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If I withdraw some cash from my TFSA this year, can I re-deposit it in a future year?
October 11, 2022
11:08 pm
piggybank
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I've maxed out my contributions to my TFSA.
Most of my TFSA is invested in index funds and other securities. I've gotten some dividends from them, and I've sold some securities. So my TFSA has some cash balance. (Let's say it's $10,000.) Currently that cash is not earning me interest. I'd like to have it earn interest. What are the ramifications of withdrawing the cash in my TFSA, so that I can put them into my HISA with National Bank?
And can I re-deposit that $10,000 into my TFSA in a future year (without using up my future contribution room)

October 11, 2022
11:19 pm
Norman1
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With a brokerage TFSA account, one should be able to park the cash into a related ISA within the account.

For example, if it is a BMO InvestorLine TFSA account, then one should be able to put the cash into BMT104 (BMO High Interest Savings Account).

October 12, 2022
12:41 am
bobwatford
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Norman1 said
With a brokerage TFSA account, one should be able to park the cash into a related ISA within the account.

For example, if it is a BMO InvestorLine TFSA account, then one should be able to put the cash into BMT104 (BMO High Interest Savings Account).  

Agreed....no reason to withdraw the cash from a TFSA and put it in a fully taxable 'HISA' when you can just put it in an ISA through your brokerage. The TDB8150 thru TD pays 2.9% and I'm assuming most others pay close to the same rate.....which is comparable to what most banks pass off as "High" interest savings accounts.

October 12, 2022
1:06 am
piggybank
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Hi Norman and Bob. Thank you for your reply. My TFSA is with wealth simple trade

October 12, 2022
3:36 am
Bill
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In answer to your question, yes, any amount withdrawn from a tfsa can be recontributed in a future year, i.e. it effectively gets added as future contribution room.

October 12, 2022
4:50 am
savemoresaveoften
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Bill said
In answer to your question, yes, any amount withdrawn from a tfsa can be recontributed in a future year, i.e. it effectively gets added as future contribution room.  

Never look at it in details but let’s say ur TFSA is currently worth $120k, can u withdraw $120k and able to redeposit $120k the next year. Notice $120k is more than the life time contribution limit which is around $81500.

October 12, 2022
4:57 am
Bill
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Yes, put the $120k back in any future year, withdrawals get added to contribution limit next year no matter your "lifetime" limit.

October 12, 2022
5:05 am
Norman1
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Yes, the $120,000 withdrawal will be added to the TFSA contribution room for next year.

That situtation was discussed in the past.

October 12, 2022
11:36 am
Dean
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piggybank said

Hi Norman and Bob. Thank you for your reply. My TFSA is with wealth simple trade 
 

Does Wealth Simple not have an ISA (Investment Savings Account) you can access in your investment TFSA ❓

Most Brokerages have ISAs ... and they pay pretty good interest ❗

    Dean

sf-cool " Live Long And Prosper " sf-cool

October 12, 2022
11:55 am
AltaRed
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i would be surprised if WealthSimple Trade would have ISA options (bought and sold through the mutual fund FundServ code system). All the OP can do is try with one of the ones from https://mrthrifty.ca/investment-savings-accounts-maximize-interest-in-your-brokerage-account/

Failing that, I suspect the OP can buy one of the Cash ETFs such as Purpose PSA per https://www.purposeinvest.com/funds/purpose-high-interest-savings-etf or if not that one, HSAV or CSAV.

October 12, 2022
12:03 pm
piggybank
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AltaRed said
i would be surprised if WealthSimple Trade would have ISA options (bought and sold through the mutual fund FundServ code system). All the OP can do is try with one of the ones from https://mrthrifty.ca/investment-savings-accounts-maximize-interest-in-your-brokerage-account/

Failing that, I suspect the OP can buy one of the Cash ETFs such as Purpose PSA per https://www.purposeinvest.com/funds/purpose-high-interest-savings-etf or if not that one, HSAV or CSAV.  

