# Pay no taxes on RRSP by slowly transfering your holdings into TFSA tax-free



## 1.5M (Apr 21, 2012)

All equity assets are more or less cyclical. The basic idea is to sell your assets in RRSP when they drop and buy them back in TFSA. Then sell them in TFSA when they rise and buy them back in RRSP. 

You need to hold a variety of cyclical low correlated assets in TFSA and RRSP (or have 20-40% cash/bond etfs), which is what you should hold anyway.

The actual percentages depend on what you are holding and your desired transfer timeline.
How you do it:
- sell your assets in RRSP when they drop 10%-15% from their local maximum (max value in the last few months or couple of years). Buy them in TFSA (if you don't have enough cash in TFSA, sell the best performing assets and buy them back in RRSP)
- sell your assets in TFSA when they rise 10%-15% from their local minimum (min value in the last few months). Buy them in RRSP (if you don't have enough cash in RRSP, sell the worst performing assets and buy them back in TFSA)

This does not guarantee you'll be able to transfer all your RRSP to TFSA, or even that you'll actually incur losses in RRSP. However, you'll likely have much better returns in TFSA than in RRSP.

Bonus: collect OAS/GIS in retirement because you'll pay no taxes (if they don't change the tax code by that time).

Simplified example with real prices for the XIV inverse-volatility etf:
start with 100k rrsp/75k tfsa on Aug 13, 2014
buy 2500 xiv @ 40 in rrsp on Aug 13, 2014
sell 2500 xiv @ 30 in rrsp on Jan 3, 2015
buy 2500 [email protected] 30 in tfsa on Jan 3, 2015
sell 2500 [email protected] in tfsa on Apr 13, 2015
end with 75k rrsp/100k tfsa on Apr 13, 2015 
buy 1875 xiv @ 40 in rrsp on Apr 13, 2015
sell 1875 xiv @ ??? in rrsp on ??? // wait for it, lol, will drop sooner or later


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## Beaver101 (Nov 14, 2011)

Isn't the title to the thread misleading? How can you possibly *pay no tax on RRSP *whether you sell your investments or transfer the funds out of your RRSP?


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## OptsyEagle (Nov 29, 2009)

Actually, I would like advice on how to sell something when it rises 10% to 15% and then buy it back when it falls 10% to 15%, over and over and over again. 

I think my first problem with your strategy is my ability to buy 2500 XIV on August 13, 2014. Something tells my that is going to be a problem today.


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## 1.5M (Apr 21, 2012)

OptsyEagle said:


> Actually, I would like advice on how to sell something when it rises 10% to 15% and then buy it back when it falls 10% to 15%, over and over and over again.
> 
> I think my first problem with your strategy is my ability to buy 2500 XIV on August 13, 2014. Something tells my that is going to be a problem today.


It's simple, use any asset you would be holding for a long time (could be etfs based on SP500 or DJIA if you don't like the additional risks associated with volatility etfs). Wait for it to rise and/or fall. If it does not, you don't win/lose anything. If it does, you're doing the transaction. Use a percentage based on the historical volatility of the cyclical asset you are holding over your desired timeframe. For example if you're using SPY and you want to do a small transfer every couple months, use 3-5%.

I don't understand your issue with my example. 
You could buy XIV today in RRSP for 41.68 and wait for it to drop 15-20% or whatever percentage you want. If it raises to 50 instead of dropping, good job, you made a profit, now use 50 as your new max and wait for it to drop 15-20% from that value. When your holding is in TFSA, keep it until it rises your desired value (you'd be holding it anyway).

As I said, the strategy does not guarantee you'll be losing money in RRSP, only that, in the long run, your gains in RRSP will be very low (most likely negative) compared to TFSA. Which effectively means a tax-free transfer from RRSP to TFSA.


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## 0xCC (Jan 5, 2012)

I don't understand why you wouldn't just do the purchases in the TFSA at the low points and keep the RSP funds in a money market fund or something. From a net worth standpoint this would work out better I would expect.

