# TFSA 2011 and 2012 - withdrawal rules



## Lilyukyuk (Nov 30, 2011)

Hi all:

I'm just looking into TFSA strategies for the upcoming year and withdrawing the 15k Ive saved in Dec 2011 to move the funds into another institution in Jan 2012.

Thing I can't figure out is how is the interest earned in the TFSA is handled - do you only get to recontribute 15k + 5k (for 2012) - or do you get to recontribute the 15k plus the interest already earned plus the 2012 5k?

Thanks, 

Lindsey


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## Dibs (May 26, 2011)

Any amount you withdraw, you can put back in the next year. So 15k + interest + 5k.


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## OptsyEagle (Nov 29, 2009)

Dibs said:


> Any amount you withdraw, you can put back in the next year. So 15k + interest + 5k.


That's right.


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## the-royal-mail (Dec 11, 2009)

Don't withdraw TFSAs if the funds destination is merely another bank!

*Transfer*.


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## whitby (Nov 17, 2010)

Transfer may cost money.


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## the-royal-mail (Dec 11, 2009)

Arrange first to have the new bank pay those fees.


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## Toronto.gal (Jan 8, 2010)

I think you are talking about cash, not investments, so in that case, your withdrawing strategy at the end of the year is fine & closing an account is preferable to avoid transfer fees as well [though I think you could still be charged if you did not hold the account long enough, but not sure]. 

Banks typically cover costs for transfers of $25K and up, but ask them anyway.

If you had investments that you did not wish to sell and simply transfer to another institution, then a transfer-in-kind would have been the method to use.

Lots of useful information here:

http://www.taxtips.ca/tfsa.htm

Welcome to CMF!


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## CanadianCapitalist (Mar 31, 2009)

Check out Potato's rabbit analogy for how TFSA withdrawal rules work:

http://www.canadianmoneyforum.com/showthread.php?p=41255


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## the-royal-mail (Dec 11, 2009)

Even if the money is withdrawn, it still has to be transferred to the new bank somehow.


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## Toronto.gal (Jan 8, 2010)

Yes, but why pay $100/$150 for 'transferring' when closing the account could be done for free and far easier/faster than by filling out any forms?


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## the-royal-mail (Dec 11, 2009)

The OP still needs to get the money to the new bank. That will involve forms and such, unless she writes herself a personal cheque and hands it to the new bank?

Based on what we saw in the past year or so, I don't have a lot of confidence in people's ability to properly move money around via TFSA withdrawals. IMO it's better to do a transfer of the cash after the investments, then it can be done anytime and the receiving bank might pay the transfer fees. Seems to me that would cleaner than trying to figure out how to actually transfer the $ to the new bank.


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## Toronto.gal (Jan 8, 2010)

I agree, there was & there still is much confusion, however, the OP did not ask about transfer methods as she seems to understand the importance of dates, ie: withdrawing at the end of the year and immediately redepositing in the new year.

Still no official announcement on the website as to the new limit for 2012.


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## the-royal-mail (Dec 11, 2009)

Actually it's that very point about the dates that threw up the red flags in my mind. The way the question was asked suggests she still thinks withdrawing is the way to move TFSA money around and that the dates provide the once-annual opportunity. While technically correct, unless we hear something more from the OP, it usually isn't the best way to do it and suggests the OP may not fully understand all her options.

Either way, the money has to be moved from one bank to another. I would like to hear from the OP as to how they intended to do this AND on why they didn't mention anything about a transfer in their post. 

OP?

P.S Yeah is the gov't asleep at the switch? Just 31 days away from 2012 deposit day and they still haven't told/confirmed to us the official amount! Do they even realize it's happening this year? Better be careful...