Yes, the chat agent recommended Purpose ETF. But all ETFs, including this Purpose ETF, don't have a guaranteed rate, right?Screenshot_20221012-115854_Wealthsimple2.png

October 12, 2022
12:13 pm
Loonie
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according to https://help.wealthsimple.com/hc/en-ca/articles/360058456853
wealthsimple's savings rate is 1.5%. I guess we assume this applies equally to TFSAa, in which case it's a crappy rate.

October 12, 2022
12:25 pm
piggybank
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AltaRed,
thanks so much for mentioning HSAV, PSA and CSAV. I googled those 3 terms and came to https://www.fool.ca/2022/06/13/hsav-vs-csav-vs-psa-which-money-market-etf-is-the-better-buy-for-canadians/.

I'm gonna go with HSAV.
it looks like the rate is guaranteed, so from now on, I'm putting all my free TFSA cash into HSAV.

October 12, 2022
12:31 pm
piggybank
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AltaRed,
My only regret is that I didn't know about pretty-much-guaranteed-interest-rate ETFs sooner. The cash in my WS Trade and NBDB accounts were not making any interest until now. I've now put all the free cash into HSAV.

October 12, 2022
12:42 pm
Loonie
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Maybe we need to back up for a moment.
Why do you want this money in a savings account? Is it because you anticipate needing quick access to it? Do you intend to keep it in TFSA for long term but just don't want the risk of ETF? In other words, what is your goal for this money?

Answers to these questions affect the recommendations, at least from me.

No savings rates are guaranteed to last except occasional promotional rates for short term.
If you want a guaranteed rate, you need to get a GIC. You can transfer the money you are concerned about to a financial institution which issues GICs. If transfer fees are prohibitive, you might be better off to take out the cash now and open a new TFSA at another financial institution in January. If withdrawal fees are prohibitive, why not just reinvest it where it is and put next year's contribution into another financial institution in a GIC or savings account instead? Next year's amount is likely to be $6500.
With a transfer, you retain the TFSA room provided by the interest earned continuously, but if you withdraw, you lose the room that interest gained outside the TFSA might have provided. It probably wouldn't be a large amount, but you can't get it back.

Be aware that WealthSimple is always going to want to sell you another ETF because that's the business they are in. It doesn't mean it's necessarily wrong, but it does mean you have to ask yourself if it's what you want.

October 12, 2022
12:59 pm
piggybank
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Loonie,
Thank you for your reply. I welcome your questions.

Why do you want this money in a savings account?

I initially wanted to move the "free cash" from my TFSA into a savings account for this simple reason: My savings account with National Bank yields 4.25% interest. My TFSA (and other registered accounts) get 0%.

Is it because you anticipate needing quick access to it?

No, I don't need quick access to the money.

The reason why it's currently in "free cash" and not invested in any security is because the investing model I'm following has divested itself of all securities while we're in recession. (It has been in an all-cash model since about May of this year.) When the investing model tells me to buy securities again (whenever recession is done), then I'll be using up all the free cash in those.

Do you intend to keep it in TFSA for long term but just don't want the risk of ETF?

I'm okay with the risk of an ETF. In fact, most of my holdings in my TFSA are in ETFs like VFV.

If you want a guaranteed rate, you need to get a GIC.

I don't want GICs because:
1. Your money is locked (I want the freedom to invest in securities whenever the model tells me to)
2. I get a better interest rate with my National Bank 4.25% than most one-year GICs. I concede that this is a promotional rate that will end before the year is done, but then, I hope to move the free cash in the savings account to whichever has the best savings-account interest rate. You may helpfully ask, "PiggyBank, why not then invest in a 2year GIC?" I'd respond by saying, "Because, Loonie, I may want my money out before the two-year jail term is complete."

You said that no savings are guaranteed to last. Yes, I agree. but I don't understand why you'd make that (true) statement.

If transfer fees are prohibitive, you might be better off to take out the cash now and open a new TFSA at another financial institution in January."

I haven't considered transferring the "free cash" to a different institution. Should I?