If the goal is just to avoid paying taxes on RRSP withdrawals it sort of seems like a crafts person like a furniture maker or a carpenter cutting their hand off because they don't want to generate any more income from their trade because the government taxes their income.


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## 1.5M (Apr 21, 2012)

Beaver101 said:


> Isn't the title to the thread misleading? How can you possibly *pay no tax on RRSP *whether you sell your investments or transfer the funds out of your RRSP?


You don't transfer funds outside your RRSP. You don't pay taxes when you sell investments inside RRSP. 
You'll pay no tax on the portion of RRSP you'll successfully transfer to TFSA using the strategy outlined in my OP. It's not a direct transfer and it does not guarantee success.


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## Charlie (May 20, 2011)

I guess for this to work you'd have to sell/buy an offsetting winner and loser each time so there's cash avail.

Interesting. Pushes the higher growth to the TFSA. Transaction costs and imperfect buy/sells might be a killer.


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## 1.5M (Apr 21, 2012)

0xCC said:


> I don't understand why you wouldn't just do the purchases in the TFSA at the low points and keep the RSP funds in a money market fund or something. From a net worth standpoint this would work out better I would expect.
> 
> If the goal is just to avoid paying taxes on RRSP withdrawals it sort of seems like a crafts person like a furniture maker or a carpenter cutting their hand off because they don't want to generate any more income from their trade because the government taxes their income.


Sorry you didn't understand my post. The primary objective always is to maximize gains. The secondary objective is to have most gains in TFSA. Like any strategy, it may or may not work.


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## Beaver101 (Nov 14, 2011)

1.5M said:


> You don't transfer funds outside your RRSP. You don't pay taxes when you sell investments inside RRSP.
> *You'll pay no tax on the portion of RRSP you'll successfully transfer to TFSA using the strategy outlined in my OP. It's not a direct transfer *and it does not guarantee success.


 ... either it's a zero-sum game to me or from post #5:



> *OxCC: ...* If the goal is just to avoid paying taxes on RRSP withdrawals it sort of seems like a crafts person like a furniture maker or a carpenter cutting their hand off because they don't want to generate any more income from their trade because the government taxes their income.


 .... lol. 

And to *Charlie's* point:


> Transaction costs and imperfect buy/sells might be a killer


 .. who has the most to gain for ALL that work or scheme, at the end of the day?


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## OptsyEagle (Nov 29, 2009)

1.5M said:


> I don't understand your issue with my example.
> You could buy XIV today in RRSP for 41.68 and wait for it to drop 15-20% or whatever percentage you want. If it raises to 50 instead of dropping, good job, you made a profit, now use 50 as your new max and wait for it to drop 15-20% from that value. When your holding is in TFSA, keep it until it rises your desired value (you'd be holding it anyway).


OK, I buy it at $41.68 and it really can't go to $50 if I sell it at 10% to 15% higher. Let me correct that. I don't get to see it go to $50 because I sold it at $45 to $48. By the way there is no such thing as selling it at $45 to $48, since it hits $45 before it hits $48. So pick one. Now it goes on to $50. What do I do now? Buy it at $50. I do, it drops to $40. I don't, it rises to $55. That is the real world not the backward looking, made up number calculating world you are living in.

That is my problem with your example.

I could make up numbers to mathematically make any strategy work, and I could look back and find a lot of great entry and exit points to buy, sell, contribute and withdraw, but doing it in the real world is the problem I am talking about.


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## 1.5M (Apr 21, 2012)

OptsyEagle said:


> OK, I buy it at $41.68 and it really can't go to $50 if I sell it at 10% to 15% higher.


If you buy it at $41.68 in RRSP you want it to drop 10-15%, not raise 10-15%.


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## 1.5M (Apr 21, 2012)

Now, I'll stop replying to this post. 
If you didn't understand the OP or think it will not work, that's ok, just ignore it.


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## Eclectic12 (Oct 20, 2010)

1.5M said:


> ... This [strategy] does not guarantee ... that you'll actually incur losses in RRSP.


Constantly buying at a high price and selling at a low price makes it likely. Where one has sold at a mid-point thinking it's a low ... it sounds like one could be sitting in cash, forgoing income/gains for a while.




