# TFSAs and SDTFSAs



## not_a_virus.exe (Feb 23, 2012)

What's the difference between the two, and is one preferable over the other? Right now I'm 23 and have $8000 saved up in my high interest TFSA (Not exactly high right now with the state of the economy. I'm lucky to snag 7 bucks a month off my 8k).


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## avrex (Nov 14, 2010)

Advantage. You can place a wider array of investment choices within a Self-Directed TFSA.
You may want to consider switching to one, as you continue to save.

Which Tax-Free Savings Account (TFSA) [by Canadian Capitalist]


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## uptoolate (Oct 9, 2011)

Off topic NAV.exe but great handle!


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## Eclectic12 (Oct 20, 2010)

not_a_virus.exe said:


> What's the difference between the two, and is one preferable over the other? Right now I'm 23 and have $8000 saved up in my high interest TFSA (Not exactly high right now with the state of the economy. I'm lucky to snag 7 bucks a month off my 8k).


As avrex points out, there are more choice of investments in a SD-TFSA. There are also more costs (ex. commissions, maybe a fee for the 2nd+ withdrawal per year, higher minimum purchase requirements etc.) and maybe not as easy for withdrawals.

I like having the best of both worlds so I setup two TFSAs. The first is a HISA to hold emergency money or needed shortly money. The second is a brokerage TFSA so I can put the long term money into a broad range of investments (ex. stocks, bonds, GICs, MFs, ETFs, MF HISAs, etc.).


As long as one tracks the TFSA contributions and limit across *all* TFSAs, there is no problem with having more than one.


Cheers


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## not_a_virus.exe (Feb 23, 2012)

I appreciate all the replies. Does anyone know if TD provides this account option? After looking through all their account types the only self directed account option I see available is an RSP. RRSPs are something I want to try and steer clear from. Would I have to open up an SDTFSA account with another bank? Also, if I did, would this infringe on my right to hold no more than one TFSA per person?

PS. I didn't know where else to post this but thanks for the compliment UTL. That's my handle on more than one message board and I get comments abound.


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## avrex (Nov 14, 2010)

You can open a self directed TFSA account with TD Waterhouse.

Just walk into a TD bank and ask for an appointment with their TD Waterhouse representative.

Alternatively, you can also apply online.
TD TFSAs

The 3rd <Apply Now> pushbutton is the TFSA with TD Waterhouse (they don't use the term "Self Directed", but it is.) I believe this is what you are looking for. I also have this TFSA account with TD Waterhouse.

The 1st and 2nd <Apply Now> pushbuttons are for TD Bank's 'regular' TFSAs.


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## not_a_virus.exe (Feb 23, 2012)

avrex said:


> You can open a self directed TFSA account with TD Waterhouse.
> 
> Just walk into a TD bank and ask for an appointment with their TD Waterhouse representative.
> 
> ...


Most excellent. I already have a standard TFSA, if I wanted to open up one of these, would I have to close my current standard TFSA to do so? As far as I know, one person can only have one single TFSA for themself at any given time.


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## avrex (Nov 14, 2010)

You do not have to close your current 'standard' TFSA.

As Eclectic points out, upthread, an individual can have more than one TFSA.



Eclectic12 said:


> I like having the best of both worlds so I setup two TFSAs. The first is a HISA to hold emergency money or needed shortly money. The second is a brokerage TFSA so I can put the long term money into a broad range of investments (ex. stocks, bonds, GICs, MFs, ETFs, MF HISAs, etc.).
> 
> As long as one tracks the TFSA contributions and limit across *all* TFSAs, there is no problem with having more than one.


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## not_a_virus.exe (Feb 23, 2012)

avrex said:


> You do not have to close your current 'standard' TFSA.
> 
> As Eclectic points out, upthread, an individual can have more than one TFSA.


OK then I may have misunderstood the basis of the TFSA. I know you can either have one TFSA, or multiple TFSAs providing you don't surpass 5k a year. Is that correct? So if I open up a new waterhouse TFSA account, will that hinder my ability to maximize what I can deposit into my standard savings account? Or is this waterhouse account a new one altogether with no deposit cap? Sorry if these are stupid questions. I'm new to all this.


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## avrex (Nov 14, 2010)

no problem. Let's review.

Each year you can contribute 5,000.
2009 + 2010 + 2011 + 2012 = 5k + 5k + 5k + 5k = 20,000

Each individual needs to keep track of their contribution room.
Let's say, for example, that you have so far contributed 7,500 to your standard TD 'High Interest' TFSA. Let's call this TFSA 'A'. Even though you have 8,000 now (gaining 500 due to interest payments), you still have contributed only 7,500 thus far.

This means that you have 20,000 - 7,500 = 12,500 remaining in contribution room.

You now open up a 'new' TFSA 'B' with TD Waterhouse. You can split up the remaining contribution (12,500) in any way you please.

You can put 2,500 in TFSA 'A' and 10,000 in TFSA 'B'.
or you can put 7,500 in TFSA 'A' and 5,000 in TFSA 'B'.
The choice is yours. You just need to keep track of how much goes into your TFSAs (not how much accumulates inside the TFSAs).