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## Eclectic12 (Oct 20, 2010)

the-royal-mail said:


> The OP still needs to get the money to the new bank. That will involve forms and such, unless she writes herself a personal cheque and hands it to the new bank?
> 
> Based on what we saw in the past year or so, I don't have a lot of confidence in people's ability to properly move money around via TFSA withdrawals. IMO it's better to do a transfer of the cash after the investments, then it can be done anytime and the receiving bank might pay the transfer fees. Seems to me that would cleaner than trying to figure out how to actually transfer the $ to the new bank.


Maybe ... maybe not. 

I suspect a lot depends on whether the 2nd TFSA has already been opened as well as what transfer options are available.

After making sure I understood the rules and having two separate TFSAs already opened, I figured it was easier for me to use 1 phone call, one cheque deposited via ATM and two online transfers versus spending the time in a branch to fill out paperwork.


As well, I had done my due diligence to understand the TFSA withdrawal plus re-contribution rules so that I'm more confident in this process versus some other posters where the financial institution messed up the transfer. 

For what it's worth - those with messed up TFSA transfers seemed to be finding out when the CRA letter about over-contribution penalties were due, months after the fact. I have to believe there are fewer and fewer happening but don't have any numbers.


It could just be I'm cynical as I'm still trying to sort out the LIRA transfer to my brokerage LIRA that a fax error has stopped. The time in branch was about an hour and a half just to get the paperwork filled out!


To each their own ....

Cheers


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## HaroldCrump (Jun 10, 2009)

Toronto.gal said:


> Still no official announcement on the website as to the new limit for 2012.


I'd be very intrested to hear about this as well.
I have seen some personal blogs and posts indicating that the new limit might be $5,500, but nothing official yet (that I know of).


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## Freedom25 (Dec 3, 2011)

*How do you transfer a TFSA?*

How is a transfer of a TFSA between institutions done? I have mine in cash at ING and I want to invest it in EFT's at a discount brokerage of another bank. How do I do this? I can't find any info on it on the bank's site.


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## Spudd (Oct 11, 2011)

I just transferred my ING TFSA to TDWH. I just told TDWH I wanted to do it, they asked me for some details about the ING account (address of bank, account #, etc), and they filled out a form that I had to sign. Then they dealt with getting the money from ING themselves, and it just appeared in my TDWH account a few weeks later.


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## Four Pillars (Apr 5, 2009)

Freedom25 said:


> How is a transfer of a TFSA between institutions done? I have mine in cash at ING and I want to invest it in EFT's at a discount brokerage of another bank. How do I do this? I can't find any info on it on the bank's site.


Pretty much what Spudd said. Set up the new account at the discount brokerage and then submit a transfer form to the discount brokerage.

You will have to fill out all the info regarding the old account on this transfer form and then they will take care of it from there.


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## Lilyukyuk (Nov 30, 2011)

Hi all,

OP here - my TFSA currently is in a cash savings account. I think that clears up all the issues about transfers in kind/institutions etc. There are no closing fees that I know of with my current account. 

On another note - I'm a little bit torn as to what to do with the 15K plus interest plus 2012 $5k for the upcoming year - I earn 2.5% on it right now but I know I can do better. My thoughts are:

1. lots of places give a bonus % to attract customers in Jan 2012 - if I withdraw everything in Dec and put everything back in Jan, my entire amount would be at the bonus rate. thoughts?

2. other options such as funds, ETFS etc - I think I will use the savings soon as a downpayment on a house....probably not a good idea for short term right?


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## the-royal-mail (Dec 11, 2009)

Who said you can do better than 2.5%? I just locked in a 5 year non-cashable GIC and got just over 2%. You are quite lucky to be getting 2.5%.

The issues about transfers between banks is NOT cleared up. You still have to pay transfer-out fees. Bank B will be charged this amount upon transfer from bank A. It has nothing to do with it being cash. This is not a closing cost.

On the issue about a teaser rate, no, that won't work. The interest is typically paid semi-annually (this varies) and the teaser rates usually only last a couple months.

It seems to me you are looking for instant gratification and high returns. That is simply not realistic in these circumstances.