1.5M said:


> ... The primary objective always is to maximize gains.


I don't see how selling something that is going to recover ... just to have losses in a particular account is maximising gains.

Consider Mar 2009 ... does one do better putting all spare cash / new contributions into investments that typically went up by 80% or better in the next few years? Or does selling in the RRSP and buying in the TFSA to force gains/losses to be in the desired account miss out on gains?

Now add in that one is likely spending a lot more in commissions as almost *everything* is down so that's lots of selling the RRSP, being matched by lots of buying in the TFSA. That's another drain on the gains / adding to the losses.

Add in that some of those purchases were paying 9% dividends where the dividends have since increased, just as the share price has.




1.5M said:


> ... The secondary objective is to have most gains in TFSA.


AFAICT ... this is the primary objective where depending on the situation, one may be sacrificing overall gains.




1.5M said:


> ... Like any strategy, it may or may not work.


Like other strategies ... how likely is one to make the right moves to be sure that the TFSA gains even out for the triggered losses/additional costs? How many individuals can keep the amounts balanced (ex. $60K TFSA and $480K RRSP)?

The "transfer" part of the strategy is to destroy value in the RRSP with a buy in a TFSA to report gains in that account.


Another question is how many need to care about this?

... having changed jobs frequently where retirement income is projected to be four or five tax levels lower than today. For my situation, it seems like it has lots of opportunity to under perform for a questionable benefit.


Cheers


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## OptsyEagle (Nov 29, 2009)

1.5M said:


> If you buy it at $41.68 in RRSP you want it to drop 10-15%, not raise 10-15%.


Yes. But I do not control the movement of the stock. You were the one that mentioned about it going to $50. I was just using some of your theoretical numbers. I can theoretically use dropping numbers as well, if you want, but except for interesting conversation, it is of no use.

You strategy is interesting math but impossible to implement. That is my point.


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## lb71 (Apr 3, 2009)

The key to making this work is timing the market. If you can do that, why not maximize the growth of both your RRSP and TSFA? You say to buy/sell when the drop/rise is 10-15%, yet your example shows buying and selling beyond the 15% range.


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## OptsyEagle (Nov 29, 2009)

lb71 said:


> The key to making this work is timing the market. If you can do that, why not maximize the growth of both your RRSP and TSFA? You say to buy/sell when the drop/rise is 10-15%, yet your example shows buying and selling beyond the 15% range.


That is my point as well. Forget about the tax strategy. If a person could do what he was suggesting they would be so rich who would care about taxes. The problem is that it cannot be done consistently, so in the end it is just some interesting numbers.


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## mrPPincer (Nov 21, 2011)

It could work within limits, but it assumes holding cash / fixed income in both accounts, which makes large corrections/fluctuations problematic, but lesser so assuming ongoing contributions.

The main problem would be, ok example..
TFSA: 1 FI TDB909 + 3 equity funds 
RRSP: ^same

So, problem being, every time you sell in the RRSP and buy in the TFSA when it looks high according to your pre-set definitions, (or similar case vice versa), you would decrease the wiggle room (offset somewhat for a regular contributor), so it could work nicely in a highly volatile market, but we don't always get that, sometimes the market keeps going up and sometimes the other direction for extended periods, which are the situations where the model would fail somewhat, because one side (TFSA) or the other (RSP) would run out of the fixed income portion.

Interesting thought though, and the concept is well worth working into long-term strategy imho
__

Another problem will be assuming my example (free trading) is that TDDI will send you a warning letter complaining about excessive short-term trading and possibly take further action, and using an ETF example you would be adding trading costs.


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## GoldStone (Mar 6, 2011)

1.5M said:


> Simplified example with real prices for the XIV inverse-volatility etf:
> start with 100k rrsp/75k tfsa on Aug 13, 2014
> buy 2500 xiv @ 40 in rrsp on Aug 13, 2014
> sell 2500 xiv @ 30 in rrsp on Jan 3, 2015
> ...


