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The December Manoeuver question
December 3, 2021
2:15 pm
frugal lady
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I plan on transferring out my Tax Free Savings into my regular savings account at the same FI on December 31st.
What would be the best time of day to do this? (live in Alberta)
How do you avoid transferring the total $$ and then December interest is posted and you have that interest sitting in your account on January lst?

December 3, 2021
2:44 pm
Loonie
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I've never done it, but think it might depend on your FI. Most have early closing on Dec 31, but I don't know if that would affect it. Can you do this online or does it require staff action? I don't think I'd risk putting it off until after they have closed for the day, just in case yu run into a problem. If it were me, I'd probably do it on the 29th, which gives you all day on 30th to follow up if any snags. You may have trouble getting through on 31st.
Which FI are you using?

I recall someone reported that they'd had a bit of a hassle with CRA over this, needing to prove they'd done the transaction in December.

You could try withdrawing a small amount Monday, just to see how quickly it goes through, to help you decide.

December 3, 2021
3:07 pm
frugal lady
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Loonie: Can you do this online or does it require staff action?

I can do it online with EQ so I assume it would be done immediately just like any
other transfer.

December 3, 2021
3:35 pm
Loonie
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That sounds good.
Theoretically, you should be able to do it until 10pm your time, to cover the time diff with Toronto. Still, I'd do it earlier just in case there is back room stuff that has a different timetable. I'm a very cautious person. I wouldn't want to have to deal with proving it to CRA.
Nobody has any experience with EQ on this matter yet (including EQ!), so I don't think anyone can reliably advise you.
Knowing it's EQ, I think I'd do it on the 29th to be safe. The worst that should happen then is that it wouldn't post until 30th, although it should be instantaneous on the transactions you can see. For the sake of tax on a day or two of interest, I think this is the safest bet. Who knows? - Their computers might go down on the 30th or 31st, and you know that if that should happen, you won't be able to get through on the phone.

December 3, 2021
4:01 pm
Bill
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I'm not sure you can avoid interest going into the TFSA account on Jan 1, can you?

The times I've done this I've done it on Dec 1 to avoid having December interest sitting there in Jan, or else I've just taken the interest out in January, or the interest balance the following Dec 1, and redeposited it to a TFSA the following year.

December 4, 2021
11:49 am
LK
British Columbia, Canada
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I usually transfer mine around the third week of December (TSFSA> HISA within same FI), just to have ample time especially if I want to then move the HISA $$ to another FI for January 1. I don't worry about any interest transferring out until the next December.

So for me:
~ around Dec 21 transfer from FI 1 TFSA to FI 1 HISA;
~ around end of December, depending on what is offered, I might transfer from FI 1 HISA to FI 2 HISA, and if so, on January 1 move from FI 2 HISA to FI 2 TSFA;
~ interest from December in FI 1 TSFA as of January 1, stays there until the next December (for me, it's not enough $ to worry about).

My advice is don't cut your timing too tight. It's not worth it. Go a week early given stat holidays, etc as counting 'business days' at the end of December seems a bit risky to me.

December 4, 2021
12:09 pm
Dean
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.
What LK just said . sf-smile

    Dean

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

December 4, 2021
12:22 pm
Loonie
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That reminds me, I once attempted to close an RIF or RSP, in cash, at Tang in December. I explicitly asked them to calculate the interest due and CLOSE it. They did transfer cash to regular savings, but not the December interest. They seemed incapable of doing this even though it was early in the month, but I had no control over them. The interest was duly posted in the RSP/RIF in January, all seven dollars of it. The following January, a year later,I got a T slip for that seven dollars. It was the RSP that wouldn't die! LOL Evidently I should have started in November. Who knew?

I never had this particular problem with the bigger banks, although I did have other problems. Scotia wouldn't give me an apointment to close my LIRA, even though I asked in October. I had to wait until the following YEAR, which seriously messed up my plans. HSBC took several weeks and 2 in-person appointments - good thing I started early there.

Although I suggested you could probably wait until Dec 30 - and you probably can - I personally would never do this as I've had too many bad experiences elsewhere and EQ is inexperienced in this. I would want to do it by the 15th probably, just in case.

December 4, 2021
12:35 pm
frugal lady
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Thanks everyone. Will take the advice and start this earlier than December 31.

December 4, 2021
12:43 pm
HermanH
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Loonie said
That reminds me, I once attempted to close an RIF or RSP, in cash, at Tang in December.

