This article has 28 comments

  1. Thanks for following up with a more complete description of the TFSA transfer strategy — your readers definitely asked for more information. The strategy is simple enough, but I don’t blame people for being suspicious about the rules surrounding tax shelters. Hidden traps await the unwary (or unlucky).

  2. Anyone who wants to transfer anything out of a TFSA needs to do it now, as well, to free up the contribution room for next year.

    I just moved a GIC from a TFSA to an RRSP, freeing up some of my TFSA contribution room for January.

    If I’d waited a month (ie, until 2011) before making the transfer, the contribution room wouldn’t have been available until 2012.

  3. Thanks for expanding on this idea CC. While we are not in the market to move our TFSA at the moment it is great to become educated well ahead of the time we may desire to take such action.

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  5. Great post; I’ve learned something.

  6. @Michael: It’s surprising how confusing TFSA rules are to so many. It’s a pity because the TFSA is a valuable savings tool for pretty much everyone.

    @Paul: Agreed. The withdrawal has to be done by December 31 for the strategy to work. It’s best not to wait till the last minute.

    @SPF, @Dr. Dale: You’re welcome.

  7. So basically if I want to move my TFSA savings from ING to a TFSA investment portfolio at Questrade, I have to move it before Dec 31.

    I am still not sure why you put ING TFSA there as an “exception” for the December shuffle. Do you mean if in the event that I have two separate accounts at another bank and we’d only pay ONCE for a TFSA move rather than multiple times?

  8. Sorry, forgot to subscribe to the thread.

    Excellent and clear post by the way.

  9. What happens if your limit is $10k, but you have $11k in your account and you take it out in December 2010? Is your limit for 2011 $15k (based on the previous years limit) or $16k (increased for the actual amount removed)? Thanks.

  10. @FB: ING Direct does not charge a fee for transferring your TFSA, so it doesn’t matter whether you transfer your account over or withdraw now and contribute back in the New Year.

    If ING Direct did charge a transfer fee, then yes, it is preferable to withdraw from ING Direct now, open a TFSA account at Questrade and contribute the withdrawn amount in the New Year.

    @Colin: The formula for your 2011 contribution limit is:

    2010 contribution limit – 2010 contributions + 2010 withdrawals + $5,000

    So, let’s say you started off 2010 with a contribution limit of $10,000.
    You contributed $10,000 to your TFSA account in Feb 2010.
    You withdrew $11,000 from your TFSA account in December 2010.

    Your 2011 TFSA contribution limit = $10,000 – $10,000 + $11,000 + $5,000 = $16,000.

  11. CC – thanks. So a large growth in your TFSA capital, upon withdrawal, increases your contribution room in later years. Cool.

  12. So here’s a thought.
    Please tell me if there is anything wrong (in the eyes of CRA) with this:
    I am in a higher tax bracket than my spouse. I contribute to my spouses TFSA (or at least give her the cash and she can contribute). She can deposit it into her TFSA during the year and then take it out at the end of the year and put it into her unregistered account and invest it. Repeat year after year. Is this a viable strategy to get around attribution rules- i.e. I make the money, but the investments are in my wife’s name? After room builds up in her TFSA after a few years, and if allowable, this could help spread our investments out so that we are both in the same tax bracket. Something about this feels like a loophole that either doesnt exist, or that will be closed sometime… but for now, I cant find the rule that says its not allowed. Anyone have any insight on this?

  13. Correct me if I’ve missed something, but can’t you take money out of your TFSA before Jan. 1, then put it back in the SAME TFSA after that? Why does it have to be a different TFSA?

  14. @JayRoc: You can. CC’s strategy is a way to transfer your TFSA to a different institution without being charged a fee(many institutions charge a fee if you transfer away from them).

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  17. Thanks for useful information! I have started to think about how to increase contribution room for later and this seems to me like a very clever first step. Is there anything else we should know about those transactions? I mean, they could make some rules to avoid people to doing this… Do you have some more actual information?

  18. Colin Fitzgerald

    I’ve just transferred ~$10,000 out of my TD Waterhouse TFSA (Discount) and was informed I had to leave the closure fee ($150) in the account !! I told the rep I was not closing the account and that he could leave $5 in it. His response was that TD has changed the rules and now requires the closing fee as a minimum balance, as a “business decision”. Lol.

