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2018 TFSA - WHERE AND WHEN TO OPEN, etc
January 4, 2018
9:45 am
JenE
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Looking for advice here.
1. Recommendations for FI would be helpful.

2. Term: 3% for 5 years is about the best I can get now, but maybe I should go for 2-4 years in case rates rise in a couple of years. (Put on your soothsayer’s hat everyone).

3. I’ve got numerous TFSA GICs, and I’m thinking of trying to combine some of them, when appropriate. If I cash some in (maturing in October) and then redeposit in 2019, can I deposit all of the withdrawn TFSA monies, including interest earned, into the new 2019 GIC? If I can, what kind of proof would I need in the event of questions from the CRA?

Loonie, I read that you were already opening this year’s TFSA. Are you not expecting any interest rate hikes in the near future?

Any suggestions very welcome.sf-smile

January 4, 2018
10:20 am
2of3aintbad
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As for proof for CRA, financial institutions are required to report TFSA contributions and withdrawals by the end of February for the previous calendar year. You should google 'CRA My Account' and set up online access, so you will be able to confirm for yourself the status of your TFSAs.

I realize that this is a 'High Interest Savings' forum, so likely no one will care about my opinion, but the TFSA contribution limit is a 'gift', and should not be wasted on GICs, nor (except in special circumstances) on savings accounts.

January 4, 2018
10:43 am
Bill
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Yes, anything you withdraw from a TFSA can be put into a TFSA in future years, so your plan for 2018/19 is fine. As 2of3aintbad indicated the FIs report TFSA activity to CRA plus you can keep tabs on it via CRA MyAccount so you should be ok there. Or keep your own records (statements) re your TFSA transactions.

January 4, 2018
3:09 pm
Loonie
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I keep my own list of TFSA deposits, transfers, withdrawals , with dates, amount, name of FI. CRA is not always up to date. In principle, I think everyone should keep their own records. Anything you take out, whether original deposit or interest/profit, can be redeposited the following year or later, as has been said. You just have to keep good track of it.

Yes, I opened a one-year GIC for a 2018 deposit of 5500 at Hubert on Jan 2. (More accurately, spouse did. I will too after I get the account opened.) All the rest is in a five-yr at Oaken at 3.5% - an offer I couldn't refuse!

Rates may go up this year, but I am comfortable with the fact that I can switch over at any point if it seems worthwhile. With such a small amount of principal, I don't think it makes a lot of difference, but others may feel that it's a large amount and that it does make a difference to them. It probably depends on how much money you are managing.

I am looking at it more from the point of view of what I will do with it down the road. In 2019, there will be another 5500 or 6000, and so on. I don't like having a lot of little bits and pieces and don't think it's worthwhile to do so - at least not for me. So, next January, when rates are hopefully a bit higher, I can take this year's deposit and add it to next year's, so that I have not added an extra one. In a few years (undetermined, but no more than five), when there is enough of a critical mass or a sufficiently attractive offer, I can move it to another longer-term GIC.

Alternatively, I suppose one could start now with a five-year at $5500 and do another one next year etc. Then you end up in the situation you are now in, with a whole bunch of them. This may bring in more money in the long run. I just find it too much clutter, for me, considering the relatively small difference in returns over 2 or 3 or 4 years. However, if rates change significantly (at least 1%), I can always change my mind.

If you are young enough, which I am not, you can probably arrange it over time so that each year you are maturing a significant amount, creating a decent ladder and annual access to any needed funds. I would do that if I could. For example, at 5000/yr, over 25 years, you could have principal + interest on 25K maturing annually in a five-yr ladder - provided the government hasn't done away with them by then!

I did explore this topic on another thread some months ago but there didn't seem to be any better solutions that suited my needs. If it matters to you, one should be aware of the possible need to cash in smaller amounts from time to time. In that case, a larger longer-term GIC is not the answer, but, still, it would be easier to have them all in one FI.

It's because of the way these TFSAs are set up by the government that these problems are created. I think we should be able to open, close, and redeposit at our leisure, or at least after, say, 3 months in order for them to keep their paper work on track if needed, rather than waiting until next calendar year. It makes no sense to me that if you cash in January, you can't redeposit for a year, but if you cash in December, you can redeposit within days.

It's not a "waste" to put this money in GICs or HISAs. Everything depends on your circumstances, values, needs, and so on.

January 4, 2018
4:24 pm
Rick
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2of3aintbad said
As for proof for CRA, financial institutions are required to report TFSA contributions and withdrawals by the end of February for the previous calendar year. You should google 'CRA My Account' and set up online access, so you will be able to confirm for yourself the status of your TFSAs.   

Keep in mind the CRA web site is current only to the prior year. Any contributions/withdrawals you do in the current year won't show on the web site until the following year.

2of3aintbad said I realize that this is a 'High Interest Savings' forum, so likely no one will care about my opinion, but the TFSA contribution limit is a 'gift', and should not be wasted on GICs, nor (except in special circumstances) on savings accounts.

Really?? That is the strangest thing I have ever read on this forum. How is the government allowing me to keep the interest I make on my meager savings a "gift". I don't consider the TFSA nest egg I manage scrape together after various levels of government have taken half my income in taxes to squander, a gift. Never ceases to amaze me how we keep electing millionaires, multi-millionaires and billionaires (Morneau etc) that make more in the first week of the year than I make all year, to create monetary policy for the whole country, and they are the only ones coming out ahead. What am I supposed to do with my tax free? Thanx to Morneau and his new targeted pension rules. we may HAVE to go back to work just to live.