You can transfer a TFSA whenever you want.


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## Toronto.gal (Jan 8, 2010)

the-royal-mail said:


> 1. The issues about transfers between banks is NOT cleared up.
> 2. You still have to pay transfer-out fees.


1. Actually, she has confirmed what she stated from the beginning, that the $15K + interest is in cash, therefore, no transfer-in kind is required.

2. She said that she's withdrawing, not transferring, so a fee might not apply and I explained this in my previous post, but TRM, I think you're confused.

Transfer out fees apply to transfers, but [in most cases] not to withdrawals. Would your bank charge you if you took your money out of your savings account & closed the account? No.

However, I heard or read somewhere that some institutions may charge you even for withdrawing, if account was opened for less than a year [I suppose to cover admin. costs]. 

- most institutions do charge a transfer-out fee [$100/$150]
- in most cases, if transfer is over $25K, the receiving institution will cover the cost
- closing an account [withdrawing] should not result in any fees [consult your bank to be sure].


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## the-royal-mail (Dec 11, 2009)

Yes but how the heck is the OP going to actually move the money over to the other bank? Money bags and an armoured car? 

I still don't see any reason for the OP to withdraw the money in her TFSA and depositing it in another bank. This has shades of the earlier TFSA withdrawal crisis.


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## Four Pillars (Apr 5, 2009)

the-royal-mail said:


> Yes but how the heck is the OP going to actually move the money over to the other bank? Money bags and an armoured car?


Most modern financial institutions will do an EFT to your bank account or will send you a cheque.


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## Toronto.gal (Jan 8, 2010)

the-royal-mail said:


> 1. Yes but how the heck is the OP going to actually move the money over to the other bank? Money bags and an armoured car?
> 
> 2. I still don't see any reason for the OP to withdraw the money in her TFSA.


1. LOL, you're not sounding cool now; it's 2011 TRM, not 1960, you're talking as though 15 million were being transferred.  

2. SIMPLE: to avoid paying $100 or more in fees. If let's say she only made $50 in interest, it wouldn't feel good to have to pay $100 to move the money, would it? No crisis because she understands the end of year strategy.


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## Toronto.gal (Jan 8, 2010)

the-royal-mail said:


> Money bags and an armoured car?


I forgot to say that $15K in cash [and more] fit nicely in a woman's small purse, but I guess not having a purse, you would not know that.


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## jamesbe (May 8, 2010)

Certified cheque. Sheesh ....


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## Lilyukyuk (Nov 30, 2011)

the-royal-mail said:


> Who said you can do better than 2.5%? I just locked in a 5 year non-cashable GIC and got just over 2%. You are quite lucky to be getting 2.5%.
> 
> The issues about transfers between banks is NOT cleared up. You still have to pay transfer-out fees. Bank B will be charged this amount upon transfer from bank A. It has nothing to do with it being cash. This is not a closing cost.
> 
> ...


Royal:

I dont understand - the institution I currently have my TFSA has no closing fees whatsoever - I checked - I can withdraw to zero at any time and either close it down or leave it open. Then all I plan to do is move the funds into my regular account and redeposit in Jan 2012 - am I missing something here?

Re: instant gratification - yes, I definitely am, but who isn't?


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## Lilyukyuk (Nov 30, 2011)

the-royal-mail said:


> Who said you can do better than 2.5%? I just locked in a 5 year non-cashable GIC and got just over 2%. You are quite lucky to be getting 2.5%.


Also...why did you lock in for 5 years? Are we expecting interest rates to stay low forever?


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## Toronto.gal (Jan 8, 2010)

TRM's issue is with the money 'movement' method, but as others have said, there are a few modern ways!


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## HaroldCrump (Jun 10, 2009)

Toronto.gal said:


> I forgot to say that $15K in cash [and more] fit nicely in a woman's small purse


T.Girl, please let us know the next time you plan to carry $15K in your "small purse".
Royal Mail and I might arrange a slight...ummm...distraction.