I think I can do a bit better:

start with 100k rrsp / 75k tfsa on Aug 13, 2014
*don't* buy 2500 xiv @ 40 in rrsp on Aug 13, 2014
*don't* sell 2500 xiv @ 30 in rrsp on Jan 3, 2015
buy 2500 [email protected] 30 in tfsa on Jan 3, 2015 *and buy 3333 xiv @ 30 in rrsp*
sell 2500 [email protected] 40 in tfsa on Apr 13, 2015 *and sell 3333 xiv @ 40 in rrsp*
end with *133k* rrsp / 100k tfsa on Apr 13, 2015

133K+100K > 75K+100K

If you can time _your _strategy, why can't you time _mine_?

LOL


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## Westerly (Dec 26, 2010)

I think this idea has merit. At the simplest level, if I own oil stocks, gold stocks, Bombardier, and couple others in my RRSP which have gone down significantly, [which I do], AND I think those will go back up significantly, [which I hope and will continue to hold], I will sell those in the RRSP and rebuy in the TFSA. The funds from the sale in the rrsp (not deregistered) will be used for reinvestment, possibly into something that I currently hold in the TFSA which has gone up AND I want to continue to hold. Personally, my only short term problem is I need funds in my TFSA for this to work, which will come in time.


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## andrewf (Mar 1, 2010)

I think you might be able to make this work with interesting option arrangements.

Like a somewhat in the money VXX covered call in RRSP, while buying puts with the same number of contracts, strike & expiry in the TFSA. No guarantee which side would win, but it might bias toward TFSA winning. It would require some modelling. Long put and short call is a synthetic short, hedged by the long position in the underlying, so it should be neutral from a total portfolio perspective.


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## OnlyMyOpinion (Sep 1, 2013)

:sleeping::sleeping::sleeping::sleeping:


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## Westerly (Dec 26, 2010)

I'll say this quietly so as not to wake the non-believers. This is something I've considered for some while, a gradual shift of assets out of RRSP's based on the relative risk level of holdings between registered accounts. More recently I'm thinking a simple strategy of making my DCA buys (2nd or 3rd buy) in my TFSA, depending on my perception of the risk level.

1.5M: I've tried to raise your idea before (my version of it) and it was just as quickly dismissed. I intend to employ it as part of my long-term strategy and I will pay lower taxes.


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## 0xCC (Jan 5, 2012)

andrewf said:


> I think you might be able to make this work with interesting option arrangements.
> 
> Like a somewhat in the money VXX covered call in RRSP, while buying puts with the same number of contracts, strike & expiry in the TFSA. No guarantee which side would win, but it might bias toward TFSA winning. It would require some modelling. Long put and short call is a synthetic short, hedged by the long position in the underlying, so it should be neutral from a total portfolio perspective.


Are you allowed to buy puts in a TFSA (or RRSP for that matter)?


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## Eclectic12 (Oct 20, 2010)

Westerly said:


> I'll say this quietly so as not to wake the non-believers. This is something I've considered for some while, a gradual shift of assets out of RRSP's based on the relative risk level of holdings between registered accounts.


I have no doubt that where one buys high/sells low in the RRSP, over long periods - the RRSP will drop in value also lowering taxes to pay. 


The question is whether one is giving up overall growth to achieve to end up owing less taxes. The model assumes th e growth in the TFSA is going to equal the locked in loss in the RRSP. It does not take into account any other opportunities or losses that are being missed.

[Side Note: Unless one has found a way to buy/sell without commissions - I'd want the TFSA growth to be bigger than the RRSP loss as equal gain/losses means one's overall value is dropping by the commissions paid. ] 

Then too, having bought/sold at what I thought were high/lows, I've also watched while the prices did something completely different. 

Depending on one's situation ... it seem far more predictable as well as easier to accomplish where one retires early to withdraw from the RRSP in a low income time frame.


At the end of the day ... it is an academic discussion in my case.