January 4, 2018
4:35 pm
Rick
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JenE said
Looking for advice here.
1. Recommendations for FI would be helpful.

2. Term: 3% for 5 years is about the best I can get now, but maybe I should go for 2-4 years in case rates rise in a couple of years. (Put on your soothsayer’s hat everyone).

3. I’ve got numerous TFSA GICs, and I’m thinking of trying to combine some of them, when appropriate. If I cash some in (maturing in October) and then redeposit in 2019, can I deposit all of the withdrawn TFSA monies, including interest earned, into the new 2019 GIC? If I can, what kind of proof would I need in the event of questions from the CRA?

Loonie, I read that you were already opening this year’s TFSA. Are you not expecting any interest rate hikes in the near future?

Any suggestions very welcome.sf-smile  

1: I like Motive
2: It's a gamble. Check your crystal ball and LMK cause I'm starting 2 x 5 year (1 for me, 1 for the wife) ladders maturing 6 months apart. Difference between 2 and 3 year terms right now is .2% and .07% between 3 and 4 year terms. Difference between 2 and 5 years is .52%, and I'm betting rates will go up at least that by then. I'm not locking in YUUUUGE amounts, so slight difference in rates is not an issue for me.
3: Answered in post #3

Didn't ask but I am expecting rate hikes this year. US has already said to expect at least 2 more this year, and I expect Canada to follow. Bad news is, too many variables in the world to guarantee it, so I'm happy with 3% right now. Something coming due every 6 months should smooth out the rates.

January 4, 2018
5:03 pm
phrank
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I personally believe rates will go up at least once in the next two BoC announcements, but no matter which "expert" you ask, the probability of being correct is 50%.

IMO, the real problem with waiting to lock in after you hope rates go up is that even if the BoC raises rates in the coming weeks, you'll have to wait weeks or months more for a miniscule, if any raise in GIC rates by the financial institutions you deal with.

If this was a normal year for us, I'd lock in at 3% whichever funds I was looking to lock in right now. I agree with Loonie that you don't want too many accounts to manage, but it's worth trying to break down your entire portfolio so that you have as close to an equal amount coming due every year over a 5 year window, if you like 5 year GICs. This ensures you're getting the best and worst interest rate at all times. It's something I try to do to remove the stress of an itchy trigger finger.

Bottom line is execute whichever plan you're comfortable with. If you do that, you're less likely to regret your choice (no matter what the future brings) versus people who do what others tell them or haphazardly execute with no plans at all.

January 5, 2018
5:32 am
Saver-Mom
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I'm guessing what 2of3aintbad meant by a gift was that the compounding without taxation is better served by a riskier investment such as stocks, with more growth potential. In my experience the CRA site for TFSA activity is inaccurate and confusing. I have started keeping track myself. Did the December manoeuvre for the first time and will re-deposit the funds shortly. Check out Alterna Bank for 2.05% on daily interest TFSA account. I do not ladder TFSAs as (for me) the amounts do not warrant the effort.

January 5, 2018
10:03 am
JenE
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Thanks everyone. I’m going to buckle down this weekend and come up with a plan. I’ll have to write it all down of course, as otherwise it’ll seep away!

January 5, 2018
5:15 pm
Rick
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Saver-Mom said
I'm guessing what 2of3aintbad meant by a gift was that the compounding without taxation is better served by a riskier investment such as stocks, with more growth potential.

Rather sweeping statement. There is no one-size-fits-all solution to finances. I am personally at a stage in life where I am willing to take 0 risk with my investments. The stock market / mutual funds are just too volatile with no guarantees. I can't afford another 2008, so tucked safely in GIC's growing for another 5 or ten years before I have to start drawing on them is OK with me. I guess that makes me wasteful.

January 5, 2018
7:59 pm
Saver-Mom
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I am totally in HISAs and GICs as well, Rick, for the same reasons as you. Was just saying others may see TFSAs as the best place for stocks. Not saying I do...

January 5, 2018
8:24 pm
Loonie
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It can be difficult to find a reliable standard by which to judge whether one can "afford" market risk.

I like Rick's version: Can I afford another 2008? More specifically, if what happened in 2008 were to happen again next year, in five years, in 10 years, would I still believe I'd done the right thing? This helps ferret out, more realistically, what one's time frame really is.

Another one I've read is that you should never invest in anything where you can't be sure of getting principal+profit returned during your anticipated life expectancy.

January 7, 2018
8:06 am
Top It Up
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I've only ever had one TFSA account - it's parked at a MB online CU - a CU that is always at the top or near the top of the GIC interest offerings. The account is laddered - I only invest and roll in 5-year GIC and have zero inclination to rate chase - they currently offer 2.90% for 5 years (the top offering being 3.00% NOT including some airy-fairy 60-90 day enticements.)

January 7, 2018
9:22 am
SavingIsGood
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One word: Hubert

Few more words:
- no transfer fees
- 1y GIC, currently averages to 2.25%. You can take money every 3 months with no penalty
- 5 years GIC: 3.00%

As for TFSA I am GIC/HISA person.

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