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Re-contribution including interest?
March 10, 2011
9:09 pm
Suzy
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Hi,
Does anyone know if the TFSA amount withdrawn, including the interest, can be added to the following year without any penalty?

I have withdrawn my $10,000 TFSA funds plus the interest of $100 last year and I am wondering if it's OK to re-deposit these funds, including the interest ($10,100) plus the additional $5,000 for the new 2011 contribution room.

Any advice appreciated..

March 10, 2011
11:17 pm
Peter
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If you withdrew $10,100 in 2010, then yes you can deposit it back in this year. However, if you withdrew the $10,100 this year, then you have to wait until 2012 to re-deposit it without penalty. Once 2011 hit, the existing money in your TFSA isn't considered "2010 money", if that's the question. (I might be interpreting the question wrong.)

March 27, 2011
10:21 am
Suzy
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Thanks, that was helpful!

March 28, 2011
5:51 pm
Doug
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Thanks for the clarification, Peter!

I wondered that myself but I recently withdrew my TFSA funds from an institution on Dec. 17th, 2010, and it appeared as though the full amount was treated as a withdrawal and reported to CRA (including the interest earned over the years).

So, yes you may re-contribute, in the following year if you've already used your TFSA allotment for the year):

Any withdrawals from the prior year, including accrued interest.

Hope this helps, Suzy!

Cheers,
Doug

May 27, 2011
12:50 pm
88kanaka
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Hi, I have found that the tracking of my TFSA's that I do personally vs what is showing on "My Account" on the CRA website and what was shown is that I can also reinvest my principal and the interest made on a TFSA withdrawn in 2010 in 2011. For example I invested 1000 in 2010 and it earned 15.00 and I withdrew it at the end of 2010. My reports from CRA show that I can reinvest 1015.00. I only thought that I could reinvest 1000 but on the other hand 1015 is my principal plus what was earned in the TFSA

    and appears that both the interest and principal can be reinvested.
May 27, 2011
6:10 pm
Doug
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Yeah, I had the same thought, kanaka. It's a good thing, too, since it is technically a "withdrawal" and you did earn that room. Unlike RRSPs when you withdraw from them, you do get your full contribution back in the subsequent year.

That being said, I am still absolutely a fan of RRSPs (provided you'll have a lower income when you retire than when you contributed), namely for the delay of tax payment and resulting income tax refund which I would encourage people to reinvest in their RRSP or TFSA next year.

Cheers,
Doug

May 29, 2011
5:14 am
88kanaka
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Doug said:

Yeah, I had the same thought, kanaka. It's a good thing, too, since it is technically a "withdrawal" and you did earn that room. Unlike RRSPs when you withdraw from them, you do get your full contribution back in the subsequent year.

That being said, I am still absolutely a fan of RRSPs (provided you'll have a lower income when you retire than when you contributed), namely for the delay of tax payment and resulting income tax refund which I would encourage people to reinvest in their RRSP or TFSA next year.

Cheers,
Doug

Doug, if you are not close to retirement. You may want to consider maxing out on your TFSA's and put any extra $'s into RRSP. Keep in mind that TFSA income is NOT income tested when applying for Provincial or Federal subsidies or pensions. And also there is an intent to double the contribution amount to 10,000 per year. If I was younger and know what I know now...I would have maxed out my TFSA and then contributed to RRSP's.:smile:


May 29, 2011
12:12 pm
Doug
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Well, I just turned 28 this month, so while I feel "old", I'm sure from the sounds of your post, you do not consider that old.