With a transfer, you retain the TFSA room provided by the interest earned continuously, but if you withdraw, you lose the room that interest gained outside the TFSA might have provided. It probably wouldn't be a large amount, but you can't get it back.

Let's say I have $10,000 in free cash in my Wealthsimple TFSA. Let's say I just purchased HSAV ETFs with that free cash. Could you kindly tell me what you think about this transaction? Was there something better I could have done, based on the context I provided in this post of mine? Thank you, Loonie, and all others. 🙂

October 12, 2022
2:10 pm
Loonie
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Just to clarify, I only mentioned rate not being guaranteed because I thought you said earlier that this was a priority for you. Maybe I mis-read.

Thanks for the responses. I hear that you do want to be able to access this money quickly for reinvestment purposes. Therefore a GIC is not a good idea, with the possible exception of cashable GICs, which you may want to look into. I guess it depends how long you think the recession will last as the penalty for early cashing is usually high. Hubert is a bit of an exception with its one year GICs where the most you can lose is the interest from one quarter and the rates are fairly high.

Are we really talking about approx 10K, or is it your entire TFSA that you now have available? If it's only 10K, then you might as well leave it where it is. I don't think it's worth the nuisance of moving it, considering all circumstances.

If it's a larger amount and you decide to move it, you may run into minimum account fees at WealthSimple. I don't know what they do about that.

Is it an option for you to move it to a different broker? You may not want to do that. The rates mentioned earlier at BMO etc might be worth it if you don't reinvest for another year or so.

I don't think there is a simple answer to your question. We don't know how much the fund you have chosen is going to pay, as far as I know. Do we? We don't know how long the recessionary circumstances are going to last. (My guess is it will be a long one, but what do I know? And I don't know at what point your system will tell you to reinvest.)

Hopping around from one savings account to another outside of a TFSA also has its risks - although it can be a fun sport!

It may be time for you to do a little math. Consider your marginal tax bracket. If you are
receiving OAS, will it affect your OAS? In other words, how much of the money you earn outside TFSA will you lose?
Norman1 will do a better job of these calculations than I, but let's say you earn 3% outside the TFSA and lose 25% of it to taxes/clawback, leaving you with net 2.25%. On 10K, that is $225; on 100K, it is $2250. If you'd kept the money inside a TFSA, whatever interest it earned would be yours to keep PLUS all of whatever that income earned in future years. You CAN recontribute what you took out in future years but you can't do anything about the interest earned outside the TFSA except possibly use it to fund next year's new contribution.

There are a lot of unknowns in this equation but perhaps you should think about likely numbers to get a better idea of what to do.

Something else to consider is time lag if you move money out of WealthSimple. It might be difficult for you to act immediately to reinvest when you get the signal to do so, and especially if it's in another TFSA You would have to wait for money to move back to WS. It shouldn't take long if in non-registered cash but make sure you use an FI that offers chequing so that you can quickly write a cheque if needed. Hubert doesn't offer chequing.

It may well be that you are better off staying put considering your longer term commitment to the ETF strategy. You might also want to look at other brokerages for the savings options, but these rates are very much subjet to change and you probably have other reasons for wanting WS.

October 12, 2022
2:55 pm
piggybank
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Loonie said
Just to clarify, I only mentioned rate not being guaranteed because I thought you said earlier that this was a priority for you.   

Well, I'm okay with a fluctuating rate -- I can just move the money to a place with higher interest rate.

Thanks for the responses. I hear that you do want to be able to access this money quickly for reinvestment purposes. Therefore a GIC is not a good idea, with the possible excption of cashable GICs, which you may want to look into. I guess it depends how long you think the recession will last as the penalty for early cashing is usually high. Hubert is a bit of an exception with its one year Gics where the most you can lose is the interest from one quarter and the rates are fairly high.

I don't know how long this recession will last. Perhaps when a new US president is installed?

Ah, yes. I forgot I have a small ($1K?) Hubert escalating GIC. I got it just for fun. 🙂

Are we really talking about approx 10K, or ir is it your entire TFSA that you now have available? If it's only 10K, then you might as well leave it where it is I don't think it's worth the nuisance of moving it, considering all circumstances.

