BMO Offers a Chance to Win $5,000 a Year for Life

BMO is the bank that makes sense of new Tax-Free Savings Account

TORONTO, November 17, 2008 – Starting today, BMO is offering Canadians the chance to win a grand prize of $5,000 a year for life when they learn more about the new Tax-Free Savings Account (TFSA) at www.bmo.com/5000forlife.

Prizes include:

  • One grand prize of $5,000 per year for life*
  • 10 prizes of $5,000 each

“The TFSA is great news for all Canadians, providing them with a powerful tool to save money without paying any tax on investment earnings or withdrawals,” said Tina Di Vito, Director, Retirement Strategies, BMO Financial Group. “Even if they aren’t the lucky winner, Canadians can still save $5,000 a year for life by opening a BMO TFSA right away. Their TFSA investments and savings will be working harder for them than ever since the income earned will be tax-free.”

Canadians can open a TFSA with BMO through:

  • All BMO Bank of Montreal branches;
  • BMO Direct Banking at 1-877 CALL BMO;
  • BMO InvestorLine;
  • BMO Online Banking;
  • BMO Nesbitt Burns;
  • BMO Harris Private Banking;
  • bmo.com/tfsa

They can begin funding their BMO TFSA beginning January, 2, 2009.

“Tax-free status, flexible withdrawals and a broad range of uses make TFSAs an attractive option for just about every Canadian,” said Di Vito. “We encourage Canadians to sit down with a BMO financial planner to help them make sense of TFSAs and how they can help achieve their financial goals.”

Who Can Benefit?

“The new Tax Free Savings Accounts are likely to help boost the personal savings rate for Canadians, at least at the margin. The savings rate has dipped to around three per cent of personal disposable income in recent years, compared with an average rate of more than 9 per cent in the 1990s and more than 15 per cent in the 1980s,” said Douglas Porter, Deputy Chief Economist, BMO Capital Markets. “The decline is partly due to a prolonged period of low interest rates which doesn’t seem poised to go away anytime soon. This welcome new addition to savings options for Canadians should encourage a modest rise in Canada’s low savings rate.”

Younger Canadians (18 – 30)
TFSAs have tremendous appeal for younger Canadians who are just getting started on building an independent life for themselves. The tax-free status of these accounts allows them to accumulate savings for their goals, such as a new car, first home, return to school or travel, faster. The fact that TFSAs can be used for any goal imaginable and that withdrawals can be made at any time provides the flexibility young people are looking for. Many who can benefit from deferring RSP contributions until their income is higher (to maximize their tax savings from the RSP contributions) will choose to take advantage of TFSAs today. Others, who are already being taxed at a high marginal tax rate, will appreciate the additional savings TFSAs offer over and above their RSP savings.

Canadians between 30 and 60 years of age
TFSAs give these Canadians an added edge for achieving goals such as saving for education, home renovations, retirement and financial independence. Higher income earners and those with a pension plan are likely to have maxed out their tax-deferred options. TFSAs provide the opportunity for higher effective return than non-registered investments since investment income and capital gains in a TFSA are tax-free. Easy access and flexible withdrawals make TFSAs suitable for emergency funds. In addition, there are no attribution rules when money is invested in a TFSA making them ideal for income splitting with a lower-earning spouse, common-law partner or adult child.

Pre-retirees, retirees and seniors (age 60 and older)
This group will see several distinct advantages of using TFSAs. First, unlike RSPs, people can contribute to a TFSA after age 71, providing additional opportunities to shelter investment income from tax. Second, withdrawals from TFSAs do not affect federal income-tested government benefits, such as Old Age Security, the Guaranteed Income Supplement and the age amount credit, so investing in TFSAs can help avoid or minimize clawbacks of their benefits. In addition, individuals who are facing required RIF withdrawals that exceed their income needs can use TFSAs to shelter some of the money withdrawn from future tax on income.

About the TFSA:

  • Contributions to a TFSA begin January 2, 2009;
  • Canadian residents age 18 and over can contribute to a TFSA;
  • You can contribute a maximum of $5,000 per year to your TFSA;
  • You can carry forward any unused contribution room from one year to the next;
  • Withdrawals from your TFSA account can be made at any time. The amount you withdraw from your TFSA will be added to your unused contribution room so that the funds withdrawn can be put back into a TFSA in a subsequent year.

*For a full explanation of contest terms and conditions please visit www.bmo.com/5000forlife

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