Investment Options (TFSA and what else should I do?)

[seanx]

Thank you humble_pie. I replied you earlier but still doesn't appear, I started to wonder if I clicked the 'proceed' button, so let me try the quick reply thing.

I logged into my CRA account, it says my 2012 TFSA contribution room on Jan 1, 2012 is $14,700. (I didn't contribute anything until 2011.) Currently I have $8,500 (sorry I gave the wrong amount earlier), and I'm still continuously contributing $350 on the 15th and 31th of every month, so from now to Dec 2012, I have $350 * 15 = $5,250 that goes to this account this year. With the $8,500, I will have $13,750 at the end of the year.

By putting the $2,500 into TFSA, would that exceed my contribution room? Of course I can cut down monthly contribution, but where would I put my monthly saving to?

There are so many I need to learn, this is a great forum! I'm glad I came across to this forum! Thank you again!

[seanx]

Thank you Y&A, I just logged into my CRA account, it says my 2012 TFSA contribution room on Jan 1, 2012 is $14,700. (I didn't contribute anything until 2011.) Currently I have $8,500 (sorry I gave the wrong amount earlier), and I'm still continuously contributing $350 on the 15th and 31th of every month, so from now to Dec 2012, I have $350 * 15 = $5,250 that goes to this account this year. With the $8,500, I will have $13,750 at the end of the year.

By putting the $2,500 into TFSA, would that exceed my contribution room? I don't know if I understood the $14,700 correctly, if I have enough room, I will definitely maximize TFSA.

Also, thank you for recommending the TD e-series, is it
http://www.tdcanadatrust.com/product...=what-are-mers

Do you recommend one of the TD mutual funds that listed there? I would assume you meant 'TD Canadian Index Fund' as it has the lowest MER. Sorry, I have so much study to do, I'm not even sure if I asked the appropriate questions.

Thanks for recommending the Eight with Weight list, I'll definitely check the library!

[Young&Ambitious]

You can contribute up to $20,000 at this point in time. On January 1, 2013 it will be another $5,000 for total contribution amount $25,000. All the details are here: http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html

And apparently CRA has some new rule that they must answer your phone call within 2 minutes so you can also call them. But that's assuming that their records are correct and everything has been reported correctly.

[jet powder]

Seanx

I think it is good to do some reading but I think a lot will fail because @ some point thinking is needed & just reading I dont think will cut it.

[humble_pie]

och, ye'll go far, laddie. Tis a fine calculation ye have made.

you are probably better at math than i am, but it does look like, if you do make every one of those semi-monthly $350 contributions (btw are you sure there will be 15 of them ?), then by the end of 2012 you will have contributed 13,750.

and if the cra recognizes contribution room on 1 january/12 at 14,700, then the above-mentioned contribution plan should end up being a tad short of the total 20,000 that is allowed. Specifically, $950 short.

you could make up this shortfall now by transferring some funds from your advantage account. But may i suggest you flag to yourself to doublecheck all the math in november this year, because you don't want to go over the 2012 limit by a nickel (now that the penny has been abolished.) Or a centime, or a sou, or a farthing.

as it happens, i agree with Y & A about the efunds. The only reason i didn't suggest them is because you had initially described an ultra-conservative financial proposal from your bank advisor. There was no clue as to whether you yourself had informed the advisor that you could not tolerate risk ... so this gave me the impression you might be a highly risk-averse person.

and this notion, in turn, led me to the idea that you might not want to leave the comfort of the cibc.

of course, in a subsequent post you explained that the ultra-conservative weighting of the mutual fund plan was entirely the advisor's idea.

so yes, an economical, in fact spartan, way to nurture a small account - so that it will grow as fast as possible - would be to open an efunds tfsa with td itself. All contributions would be free. You could contribute every month, or as often as you like.

etfs would function just as well, but they must be bought by brokers on stock exchanges, so there is a commission for every transaction. Alas, a small account is penalized by high commissions, up to $30 per transaction. An investor with a 15k account would not dream of contributing 15 semi-monthly amounts because the full year could cost him up to $450 in commish.

the balance shifts when an account comes close to 40-50k. That's when the discount brokers tend to drop their commish to 9.99 per trade or less. So that's when some investors who have been saving with e-funds switch to a broker account where they are free to buy, not only etfs, but all kinds of stocks & bonds as well.

i don't mean to leave out questrade. Their commissions are markedly less, ranging as low as 4.95, so many new investors do start out at questrade.