The problem I have with the TFSA is I am not sure the best use of it yet. Should I use it namely for high-interest savings accounts and GICs which earn comparably smaller returns than other investment options but are principal protected? Interest income is taxed the highest, when compared to capital gains, so that's one factor further guiding me towards a TFSA for this type of savings. However, you may achieve more benefit from the growth of a TFSA by putting something with capital-appreciation potential in a TFSA (i.e., stocks). The downside of that is, if the stock tanks, if you withdraw from your TFSA when it is less than you paid for it, you lose contribution room and not only that, can't use it as a capital loss. I'm leaning towards using a TFSA not for high-interest savings accounts (because the rates are too low) nor for stocks (mainly because the capital loss advantage is lost and the dividend tax credit is lost), but instead coming down the middle and using it for slightly higher-yielding, long-term GICs with maturities of at least 5 years. My portfolio might be structured like this:

Liquid cash - high interest savings account(s) - non-registered
Small stock portfolio - non-registered
Long-term GICs/Term Deposits - TFSA(s)
Mutual funds - RRSPs and Defined Contribution Pension Plan

What do you think?

On that note, know of anyone offering 5-year GICs with earning greater than 3.5%?

Cheers,
Doug

February 6, 2018
4:48 pm
AlainJF
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Here is a specific question about the Oaken TFSA:

Context: Since Oaken do not offer any "TFSA saving account", but only TFSA-GIC, this mean that at the end of the TFSA-GIC term (without renewal), the money with interest will end-up outside the TFSA-bucket, and in a normal saving account. A "TFSA withdrawal" in the year will consequently automatically occur from a CRA perspective.

My question is: Will the interest versed on the last day of the term be deposited as TFSA money before jumping outside the TFSA-bucket, such that the withdrawal will include principal+interest ?

I have called two Oaken reps, and no one could answer this question. I think that they did not even understand the point of having the interest recognized as TFSA for bumping up the next year contribution.

Any help or real experience sharing with Oaken would be appreciated.

February 6, 2018
5:16 pm
Loonie
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I'm not sure that I understand the question either.
I do have TFSA at Oaken but it has not matured yet. I have had RSP and non-registered GICs there. I would anticipate that the interest would be deposited into the TFSA GIC before it is closed unless you had opted, when you first signed up, to have it go to a non-registered savings account. In fact, Oaken often deposits interest aa couple of days before it's due.

February 6, 2018
5:54 pm
AlainJF
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Loonie said
I'm not sure that I understand the question either.
I do have TFSA at Oaken but it has not matured yet. I have had RSP and non-registered GICs there. I would anticipate that the interest would be deposited into the TFSA GIC before it is closed unless you had opted, when you first signed up, to have it go to a non-registered savings account. In fact, Oaken often deposits interest aa couple of days before it's due.  

This was not exactly my question, but your reply leads me the the RSP case at Oaken; Since Oaken does not offer RSP-Saving-Account neither, when your RSP-GIC comes to maturity, how do you get it somewhere else without doing a RSP withdrawal ?

In my experience with other FI, having a RSP-Saving-Account, or a TFSA-Saving-Account provide the temporary vehicle required to execute T2033 transfer process properly. At Oaken, from what I read, I do not see how this would be possible.

February 6, 2018
6:42 pm
AlainJF
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Loonie said
I'm not sure that I understand the question either.
 

Here is a scenario to explain my question:

- Let`s say I have never contributed to my TFSA ever. My maximum TFSA for 2018 is $57,500.

- I go with an Oaken TFSA-GIC 1year @ 2.5% today (6feb2018). My maturity instructions are "Do Not Renew Automatically".

- On 6feb2019, at GIC maturity, the interests of $1,437.50 are due exactly at the same time the TFSA-GIC terminates.

- Everything ($57,500 + $1,437.50 = $58,937.50) ends up in my Saving Account (since a TFSA-Saving-Account is not available). At that point, I do not have any TFSA money, and a TFSA withdrawal (of $57,500 ? -OR- $58,937.50 ?) will be recorded by the CRA in 2019.

- In 2019 and 2020, let`s say that the Canadian Government allow another $5,500 of new TFSA money, my new maximum TFSA for 2020 will be:

a) $58,937.50 + $5,500 + $5,500 = $69,937.50 [if the interests of $1,437.50 were recorded in 2019 as TFSA first, before moving to my Saving Account]

-OR-

b) $57,500 + $5,500 + $5,500 = $68,500 [if the interests went straight to my Saving Account]

Obviously, I want "a". But I could not get an answer from Oaken reps... So what is the reality ?