I'm sorry for being coy. I'm shy when talking about money figures. 🙂 Yes, we're really talking about 10K -- 10K in the TFSA was in cash. I say "was", because, an hour ago, I bought HSAV. No, the rest of the TFSA, I did not liquidate -- they're still in holdings like VFV.

If it an option for you to move it to a different broker? You may not weant to do that. The rates mentioned earlyier at BMO etc might be worth it if you odn't reinvest for another year or so.

I'm open to moving to a different broker if the grass is greener.
I looked up BMT104. https://www.highinterestsavings.ca/forum/general-comparisons/brokerage-investment-savings-accounts/#p78530 shows that its rate at 2.9% is lower than my National Bank's (promotional) rate of 4.25%, so I don't know why I go with BMO.

I don't think there is a simple answer to your question. We don't know how much the fund you have chosen is going to pay, as far as I know. Do we?

A bit better than the S&P/TSX Capped composite, I think, was the goal and record.

Hopping around from one savings account to another outside of a FSA also has its risks - although it can be a fun sport!

What's an FSA? Do you mean ISA (interest savings account)?

I do jump from one HISA to another. I'm not sure if you're saying there's risks to what I'm doing. IF there are, i'd love to know.

It mayt be time for you to do a little math. Consider your marginal tax bracket. If you are over 65, will it affect your OAS?Iin other words, how much of the money you earn outside TFSA will you lose?

I'm currently in the lowest tax bracket. (If it helps, I haven't contributed to the RRSP as far back as I can remember because it wouldn't help such a low earner like me.) I'm not over 65.

Norman1 will do a better job of these calculations than I, but lets say you earn 3% outside the TFSA and lose 25% of it to taxes, leaving you with net 2.25%. On 10K, that is $225; on 100K, it is $2250. If you'd kept the money inside a TFSA, whatever interest it earned would be yours to keep PLUS all of whatever that money earned in future years. You CAN recontribute what you took out in future years but you can't do anything about the interest earned outside the TFSA except possibly use it to fund next year's new contribution.

I've been making so little money in the past years that i never owe taxes. (This may change in the [brighter!] future.)

October 12, 2022
3:11 pm
AltaRed
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piggybank said
Let's say I have $10,000 in free cash in my Wealthsimple TFSA. Let's say I just purchased HSAV ETFs with that free cash. Could you kindly tell me what you think about this transaction? Was there something better I could have done, based on the context I provided in this post of mine? Thank you, Loonie, and all others. 🙂  

Going back to posts #13 and #14, the yield of the Cash ETFs will vary depending on the underlying yield of the holdings. There is no guarantee of what the yield is from day to day, month to month, year to year. It will trend in the direction the BoC overnight rate is trending. That is about as good as one will get if immediate liquidity (like a HISA) is important.

I don't know if WealthSimple Trade has buy/sell commissions on these ETFs but if it does, you have to factor that into your net yield. In a TFSA, it likely doesn't matter which of the Cash ETFs you buy albeit HSAV is easiest because I believe it does not have monthly distributions. It uses derivatives (I think) to covert interest to cap gains.

I am not fond of transfers in/out of accounts, especially registered accounts. It takes paperwork, sometimes incurs administrative costs and for sure has some 'return' leakage while funds are in transit.

October 12, 2022
10:50 pm
Loonie
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AltaRed makes valid points.

Considering that it's only 10K and you are comfortable with fluctuating rate, I think you might as well stay where you are. I don't think it's worth the nuisance, time and costs of moving 10K, either as a separate TFSA or as a non-registered amount, considering you intend to move it back again later anyway.
Forget about the rate at National Bank; it's too short term to matter much. AS I said, do the math. If the math appeals to you for such a short period, considering costs, that's up to you but I wouldn't do it.

I don't have time to answer any more questions right now. I've given you my opinion considering your situation.

The most productive way to boost your finances is to get a better job. Good luck!

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