When recent studies suggested Canadians weren’t saving enough in their RRSPs, fingers were wagged at the possible culprit: the TFSA. Chances are Canadians instead allocate savings from their RRSP to their TFSAs, right?
Read: Many Canadians withdrawing RRSP funds for daily expenses
Maybe not, says StatsCan, which noted that, although TFSA contributions are up, so are TFSA withdrawals. And, with about $0.47 withdrawn from TFSAs in 2013 for every dollar contributed that year, many Canadians aren’t using the accounts to save for retirement.
But at least Canadians are saving. In 2013, TFSA contributions increased to nearly $16 billion from about $9 billion in 2009.
The bad news: like RRSP savings, TFSA savings are now declining — at least when it comes to contribution levels.
Canadians’ annual TFSA contributions in 2016 are down about $1,000 compared to 2015 ($5,531 versus $4,592, respectively), reveals a BMO survey. The most cited reason: a lack of funds to invest (43%). Alternatively, 36% say they can’t save because they need cash flow to cover expenses.
And, next year, survey respondents expect to contribute even less: an average of $4,325.
There is some good news: Canadians’ knowledge of TFSAs gets a passing grade, though there’s room for improvement.
For instance, almost 80% of respondents know cash investments are eligible in a TFSA, while 73% know mutual funds are eligible and 69% know GICs qualify. Further, about 64% know about the penalty tax for over-contribution or for withdrawing and recontributing within the same year.
However, one-third don’t know the maximum annual contribution level ($5,500 for 2017).
For 2016, the table below shows the breakdown of TFSA contributions across Canada.
| Region | Canadians who contributed less than $5,500 | Canadians who contributed the maximum $5,500 | Canadians who contributed more than $5,500 | Mean contribution |
|---|---|---|---|---|
| National | 39% | 15% | 7% | $4,592 |
| Atlantic | 36% | 12% | 12% | $4,312 |
| Quebec | 45% | 17% | 6% | $4,168 |
| Ontario | 37% | 15% | 6% | $4,771 |
| Prairies | 36% | 10% | 3% | $3,220 |
| Alberta | 40% | 16% | 8% | $3,849 |
| B.C. | 35% | 17% | 12% | $5,898 |
The BMO survey was conducted by Pollara between December 14 to December 19, 2016, with an online sample of 1, 500 adult Canadians. The margin of error for a probability sample size of 1,500 is ± 2.5% 19 times out of 20.
Also read:
What not to do with inheritances