can you transfer a RRSP to a TFSA.... | RRSPs and RRIFs | Discussion forum

kilarney said

Can you transfer a GIC RSP to a TFSA(specifically a TD Waterhouse trading account TFSA) and if so
are there any tax penaltys?

I wonder the about the same thing. I would imagine you would have to pay tax on it to get it out of the RRSP and any Fees imposed by TD. I am planning on dumping (transferring) my investments with Manulife to my iTrade account and was wondering similar .... could I move my ETF's or Mutual Funds from my RRSP to TFSA. Here is what I think .... I would have to sell some ETF or Mutual fund to have cash in my RRSP account, then move 5500 (or less) to my TFSA. Allow the cash to pay the income tax (10 or 20%). The brokerage will give you the value of the shares moved so you know if you are within your 5500 dollar limit. Never the less it would be interesting to hear from other on this. 5000 is probably the best as they only deduct 10% for tax...but you dont really know what it costs you til tax time!!!

Withholding Taxes

Funds withdrawn from an RRSP will be charged withholding taxes. This amount must be held back by the plan administrator and remitted to the government on your behalf.

Effective January 1, 2005, the following withholding tax rates apply:
Amount of RRSP Withdrawal.........All Provinces Except Quebec......Quebec
Up to and including $5,000....................10%..............................21%
$5,000.01 to $15,000............................20%..............................26%
More than $15,000................................30%..............................31%

You will receive a T4 RRSP receipt for any funds withdrawn during the year showing the amount to be included in your taxable income and the credit for the withholding tax.

Rick said

Depends on your situation, but if you are in a higher tax bracket, you will pay taxes on any funds withdrawn at full rate come tax time. Having an extra thousand due when you file really sux. You can tell them to take extra off when you withdraw if you need to.

For sure. You want to make sure that the amount of the withdrawal keeps you in your current tax bracket otherwise you will lose too much in taxes. If you use tax software copy your 2012 files to a "test" file and enter as a T4RS slip and add income and show what income tax is withheld...then look at the results.