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## Argonaut (Dec 7, 2010)

Does anyone know what the contribution limit is for 2012? I've heard conflicting reports on whether it is $5000 or $5500, and nothing official. The CRA desperately wants you to get your taxes in on time, but they're cutting it awful close themselves here.


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## HaroldCrump (Jun 10, 2009)

Argonaut said:


> Does anyone know what the contribution limit is for 2012? I've heard conflicting reports on whether it is $5000 or $5500, and nothing official. The CRA desperately wants you to get your taxes in on time, but they're cutting it awful close themselves here.


Two threads below :
http://www.canadianmoneyforum.com/showthread.php?t=9566


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## Toronto.gal (Jan 8, 2010)

Are you offering to be my unarmed bodyguard and keep my money 'safe' in my lil purse while I'm Christmas shopping Harold? How gracious of you!  [I was trying to prove a point, am sure you understood].

Btw, I called CRA [even before TRM made the request] regarding the 2012 limit, but nothing yet.


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## humble_pie (Jun 7, 2009)

31 december 2035 10:30 am EST.

_it's new year's eve day 2035 in the morning. Outside a busy downtown toronto bank. Two old ladies tiptoe in from stage left. In their knitted silicon raincoats & orange uggboots, they look like a cross between ageing katherine hepburn & big bird. Still, it's possible to see they might have been lookers once._

teegel: so i'm sending him a reminder right now (clicks her coat pocket.)

humbee: how many times i'm telling you to get that coat updated. You still carrying yo motherboard woven through the pocket like in 2021.

teegel: poor hubbledee always so jealous of my chic looks.

humbee: will you look at this. I just sent him a message from my knitted quebec tuque which as you know is wired to my brain implant & now he's glowing like fukushima.

roboteller: (titanium arm winches out & extends a dayglo pink shopping bag to each) happy-new-year-ladies-seven-hundred-and-nineteen-thousand-dollars-each-we-apologize-for-the-delay-but-we-have-not-had-a-cash-transaction-since-2015.

teegel: what do we do now, scoot our tfsas to our new institution ?

humbee: i've told you 20 thousand times. We have to keep the cash with us for 48 hours. We can't deposit it until the new year.

teegel: really ? now you're telling me 48 hours ? you should've told me before, i would've changed, this doesn't go with dayglo pink for more than 5 minutes, you should've asked for fake black lizard.

humbee: pssst stop being so vain & put your glasses on for once, there's a couple guys over there getting ready to follow us.

teegel (peers): where.

humbee: over there, him in the big black fedora.

teegel (peers): did you say he's cute.

humbee: omg we have a couple dayglo pink bags with 1,438,000 in cash inside & they is thugs & you askin if they is cute.

teegel: ok i'll be good. But 48 hours in dayglo pink is hard to take. Beam us up.


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## Toronto.gal (Jan 8, 2010)

Funny story; classic hp style.


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## Lilyukyuk (Nov 30, 2011)

Toronto.gal said:


> Funny story; classic hp style.


Wait...forgive me if I'm dense (I am when it comes to tax stuff!) - but say I move my current TFSA $15,700 (interest included) out at the end of December as cash and plan to move it to another bank by way of same deposit of cash - if the interest you earned can be redeposited - am I to assume that the govt will be cross referencing what I took out to what I put in?


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## HaroldCrump (Jun 10, 2009)

Lilyukyuk said:


> am I to assume that the govt will be cross referencing what I took out to what I put in?


The financial institutions will be reporting the transactions to the CRA, the same way it does for RRSP contributions.


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## Eclectic12 (Oct 20, 2010)

jamesbe said:


> Certified cheque. Sheesh ....


Or bank draft ... which at my bank is cheaper than the certified cheque.

Or if one is willing to wait for the hold to clear, regular cheque - which doesn't have to be filled out until at the new financial instituation.

Or .... I forget ... *grin*


Cheers


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