I came up with the same idea, to close my TFSA near the end of Dec and thus force all the interest to be calculated.

Has anyone tried this manoeuvre? TFSAs seem to be much easier to open/close than other registered products.

December 4, 2021
12:51 pm
LK
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Good luck, and keep us posted on your experience re EQ.

The most important thing is the timing of moving the FI 1 TSFA money out to a HISA at least a week prior to December 31. That's the most critical deadline to be able to move money around without tax consequences or transfer fees. As of January 1 or after, then put all that now-HISA money (plus any new 2022 TSFA contribution) into a new TSFA at other FI.

December 4, 2021
12:55 pm
LK
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HermanH said

Loonie said
That reminds me, I once attempted to close an RIF or RSP, in cash, at Tang in December.

I came up with the same idea, to close my TFSA near the end of Dec and thus force all the interest to be calculated.

Has anyone tried this manoeuvre? TFSAs seem to be much easier to open/close than other registered products.  

I don't close anything. If I have any short-term TSFA GICs, I make sure that they mature no later than early December. Then I do what I describe above (post #6). My TSFA HISA at FI 1 is still "open" but it has a zero balance (until the dribble of interest in January).

December 4, 2021
1:53 pm
LK
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December 4, 2021
11:27 pm
HermanH
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Another TFSA manoeuvre that I have found helpful is to purchase a short-term redeemable GIC. (They are usually redeemable after 30 days.) This way, I can cash out the GIC on Dec 31 and immediately move the proceeds out of my TFSA account. No other interest will accrue to the TFSA account and thus no lingering interest with which to deal.

December 5, 2021
8:50 am
Alexandre
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How do you avoid transferring the total $$ and then December interest is posted and you have that interest sitting in your account on January lst?

Why would having interest deposited to account on January 1st be a problem?

Thanks in advance for explaining that to me.

December 5, 2021
9:17 am
Vatox
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Alexandre said

How do you avoid transferring the total $$ and then December interest is posted and you have that interest sitting in your account on January lst?

Why would having interest deposited to account on January 1st be a problem?

Thanks in advance for explaining that to me.  

I had the same thought. I never close accounts, so I don’t mind leaving a bit. If the rate is super low, then you just pull the remainder out in January and it sits in non registered(decent rate) for a year.

December 5, 2021
9:34 am
frugal lady
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"Why would having interest deposited to account on January 1st be a problem?

Thanks in advance for explaining that to me."

Its not a huge "problem". Just complicates my record keeping a wee bit. I would just prefer not to have the interest sitting in F1 in 2022 cause you could withdraw it in 2022 but can't redeposit to F2 until Jan 2023.

December 5, 2021
1:14 pm
Vatox
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Record keeping is super easy, just record the exact amount withdrawn and then next January recontribute, I’ve done it with multiple withdrawals, including odd cents amounts, and I’ve never had CRA issues. The key is to make three columns of values, one for regular year contribution amounts available that includes previous years of missed contributions, one for withdrawals, and one for contributions. I always totally top up every January, so I know that only the withdrawals of the current year, need to be recorded. It could become cumbersome if you miss recontributions and/or can’t make each years new allotment.

December 5, 2021
2:37 pm
Pronounced Zed
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Basically, if it's December and you want to make a clean cut-off, you're too late. The interest from December gets paid on Jan 1. Even if you withdraw a couple of days early, the interest still will not get paid until Jan 1. (I know interest usually shows up on the last day of the month, but it's not officially on the books as paid until the next day due to daily interest calculation).

Let's say you have $100,000 principle and transfer it out on Dec 14/21. Let's say you accumulated $90 interest for those two weeks in December. You still won't get that interest until Jan 1/22. If you try to re-invest $100,090 in a TFSA elsewhere after Jan 1/22 you will get a penalty on the $90.

You can still re-invest $100,000 elsewhere, but the $90 needs to go through the annoying "paperwork" and 4-8 week transfer period. Or you can move that $90 into your regular savings account and then remember in 2023 to add it back to the TFSA.

Of course these little amounts is what everybody's trying to avoid.

December 6, 2021
7:31 am
Winnie
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frugal lady said
Loonie: Can you do this online or does it require staff action?

I can do it online with EQ so I assume it would be done immediately just like any
other transfer.  

Yes, I did it at 7 pm. It was instant transfer done immediately between EQ TFSA and EQ Savings account, absolutely no problems and no staff action needed.

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