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## not_a_virus.exe (Feb 23, 2012)

Now in the future if I chose to cancel my current HITFSA and transfer it all into a SDTFSA, and had the money sitting there doing nothing (no investments in stock, gics, mutual funds, bonds ect.) would it still earn interest like a standard HITFSA would?


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## indexxx (Oct 31, 2011)

No, that is one of the differences- which is also why a brokerage SD like from TDW or Questrade or RBC DI does not pay interest on top of your investments. The SD is basically a tax-sheltered vehicle that allows the holding of securities (same as an RRSP, which is simply a tax-deferred account), where a regular TFSA through your bank is the holding, if you follow me, and therefore pays a modest interest rate. A HITFSA is like a regular savings account, but just not taxable. So by the same token, you can't hold things like stocks or index funds in your savings account, but you earn (minuscule) interest. In a SDTFSA, you don't get interest, but you can hold securities that can compound completely tax-free.


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## not_a_virus.exe (Feb 23, 2012)

indexxx said:


> No, that is one of the differences- which is also why a brokerage SD like from TDW or Questrade or RBC DI does not pay interest on top of your investments. The SD is basically a tax-sheltered vehicle that allows the holding of securities (same as an RRSP, which is simply a tax-deferred account), where a regular TFSA through your bank is the holding, if you follow me, and therefore pays a modest interest rate. A HITFSA is like a regular savings account, but just not taxable. So by the same token, you can't hold things like stocks or index funds in your savings account, but you earn (minuscule) interest. In a SDTFSA, you don't get interest, but you can hold securities that can compound completely tax-free.


Gotcha! So yes in truth having both is essential. That's all I needed to know for now. Thanks all for the very enlightening and informative information. Very helpful. After I acquire an even 10k in my regular account, I'll open up a waterhouse account and split my contribution room between my 5k cap. Then a whole new world of investments to look forward to.


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## jamesbe (May 8, 2010)

I'll say it again. Should have been named the TFSP (Tax Free Savings Plan).

You can have as many accounts as you like.


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## Eclectic12 (Oct 20, 2010)

indexxx said:


> No, that is one of the differences- which is also why a brokerage SD like from TDW or Questrade or RBC DI does not pay interest on top of your investments.
> 
> The SD is basically a tax-sheltered vehicle that allows the holding of securities (same as an RRSP, which is simply a tax-deferred account), where a regular TFSA through your bank is the holding, if you follow me, and therefore pays a modest interest rate.
> 
> ...


This is false.

The TDW Commission Fee schedule states:


> Interest on Cash Balances in Registered Accounts: Interest will be calculated at TD Waterhouse Discount Brokerage's prevailing rates


http://www.tdwaterhouse.ca/apply/forms/521778.pdf


If the SD-TFSA (or SD-RRSP) does not pay interest on cash balances, then I'd better call them up and send them a refund as I was paid interest last year in both accounts. 


The difference is the rate being paid. For discussion purposes, the SD-TFSA paid maybe 0.1% where a HISA-TFSA is paying say a "high" 1.5% rate. 


IAC, there are now better options for cash that won't be moved into investments for a while. For example, there are HISA MFs which deposits the money at a Canadian bank (i.e. CDIC insured) and pays between the 1% and 1.5% interest, in the form of more MF units. The interest is much better and if a good one is chosen, there is a lot of flexibility with minimal costs.

For those interested in this option, there are several threads about this on CMF, with an example in the Investing section "TD Investment Savings Accounts".


Cheers


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## Eclectic12 (Oct 20, 2010)

not_a_virus.exe said:


> OK then I may have misunderstood the basis of the TFSA.
> 
> I know you can either have one TFSA, or multiple TFSAs providing you don't surpass 5k a year. Is that correct?
> 
> So if I open up a new waterhouse TFSA account, will that hinder my ability to maximize what I can deposit into my standard savings account? Or is this waterhouse account a new one altogether with no deposit cap? Sorry if these are stupid questions. I'm new to all this.


*shrug* - I'm not sure why there is so much confusion.

If you understand the ability to have multiple RRSPs then you understand the ability to have multiple TFSAs. 

In either case, one can open as many as one wants, as long as the contributions deposited don't exceed the contribution limits. The key differences are that the RRSP uses one formula/set of rules to control the contribution limit/contributions and the TFSA uses a different formula/set of rules plus allows withdrawals/re-contributions without penalty or taxes (if done properly!).

Check out the review avrex posted. The additional points I'd add are:
a) the review assumes the individual was 18 and a Canadian resident in 2009.
b) be aware that a TFSA withdrawal will be added to the TFSA limit - the *following* year. So when I withdrew say $3K in 2011 to pay down my mortgage, in 2012 I get to re-add the $3K to my overall TFSA contribution limit. This is another area of confusion.

Here are some links to review the TFSA setup/rules:
http://www.tfsa.gc.ca/
http://www.moneysmartsblog.com/tfsa-rules-and-contribution-limits-for-2010/
http://www.milliondollarjourney.com/tfsa-contribution-room.htm


Or you can search the several TFSA threads here on CMF.


