finance and Investing Thread - Paying More is our National Pastime

The NPC: Nov 21, 2010

pokeyman posted:

I mean, general advice is never a substitute for running the numbers on your actual situation. The usual advice I see (and would give) is something like:
1. Pay off expensive debt.
2. Save and invest via tax-advantaged accounts.
3. Invest via taxable account and/or pay off inexpensive debt, as preferred.

I think that advice still applies? You left out step one, but I don't remember seeing advice to carry a credit card balance or take out payday loans to juice your TFSA. And finding one year of bad returns and increasing interest rates doesn't much matter on a scale of decades.

Though you're entirely right to be wary of advice that assumes low or non-increasing interest rates. Or that stocks never have consecutive bad years. If you come across examples of personal finance advice that seemed good but now seems invalid, I'd be curious to see it. I'm sure it's out there but so far you're beating up a strawman. (Unless taking out a heloc to invest in stocks was common advice?)

I remember reading articles about taking out a sub 3% line of credit to buy equities which you earn more than that in the short term.

I think the main point here is there were lots of debts people classified as inexpensive when they were acquired (e.g.: loc at prime + 1.5) which are now comparatively expensive at 8+%. Now that the numbers have changed, lots of top advice articles need to be updated. New investors are going to either blindly follow them because that's what they've been linked, or be confused as to why their numbers aren't adding up the way the article's are.

# ¿ Dec 4, 2022 16:28

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# ¿ Apr 28, 2024 15:18

The NPC: Nov 21, 2010

AegisP posted:

FSHAs are a combination TFSA/RRSP for first home purchases:

* Contributions to a FSHA are tax deductible (like an RRSP);
* Withdrawals to purchase a qualifying home are non-taxable (like a TFSA, but restricted to the use of purchasing a home);
* Contribution room increases each year by a set amount (like a TFSA), up to a maximum of $40,000 lifetime limit, although you will only earn contribution room and carry forward that room once you open an FSHA for the first time.
* FHSAs have a maximum timeframe to be used of 14 years after first opening an FSHA, or turning 70 years old, or using an FSHA to purchase a home, whichever is earlier.
* Funds in an FSHA can be transferred tax-free to another FSHA of the same person, or their RRSP or RRIF, on a tax-free basis and do not use up RRSP contribution room.
* Otherwise, for all other withdrawals that are not used for a qualifying home purchase and do not go into an RRSP/RRIF/FSHA, such withdrawals are considered taxable income. Also, you do not reclaim FSHA contribution room for such withdrawals.
* As the explainer in the Department of Finance backgrounder notes, the version of the bill that received Royal Assent now allows for FSHA and HBP to be used for the same qualifying home purchase.

From what I could see of Canadian finance subreddits, the preference appears to be: FSHA > TFSA> RRSP, given that FSHAs only start accumulating contribution room after you open one, and they rollover into your RRSP whether you buy a home or not and don't consume RRSP contribution room when that happens.

For more reading:
Original guidance from the Department of Finance (with a disclaimer that the Royal Assent version changed things)
CRA information for financial institutions including background information
Bill C-32 - Royal Assent version

If I just bought a place, can I still open one of these and use the tax break to pay down the mortgage, or just funnel more into an RRSP?

# ¿ Mar 12, 2023 00:01

The NPC: Nov 21, 2010

AegisP posted:

No.

The requirements in order to open an FSHA from a financial institution requires that an individual be a qualifying individual. This is defined as:

Thanks. Those actually seem like reasonable restrictions. Now if I only had $ to save away in the first place...

# ¿ Mar 12, 2023 00:18

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