RBC poll finds tax-free benefits, flexible
investment options remain untapped
TORONTO, Aug. 20, 2019 /CNW/ - It's been 10 years since
TFSAs (Tax-Free Savings Accounts) first appeared and while they're
proving to be Canada's savings
superhero, their true super power remains dormant. Canadians
continue to largely use their TFSAs for savings storage rather than
benefiting from tax-free returns, by investing those funds to help
them grow, according to the 2019 RBC Financial Independence in
Retirement Poll.
For the first time, the poll found more Canadians have TFSAs
than RRSPs (Registered Retirement Savings Plans), by 57% compared
to 52%. TFSAs are now the preferred option of Canadians aged 55+,
who in the past have primarily focused on RRSPs. When asked which
plan they would choose if they could only contribute to one, a
resounding two-thirds (64%) selected TFSAs over RRSPs.
For all TFSA holders, the top five holdings within their plans
include:
- 42% – savings accounts and cash
- 28% – mutual funds
- 19% – stocks
- 15% – GICs/term deposits
- 7% – ETFs (exchange-traded funds)
"Canadians are drawn to the flexibility of saving cash in their
TFSAs, but it shouldn't stop there. The true advantage of
contributing money to your TFSA is to help you reach your goals,
not just to have a short-term savings account," advised
Stuart Gray, Director, Financial
Planning Centre of Expertise, RBC. "The magic happens when you
invest the money within your TFSA and gain the benefit of
compounding, which helps your earnings generate even more earnings.
You gain interest not only on your original investment, but also
interest on your interest."
Gray added that the name "Tax-Free Savings Account" has misled
many Canadians into overlooking investments they can hold within
this account and in addition they have been overlooking the
tax-free benefit. "Income earned on what you hold within your TFSA
is not taxed, so the compounding occurs for the full amount. You
can invest in a variety of investments to help you maximize your
tax-free return, to help you reach your financial goals."
RBC offers some examples of short-term to long-term investments
you can hold within your TFSA:
- Short-term savings goal (30+ days): For as little as
$500 invested for 30 days or more,
you can put your savings to work in a GIC. Your initial investment
remains protected, at a fixed interest rate, and you have the
potential to start earning more on your savings for that rainy day
fund or special trip.
- Mid-term savings goal (5+ years): For an investment of
$500 or more, you can have a
professionally managed portfolio that can easily be redeemed to
fund any big purchase you are saving up for. Check out this option
with a financial advisor at your local bank branch, who can also
help you explore a combination of GICs and mutual funds, to help
you achieve your big ticket savings goal sooner rather than
later.
- Long-term savings goal (10+ years): You can start with a
$500 investment in mutual funds,
stocks or ETFs (Exchange-traded funds) and continue to build your
savings for the long term, including for retirement. With time on
your side, you can potentially benefit from the generally higher
long term returns of investing in the stock market and smooth out
shorter term market movements. Again, a financial advisor can help
you explore your options.
The RBC poll indicated that, while the majority of Canadians
(74%) understand TFSAs can contain cash or investments, four-in-10
(43%) are misinformed and believe TFSAs are for savings and not for
growing money. In line with this savings focus, two out of three
TFSA holders (65%) reported they have not withdrawn money from
within their account.
"Canadians often have money parked in their savings accounts –
including their TFSAs – and untouched for long periods of time,"
noted Gray. "You can take control and look for opportunities to
invest these funds so they can work for you. You can build up your
savings with financial flexibility to reach your long and short
term goals."
Of the one-third (35%) who have withdrawn money from their TFSA,
the top reasons for doing so were:
- Paying off debt – 25%
- Making a large or special purchase – 24%
- An emergency – 20%
- Paying day-to-day expenses – 19%
- Purchasing something for a home – 11%
- Buying a home – 10%
TFSA fast facts – 2019 RBC Financial Independence in
Retirement Poll
TFSAs vs.
RRSPs
|
National
|
18-34
|
35-54
|
55+
|
Male
|
Female
|
Yes – I have a
TFSA
|
57%
|
52%
|
51%
|
65%
|
58%
|
55%
|
Yes – I have an
RRSP
|
52%
|
40%
|
62%
|
52%
|
55%
|
49%
|
Prefer TFSAs over
RRSPs
|
50%
|
43%
|
41%
|
64%
|
52%
|
49%
|
|
Estimated
current
market value
|
National
|
18-34
|
35-54
|
55+
|
Male
|
Female
|
My
TFSA
|
$42,300
|
$33,300
|
$36,300
|
$51,500
|
$48,100
|
$36,500
|
My
RRSP
|
$96,367
|
$47,066
|
$80,612
|
$139,870
|
$108,299
|
$83,614
|
|
Top 5 holdings in
TFSAs
|
National
|
18-34
|
35-54
|
55+
|
Male
|
Female
|
Savings accounts
& cash
|
42%
|
50%
|
42%
|
37%
|
40%
|
43%
|
Mutual
funds
|
28%
|
30%
|
26%
|
27%
|
31%
|
24%
|
Stocks
|
19%
|
22%
|
17%
|
20%
|
28%
|
11%
|
GICs or term
deposits
|
15%
|
11%
|
11%
|
20%
|
16%
|
14%
|
ETFs
(Exchange-traded
funds)
|
7%
|
8%
|
6%
|
7%
|
10%
|
4%
|
Bonds
|
6%
|
7%
|
4%
|
6%
|
8%
|
3%
|
|
Top reasons for
using a
TFSA
|
National
|
18-34
|
35-54
|
55+
|
Male
|
Female
|
Saving for my
retirement
|
38%
|
30%
|
41%
|
40%
|
41%
|
35%
|
Saving for an
emergency
|
35%
|
39%
|
34%
|
33%
|
33%
|
37%
|
Shelter savings
from taxes
|
32%
|
20%
|
26%
|
42%
|
33%
|
30%
|
Everyday
savings
|
25%
|
36%
|
22%
|
20%
|
24%
|
25%
|
Greater withdrawal
flexibility
|
14%
|
12%
|
11%
|
18%
|
15%
|
13%
|
Saving for
large/special
expense
|
14%
|
23%
|
13%
|
9%
|
12%
|
16%
|
Saving to purchase
a home
|
10%
|
27%
|
6%
|
2%
|
8%
|
12%
|
Saving to renovate
my home
|
9%
|
12%
|
8%
|
6%
|
10%
|
7%
|
About the 2019 RBC Financial Independence in Retirement
Poll
These are a selection of findings of the 29th annual
RBC RRSP Poll, conducted by Ipsos from November 20 to 26, 2018 on behalf of RBC
Financial Planning, through a national survey of 2,000 Canadians
aged 18+ who completed their surveys online. Where appropriate,
attitudes and opinions are tracked back to previous years' surveys.
Quota sampling and weighting are employed to balance demographics
to ensure that the sample's composition reflects that of the adult
population according to Census data and to provide results intended
to approximate the sample universe. The precision of Ipsos online
polls is measured using a credibility interval. In this case, the
poll is accurate to within ±2.2 percentage points had all Canadian
adults been polled. All sample surveys and polls may be subject to
other sources of error, including, but not limited to coverage
error, and measurement error.
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Planning and rbc.com/savingsspot offer planning,
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SOURCE RBC Royal Bank