[Eclectic12]

You can contribute up to $20,000 at this point in time. On January 1, 2013 it will be another $5,000 for total contribution amount $25,000. All the details are here: http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html

And apparently CRA has some new rule that they must answer your phone call within 2 minutes so you can also call them. But that's assuming that their records are correct and everything has been reported correctly.

Depending on what you mean by "can contribute", this may be accurate. I suspect the OP is more interested in what is available after the previous contributions instead of the total TFSA room accrued.

The OP started with $20K but according to the post:

TFSA: I have about $8,000 in this account.

There is no mention of withdrawals, so assuming the OP has been a Canadian resident from 2009 to today (an age of 26 was posted so the requirement to be over 18 in 2009 is taken care of), the available TFSA contribution room will be total TFSA room accrued - contributions, or $20K - $8K = $12K.

There's been a revised post so this appears to the revised amount is $20K - $8.5K = $11.5K available.

As for CRA, a quick search here or the internet reveals complaints that the CRA amounts can be as much as 12 months behind so it is well worth one's while to track this yourself. The penalty is a minimum of 1% per month until the over-contribution is removed. Depending on the timing of when the over-contribution occurred, some people have been upset to find out they have a minimum of 1% x 12 months penalty to pay.


The TFSA contribution room, IMO is best handled like balancing a chequing account. At the start of the year, add the new yearly amount, make the updates as they happen to know exactly where one stands. The main wrinkle is that withdrawals are added to *next* year's contribution room.

Example: I used up my 2009, 2010 and 2011 TFSA contribution room and withdrew in 2011 $6K.

So, up to Dec 31st, 2011 -> TFSA contribution room = $0.

Jan 1st, 2012 -> TFSA contribution room = yearly amount + unused + *last years withdrawals*
= 2012 $5K + 0 + 2011 $6K
= $11K

Mar 10, 2012 -> contribute $3K, therefore updated amount = $11K - $3K = $8K still available.

If one keeps updates amounts, it is not difficult and provides an indicator if wrong info was sent to CRA.


Cheers

[Eclectic12]

Thank you Y&A, I just logged into my CRA account, it says my 2012 TFSA contribution room on Jan 1, 2012 is $14,700. (I didn't contribute anything until 2011.)

Currently I have $8,500 (sorry I gave the wrong amount earlier), and I'm still continuously contributing $350 on the 15th and 31th of every month, so from now to Dec 2012, I have $350 * 15 = $5,250 that goes to this account this year. With the $8,500, I will have $13,750 at the end of the year.

By putting the $2,500 into TFSA, would that exceed my contribution room? I don't know if I understood the $14,700 correctly, if I have enough room, I will definitely maximize TFSA.

[ ... ]

A way to confirm CRA's assessment is add up what was contributed (not the current value in the TFSA) as of Dec 31st, 2011 and do some calculations.

If one turned 18 in 2009 or earlier and have been a Canadian resident for tax purposes for 2009 on, then in Dec 2011 - the accrued TFSA contribution room = $5K per year x 2009, 2010 & 2011 = $15K.

Jan 1st, 2012 adds another $5K and I see no mention of TFSA withdrawals.

If the CRA Jan 1, 2012 amount is accurate and one is calculating from scratch:
2012 TFSA room = 2012 $5K + previous accrued + last years withdrawals - previous contributions
= $5K + $15K + $0 - previous contributions
= $20 - previous contributions = $14,700 (says CRA)

Or putting it another way, CRA is saying prior to Jan 1st, 2012 - $5,300 was contributed to your TFSA.
If your TFSA records show something different, then a followup to figure out what's what is a good idea.