Cheers


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## Westerly (Dec 26, 2010)

I'm not advocating purposely buying something that one feels will go down in value to intentionally lose $$$ - that would be counter-productive. I'm talking about moving loss/low performing positions out to the TFSA. I did this recently with Eagle Trust. Held in my RRSP, it went way down, and down again. I sold it, reinvested the funds in the RRSP (nothing deregistered), and bought EGL in my TFSA with my otherwise available cash. I'm still under-water overall but my position in the TFSA has increased in value tax-free. I could actually sell it now and contribute the tax-free gains to my RRSP and receive a tax refund.


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## CalgaryPotato (Mar 7, 2015)

I can see doing this for the odd special case. I can't using it as the driving setup for my investment portfolio though.


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## OptsyEagle (Nov 29, 2009)

Westerly said:


> I'm not advocating purposely buying something that one feels will go down in value to intentionally lose $$$ - that would be counter-productive. I'm talking about moving loss/low performing positions out to the TFSA. I did this recently with Eagle Trust. Held in my RRSP, it went way down, and down again. I sold it, reinvested the funds in the RRSP (nothing deregistered), and bought EGL in my TFSA with my otherwise available cash. I'm still under-water overall but my position in the TFSA has increased in value tax-free. I could actually sell it now and contribute the tax-free gains to my RRSP and receive a tax refund.


Westerly, that is a nice example but step back for a minute. When you bought EGL the first time, I assume that you assumed it would go up...but it didn't. So you were wrong. No problem, I am wrong quite often also. Now you go on to say, hey this happens, so let's take advantage of the situation and sell it. Great, less future taxable money in the RRSP. Now you buy back EGL in the TFSA and this time you are right. It goes up and you use this to validate the strategy. What if you were wrong on it again? It would have went down. How does that make your plan work?

All you are really doing is looking at a glass that is filled halfway and saying it, look it is half full. See how great my strategy is.

Since you will be wrong probably as often as you are right you will find way too many times that the stock you bought in the RRSP goes up and the stock you buy in the TFSA goes down, or the one you bought in the RRSP goes down and you sell it and buy it again in the TFSA and it keeps going down, and you say, hey, I wish I had of let it fall further in my RRSP, etc., etc., etc.

This strategy is very difficult to make work well, since it either needs stocks to go down in the RRSP and up in the TFSA and/or you need to withdraw money from the RRSP way too soon and the former you have seriously reduced control over and the later you most likely should avoid, at least until you are in your 60s or in an almost 0% tax bracket.


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## gibor365 (Apr 1, 2011)

> Westerly, that is a nice example but step back for a minute. When you bought EGL the first time, I assume that you assumed it would go up...but it didn't


 This is exactly as averaging down, sometimes it can work good , sometimes bad. If you bought EGL at $10, and when it hit $7, sell it in RRSP and buy it on TFSA -> it wouldn't work... 
I have much simplier strategy  .... first max up TFSA, than RRSP... when you need income convert RRSP to RRIF and withdraw only minimum that you don't need to pay taxes on it, than withdraw from TFSA


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## MoreMiles (Apr 20, 2011)

You can do it with inverse ETF

SPY vs SH

If you get the wrong direction / timing, you don't lose money, you just end up more in RRSP and less in TFSA.


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## OptsyEagle (Nov 29, 2009)

MoreMiles said:


> You can do it with inverse ETF
> 
> SPY vs SH
> 
> If you get the wrong direction / timing, you don't lose money, you just end up more in RRSP and less in TFSA.


But that is the point. There is no way to consistently get it right. Ending up with more money in the RRSP and less in the TFSA is the big problem this thread was trying to solve. But it doesn't.

At the end of the day, Gibor's suggestion is the only fool proof way that works because it doesn't really on the movements of the investments going in the right direction for the plan to work.



gibor said:


> I have much simplier strategy  .... first max up TFSA, than RRSP... when you need income convert RRSP to RRIF and withdraw only minimum that you don't need to pay taxes on it, than withdraw from TFSA


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## gibor365 (Apr 1, 2011)

MoreMiles said:


> You can do it with inverse ETF
> 
> SPY vs SH
> 
> If you get the wrong direction / timing, you don't lose money, you just end up more in RRSP and less in TFSA.


And total value of your portfolio will always decline as regardless on market movement sum of SPY and SH will give you negative result.
Same with TZA + TNA


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