    I could not find, anywhere, in writing that this rule applies. Can they do this ? Is it legal ?

    FWIW, I do all my banking at TD and in general am very happy with their service and products. My reason for moving was due to their ultra high commissions and FX hits on small (<$50k) accounts, and the general crappyness of WebBroker for active (Swing/Day) trading.

    Be warned. TD has all 10 fingers in your pocket !!!

    To summarize:

    8 trades done in TFSA (4 buy/sell's), within 6 weeks.
    4 trades were on a US security, all trades washed.
    Gross profit on the trades: $672.52, with $10k capital, so ~6.7% in 6 weeks
    $300 in commissions, ~$365 in FX hits
    Net profit: $5.70

    Lesson learned: TD Waterhouse is the worst deal for an 'active' trader with a smallish balance. I doubt other 'big banks' are any better.

    I was at least aware of their high commissions, but thought I'd 'play' until I could setup another account somewhere else. The FX hits however were almost impossible to predict at the time of making the trades because of the obfuscation of their forex spread/fee's. The $150 'retainer' was a total surprise.

    Total joke. Maybe useful for buy/hold investing.

  19. My wife just withdrew all but 44 dollars from her TDW TFSA and no restriction or minimum retainer was required to leave behind. We do have fairly large balances in our other TDW accounts but cant see why that would have anything to do with it… we will be topping it back up in the new year after rrsp season.

  20. Colin Fitzgerald

    “We do have fairly large balances in our other TDW accounts…”

    You have it right there. TDW has no interest in the small or ‘starting out’ investor. Their entire commission/fee structure clearly points this out. Its curious for sure: This isn’t by accident. They must have a good business case for this.

    In general I find Canada very bad in terms of letting people rise from rags to riches. There are so many systems of control and obfuscation in this country. We haven’t come very far from the feudal system of the middle ages.

    In a few more days I’ll try to transfer out another $100 and see how far I get.

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  22. Colin,
    While not exactly the topic of this thread, I feel compelled to respond to your comment re the fees you paid for your transactions, the FX fees and the retainer fee. Do your homework on fees beforehand and you will save yourself a lot of heartache. Waiting til the last minute to learn these sorts of details usually results in you being on the losing side of the transaction. I have been aware of the FX charges and trading fees at TDW for a long time and I check their new fees schedule every year to see if their are any changes. I use this knowledge, along with the rest of my investment strategy to minimize costs and hopefully increase returns over time. Trading, by its very nature, can be prone to a lot of volatility, and when you add in the fees it can be very difficult to get ahead.

    Yes, having more investable capital does give you discounts at most/all of the major institutions, but thats not a secret and from a business side it makes sense for the banks. Most of us start out as ‘starting out’ investors. There are alternatives to the banks, that have their own pros and cons.

    As for Canada holding people back, I couldnt disagree more with your comments…. while I was not from a rags background, I had a negative net worth out of school in the tens of thousands, and I would say I’ve done well. Learn the rules and make them work in your favour

    Best of luck to you.


  23. One last FYI,
    We tried to make a withdrawal from my wifes TDW TFSA via the easyweb/webbroker interface but were unable to. We needed to speak to person (trading professional I think) on the phone to unlock the funds before beign transfered… We arranged this on Friday and the funds were transfered today (Wed Dec 22). If anyone is planning on moving funds before the end of the year out of your TFSA (in particular at TDW), you may not want to wait much longer in case you run up against the same process as we went through with TDW.

  24. Even if transferring your TFSA from an account like ING or Ally which do not charge fees, it might be preferable to do the “December Shuffle”. Transferring directly from one registered account to another seems to involve more paperwork and in my experience (with Ally & ING) quite a delay, whereas if you do it the shuffle way everything is handled electronically and much quicker.

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  27. CIBC charging $100 to do a Transfer.

  28. Canadian Capitalist

    @Dave: Two options for you:

    (1) Ask the receiving institution to refund the transfer fee charged by CIBC. Often times, the receiving broker will be willing to cover the fee.

    (2) Wait until December. Withdraw the TFSA balance, open a new TFSA account at the new broker and make a contribution to the new account in the New Year. Of course, if you hold securities, this may not be very practical.