February 6, 2018
7:25 pm
Wayno
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Answer Is :A

Everyone is making this too complex.

A TFSA GIC value at maturity is principal plus interest!

At the maturity date, the TFSA maturity value ( principal and interest) can then be:

    - Reinvested for the same term or a different term ( i.e 1year, 5 years)
    - Transferred to another financial institution
    - Cashed out

February 6, 2018
9:40 pm
Loonie
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I think neither is correct as you have not included the contribution room from 2019.

However,

1. yes, the interest counts as part of your re-contribution room for subsequent years after withdrawal.

2. with Oaken, the best way to avoid an involuntary withdrawal is to decide in advance where you wish to move the money to next. If you have a new FI and GIC in mind, then you can submit a transfer form several weeks in advance of the maturity date and Oaken will transfer it with interest on maturity. Phone both the receiving institution and Oaken to make sure they have received your instructions and make more phone calls at the time of maturity to make sure it is done. If you are not ready to put it into another GIC, you can move it to some place like Hubert which does have a savings account TFSA option, and decide on the GIC later.

3. While Oaken does not announce it, I believe there is a kind of limbo where the money can rest temporarily, especially if you tell them a transfer is on the way. It won't get any interest while it's there though. I'm not sure that they are allowed to de-register the funds without your permission. I have TFSA GIC there but I don't even have a savings account with them, so they couldn't very well move the money to savings account. However, I can't confirm that this is what will happen.

It is a major weakness with Oaken that they do not offer registered savings accounts, but you can work around it if the reward is worth the aggravationsf-wink

February 7, 2018
4:42 am
AlainJF
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Loonie said
I think neither is correct as you have not included the contribution room from 2019.

sf-wink  

Thanks for noticing the error in my example. I have corrected it to include 2019&2020.

February 7, 2018
4:47 am
AlainJF
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Wayno said
Answer Is :A

Everyone is making this too complex.

A TFSA GIC value at maturity is principal plus interest!

At the maturity date, the TFSA maturity value ( principal and interest) can then be:

    - Reinvested for the same term or a different term ( i.e 1year, 5 years)
    - Transferred to another financial institution
    - Cashed out

  

Thanks for your answer, at least now I have a simple and clear argument : " A TFSA GIC value at maturity is principal plus interest! "

February 7, 2018
4:49 am
AlainJF
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Loonie said
...
It is a major weakness with Oaken that they do not offer registered savings accounts, but you can work around it if the reward is worth the aggravationsf-wink  

Thanks for sharing your work around. I`ll use them for sure !

February 7, 2018
10:03 am
Bill
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As far as I can tell with Oaken your TFSA instruction options re date of maturity, if you're keeping it there, are to renew (principal, or principal and interest) for another term or else it (principal and/or interest) comes out of the TFSA (withdrawal) to whatever non-registered account you had told them to put it.

February 7, 2018
4:11 pm
Loonie
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Bill said
As far as I can tell with Oaken your TFSA instruction options re date of maturity, if you're keeping it there, are to renew (principal, or principal and interest) for another term or else it (principal and/or interest) comes out of the TFSA (withdrawal) to whatever non-registered account you had told them to put it.  

Is there something written in Oaken's rules that has led you to this conclusion, Bill? I can't find anything.
I reviewed my copy of the forms used to open my TFSA GIC with them, and found nothing relevant. I did not agree to any renewal terms, nor is there a savings account to which to direct the proceeds. My TFSA was a transfer-in, so is not connected to any savings account.

February 7, 2018
6:53 pm
Trump
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I do mine all online. And if I recall for TFSA and RRSP you cannot enter what to do at maturity. I have had a RRSP come due and you can tell them what to do with it as far as reinvesting, online. They also send you a letter. If you don’t want to reinvest all you have to do is call them ahead of time or respond to the letter and ask for your funds to not be reinvested.....and in my case I transferred to Hubert at no cost and quite quickly. Because they do not have an associated savings account for registered accounts ....you have to be on top with Oaken.

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