My and Daniel's Two Cents on Tax-Free Savings Account

• Daniel thinks it's a horrible idea:
• It's a logistic nightmare: Who keeps track of the contribution room? Is it CRA or the bank(s)? The reusable nature of the contribution room makes it even worse to keep track than RRSP contribution room.
  
• Following the previous point: how to keep track of, and prevernt, over-contribution? If the account doesn't allow over-contribution AT ALL, a person with more money to invest than the contribution room needs to split the investment into separate accounts. For example, if a person has $10,000 to invest in 2009 and he wants to put them all in Google, it will have to be split into two chunks of $5,000 in separate accounts, and pay brokerage fee twice.
  
• On the other hand, if over-contribution is allowed in the same account and their is no penalty for it, who gets to decided which investment belongs to the tax-free portion? Let's say during the course of a year, someone with over-contribution has $100 capital gain on one stock and $200 capital gain on another, all else being equal. A logical person would definitely claim the $200 as tax-free.
  
• For a measly $5,000/year, banks may not want to even offer this type of account, due to the infrastructure overhead.
  
• For someone in the highest tax bracket, at 4% for a high-interest savings account, that person gets less than $100 tax break. Unless the ROI is sufficiently high, TFSA offers little benefit. From an economics standpoint, for high-income individuals, the time required to utilize this account is probably worth more than the tax benefit.
  
• In terms of assets, a "typical" family already has RRSP, RESP, mortgage, and multiple non-registered investment accounts (equity, mutual funds, GIC, savings) to keep their money. This account makes the picture more complicated and will not offer sufficient benefits.
• Age is the only thing that determines contribution room; thus, it is discriminated against young people.
  
• Overall, government should not dictate how residents spent their money.
• I think it was OK:
• CRA already keeps track of RRSP contribution room, thus is the logical gatekeeper of this new contribution room. As long as banks notify CRA on all deposits and withdrawals. Banks already RRSP withdrawal withholding tax, so that's not a big problem.
  
• With the current credit crunch, and the fierce competition in retail banking sector, banks should be more receptive to TFSA if it helps them obtain and retain customers.
• It is forseeable for account fees to be attached to this type of account. It may come in the form of monthly/annual fee (like many normal savings account the big banks offer), or withdrawal fee (akin to RRSP).
• Over-contribution should incur a heavy penalty, similar to the 1% per month for RRSP.
• The majority of Canadians don't even max out RRSP and don't have much non-registered savings. From a logical standpoint, RRSP and RESP provide more monetary benefits under most normal circumstances (lower income tax for RRSP, and matching government contribution for RESP). As a result, assuming there is "real" benefit in TFSA (tax benefit - bank fee), it is beneficial to people who maxed out RRSP contributions AND still have money to invest -- which isn't that many.
  
• One scenario TFSA is beneficial is young people saving up for down payment of the first house. This RRSP season, a young coworker asked my opinion on whether he should continue to max out RRSP once he has saved enough for HBP. He was concerned with the non-liquidty of RRSP, but the immediate tax savings plus the tax-free gains were appealing. If he kept the money on non-registered investments, he would essentially be taxed on both the principal and any incurred gains. If TFSA were available now, at least the gains wouldn't be taxed.
  
• It will work out very well for income splitting among couples, as long as they actually have money to contribute.
  
• Personally, I would probably use this account for further retirement. There are probably too many strings attached to utilize TFSA as emergency fund. I have yet to work out the numbers on whether it is favourable to fund major purchases (e.g. new car, major renovation).
• The two investment-related tax breaks I'd like to see the most are still missing from this budget: making mortgage interest tax-deductible (without any and all risks of leverage strategies such as Smith Manouvre), and making capital gain tax-free as long as the principal + gain are reinvested within a certain time frame (e.g. a month).
  

Only in Korea

... would they "spend millions of dollars and several years perfecting a version of kimchi [for space]".

In case you don't know any Koreans, or haven't been to Korea or any Korean restaurants, kimchi is a traditional side dish of fermented vegetables and seasonings. There are as many varieties of kimchi, some spicy and others not, though all of them are fermented thus are rather pungent.

