I don't quite understand TFSA - please help

[babytoe]

@lovingthetruth Not sure that’s a good thing. TFSA is a good vehicle for longer term like an RA is(16+yr) .. but with greater flexibility on draw down and investment selection with no tax on currency weakness(baked into feeder funds, basically currency devalue means you pay for that as interest albeit the asset had a fixed usd cost perhaps) & interest.

But for people leaving SA know that you need to withdraw it prior to losing tax residency status else you need to pay tax on this “income” in your new tax resident country(foreign). That withdrawal.. means you basically kill off your TFSA allowance by the amount invested/contributed(not the withdrawal amount).

For a 5yr thing this seems a waste given the standard individual tax free allowance is 20k and you would need to invest 200+k with a 10% return to get that. 5yrs (at 36k/anum) = +/-180k TFSA contribution

 

[jacob1122]

@mjt1k987 There's already a lot of decent advice here so far here. What I'll advise in addition is that you go and give all 240+ episodes of The Fat Wallet Show podcast a listen. This will help you greatly! Not just with regards to figuring TFSA's out but also other personal finance issues in general

 

[vincent1994]

@mjt1k987 You could also put it this way. The money you put in a TFSA shouldnt be touched and only withdrawn once at that one retirement point etc and in the process you will pay nothing to the government. A regular savings account on the other hand shouldn't be treated as an investment. Remember on a 2-3% interest rate you are effectively losing money as inflation goes up 6% every year. This savings account should be treated as a quick access of funds for when you need it or for that holiday etc. The real comparison we should be making is TFSAs vs ETFs vs Funds etc. As someone mentioned previously you really start to get value when you combine the two and get a Tax Free ETF