As for the NOA $14,700 - that may only apply to Jan 1st, 2012. Any TFSA contributions in 2012 will reduce this amount by each contribution amount. The only way to tell if the $2,500 is an over-contribution is to gather up the 2012 TFSA contributions to date, subtract them and see where you are *today*. Then project where you will be based on your automatic contributions.

This is why I keep a spreadsheet that records each contribution so that it reduces the running total. Then once a year, the new yearly amount plus any previous year withdrawals are added to bring everything up to date.


Cheers

[seanx]

Thank you Eclectic12 for explaining this for me, it's very clear now. I started putting money into TFSA since August 2011, until Dec 31, 2011 I put in a total of $5,300, so this $14,700 came from 20k - $5,300, makes sense and accurate. Since Dec 31, 2011 I've been putting $350 twice every month into TFSA, so far I've put 9 payments in, so that's $350 * 9 = $3,150. There will be 15 of these payments coming up until Dec 31, 2012, that would be $350 * 15 = $5,250. If that's all I'm contributing to TFSA, the total contribution for 2012 is $8,400. It's $6300 away from my contribution room for 2012. Am I understanding this correctly?

Thank you very much!

Should've mentioned, no withdrawals were made ever.

[Eclectic12]

Thank you Eclectic12 for explaining this for me, it's very clear now.

I started putting money into TFSA since August 2011, until Dec 31, 2011 I put in a total of $5,300, so this $14,700 came from 20k - $5,300, makes sense and accurate.

Since Dec 31, 2011 I've been putting $350 twice every month into TFSA, so far I've put 9 payments in, so that's $350 * 9 = $3,150. There will be 15 of these payments coming up until Dec 31, 2012, that would be $350 * 15 = $5,250. If that's all I'm contributing to TFSA, the total contribution for 2012 is $8,400. It's $6300 away from my contribution room for 2012. Am I understanding this correctly?

Thank you very much!

Should've mentioned, no withdrawals were made ever.

Yes ... looking at it at the end of 2012, there will have been 24 payments * $350 = $8,400 (which matches $3150 already in plus future $5,250).

Since you have confirmed the CRA Jan 1st TFSA contribution room is accurate (and assuming nothing changes for the auto-payments), then on Dec 31st, 2012, the TFSA room = starting room - 2012 contributions
= $14,700 - $8,400, which my math also says is $6,300 TFSA contribution room left.

As others have mentioned, on Jan 1st, 2013, there will be another $5K TFSA contribution room added, which will make the $6,300 grow to a new total 2013 TFSA room of $11,300. This assumes the indexing part of the TFSA contribution room has not kicked in to increase from the current $5K TFSA amount.

If it's made it clear and has helped simplify your calculations, I'm happy. I sometimes worry I've jumped into too much detail before the idea is understood.


Cheers

[seanx]

Yes ... looking at it at the end of 2012, there will have been 24 payments * $350 = $8,400 (which matches $3150 already in plus future $5,250).

Since you have confirmed the CRA Jan 1st TFSA contribution room is accurate (and assuming nothing changes for the auto-payments), then on Dec 31st, 2012, the TFSA room = starting room - 2012 contributions
= $14,700 - $8,400, which my math also says is $6,300 TFSA contribution room left.

As others have mentioned, on Jan 1st, 2013, there will be another $5K TFSA contribution room added, which will make the $6,300 grow to a new total 2013 TFSA room of $11,300. This assumes the indexing part of the TFSA contribution room has not kicked in to increase from the current $5K TFSA amount.

If it's made it clear and has helped simplify your calculations, I'm happy. I sometimes worry I've jumped into too much detail before the idea is understood.


Cheers

Perfect. The idea is to maximize TFSA as much as I can, right? So this basically means if I move $2500 out of eadvantage to TFSA, I will still be fine for 2012. The bank advisor mentioned I should transfer all TFSA funds to a tax-free mutual funds with CIBC, would this be a good idea?