Oh, and Koreans can't live without them.

[Starship Kimchi: A Bold Taste Goes Where It Has Never Gone Before - New York Times]

Grand Canyon Trip Gets Green-Light Again

In light of the previous post on air tickets to Vegas, I should point out our Grand Canyon trip is back on, just as originally planned.

For the days we originally planned to hike down the Canyon, we still fully intended to do so. =P We'd just try our luck on getting a no-reservation permit.

In case you wonder about "what if," we also booked a regular campsite (i.e. on the top of the Canyon) within the national park for those two nights. We'd have to camp at a much lower temperature, but we'd have access to our rental car, and by extension, all the winter clothing we'll bring along.

On top of all the camping, we still have one night of cabin stay on the last night we'll be at Grand Canyon. After that, we will spend two nights in Las Vegas before heading home.

TODO list: car rental, Las Vegas hotel room, and reservations to any shows or fancy restaurants we might be interested in (probably none).

A mildly interesting conversation occurred when Daniel was booking the flight.

D: Do you want a red-eye flight on Saturday evening, or a regular flight on Sunday?
C: Regular flight. I had too many red-eye flights in my life, more than I can bear.

Two consecutive red-eye flights (16 hours and 6 hours respectively, with less than 18 hours and no night time in between) would do that to you.

Cheap Airtix FTW!

Last night, while I was semi-working (hey, SVN-over-VPN is slow, Xbuild is slow, and Eclipse is slow), semi-surfing (which may or may not further contribute to the slowness of working), and semi-basketball-watching (the Lakers at Suns is a little over-hyped), Daniel decided to it was time to shop for YYZ-LAS plane tickets. He asked me about "other" travel sites--which I took as meaning sites other than Travelocity and Expedia. I named a few more, most notably Kayak and Exit.ca.

He checked out Kayak and was duly impressed by the slick and useful interface. (My reputation as his internet advisor has probably gone up a notch.)

In the mean time, I suddenly remembered seeing some sort of WestJet sale via RedFlagDeals while going through my RSS subscriptions (current count: 85 feeds, averaging 280 total items per day). My first reaction was, "do you know if WestJet flies to Toronto? I think WestJet is having a sale." Then, I went to my trusted Google Reader and found the RedFlagDeals post on one-day-only, 50% off seat sale at WestJet. I reinforced the urgency, "the sale is today only," and left it at that.

A few minutes later (as Daniel must have been checking out WestJet), he yelled, "Holy sh*t WestJet is DIRT CHEAP!!!" Since I have used WestJet's site before and recalled them not including any extra fees to the price until later in the check out process, I reminded him, "does that include all the airport tax and stuff?" "Yes! And it's still WAY cheaper!"

He went on and bought the tickets for $365 per person, earning me a few Air Miles reward miles in the process.

Chinese New Year Festivities

One major change that marriage brought to our lives was, family-oriented holidays are twice as hectic as before. Although we get breaks for major traditional Canadian holidays like Thanksgiving and Christmas, Daniel and I get doubly hit when it comes to Chinese New Year: You see, Chinese traditions on CNY celebration spans multiple days. First, we start off with a end-of-year family gathering on new year's eve. On the first day of CNY, you're supposed to go to the temple and pray for a good year, though neither side of our family actually do that (thank goodness). On the second day of CNY, you first visit your parents for lunch to celebrate the beginning of the year. Only after that you're supposed to visit your boss, friends, and other acquaintances.

The problem? We don't get multi-day CNY holidays like HK, so all the pre- and post- dinners are squeezed into weekends. That, plus having to deal with both sides of families, means a complete write-off of the weekends before AND after CNY.

At least I don't have to give out too many red pockets, since the number of juniors around us is (still) relatively small.

Frugal V-Day

Lunch: leftovers from Wednesday's dinner at Daniel's parents' place ($0)

Dinner: 2 pieces of AA sirloin steak (on sale), 1 whole wheat baguette, 2 carrots, 3 broccoli heads, 3 avocados, 2/3 of a medium onion, 4 roma tomatoes, 1 bottle of "make your own" barolo, oil and seasoning (est. cost $20)

Gift: none