Trivia: The TFSA penalty for over-contributing is the same as the RRSP penalty. The main difference is that TFSA over-contributions are typically flagged much later, after a much more expensive penalty is assessed. So there is incentive to understand and avoid the penalties.


Cheers


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## Four Pillars (Apr 5, 2009)

Eclectic12 said:


> *shrug* - I'm not sure why there is so much confusion.


A lot of questions posted on these (as well as on my blog/email) are from people who can't be bothered spending 5 minutes to learn something on their own. 

Usually I can't be bothered answering them.

For the record - All investment accounts are self-directed, unless you have given someone a power of attorney to trade for you.

From this confusing thread it appears that the OP thinks that TFSA = savings account and SDTFSA = brokerage account?

They are both just TFSAs.


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## not_a_virus.exe (Feb 23, 2012)

Four Pillars said:


> A lot of questions posted on these (as well as on my blog/email) are from people who can't be bothered spending 5 minutes to learn something on their own.


Anything anyone asks on this forum can be learned somewhere else on their own. So what purpose does this place hold if not to ask questions? Mine was already answered. And a brief skim through the thread would have told you that. so I wasn't putting any of you two out.

If it makes Eclectic feel better, I had no prior knowledge of RRSPs at all. So I didn't know how they worked. Before I opened up my TSFA, I only held my money in a standard value account collecting nothing. When I said I was new to all this, I meant it. If no one wants to reply, I'm not making them. But I appreciate the ones who did without making a fuss about it.


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## DanFo (Apr 9, 2011)

If your already a TD customer the easiest way to get a TFSA with TDW is to go into the bank and have them set you up...your accounts will be linked and they'll get copies of your ID which is required ( you'd have to mail it in if you do it online). the TDW account will also appear on your easyweb account. The main downfall is that TDW has high trading commisions until you get more than 50K into it...mutual funds are commision free as long as you hold them >90 days. No annual fee for the TFSA, there is one for a regular trading account but it can be waved if you do paperless documents.


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## Eclectic12 (Oct 20, 2010)

not_a_virus.exe said:


> Anything anyone asks on this forum can be learned somewhere else on their own. So what purpose does this place hold if not to ask questions? Mine was already answered. And a brief skim through the thread would have told you that. so I wasn't putting any of you two out.
> 
> If it makes Eclectic feel better, I had no prior knowledge of RRSPs at all. So I didn't know how they worked. Before I opened up my TSFA, I only held my money in a standard value account collecting nothing. When I said I was new to all this, I meant it. If no one wants to reply, I'm not making them. But I appreciate the ones who did without making a fuss about it.


I wasn't put out ... or I wouldn't have answered. 

So while I may understand what you've written better, it has no impact on my feelings.


Looking at the post that sparked my confusion, if you understand that:


> _I know you can either have one TFSA, or multiple TFSAs providing you don't surpass 5k a year._


then how could there be:


> _... a new one altogether with no deposit cap?_


To me, either you know the first part is right, which would have no mention of part two or you are not so sure and want to confirm you are right. Being "sure" and then writing something that isn't true is a contradiction, that says to me that you are not so sure.


BTW, I've run into other people who are able to grasp the RRSP equivalent but somehow see the TFSA as complicated where the rules are relatively simple.


Cheers


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## indexxx (Oct 31, 2011)

Eclectic12 said:


> This is false.
> 
> The TDW Commission Fee schedule states:
> 
> ...


Sorry, my mistake. I was unaware that in brokerage TFSAs interest is accrued on cash balances- but of course it makes sense. 

@four pillars- a TFSA is a TFSA, but I think the OP was using the delineations of "SD and "HI" for his own understanding, so the I went along for the sake of differentiating a brokerage TFSA.


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## Eclectic12 (Oct 20, 2010)

indexxx said:


> Sorry, my mistake. I was unaware that in brokerage TFSAs interest is accrued on cash balances- but of course it makes sense.
> 
> @four pillars- a TFSA is a TFSA, but I think the OP was using the delineations of "SD and "HI" for his own understanding, so the I went along for the sake of differentiating a brokerage TFSA.


Actually it's RRSPs, TFSAs and cash accounts (i.e. all flavours of accounts) - though as pointed out, the interest rate paid is to the benefit of the brokerage (and I'm certainly not counting on it!).


+1 on the "SD" is to differentiate between a HISA only and a wider range of investments. I think it's more than just the OP as I've seen the same tags applied for MF only RRSP and full investment range RRSPs. I'm on the fence as technically, four pillars is correct while the "SD" tag is in relatively common use to highlight the range of choices.


Then too - I'm not used to thinking of a savings account as an investment account.


Cheers


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## Four Pillars (Apr 5, 2009)

Eclectic12 said:


> Actually it's RRSPs, TFSAs and cash accounts (i.e. all flavours of accounts) - though as pointed out, the interest rate paid is to the benefit of the brokerage (and I'm certainly not counting on it!).
> 
> 
> +1 on the "SD" is to differentiate between a HISA only and a wider range of investments. I think it's more than just the OP as I've seen the same tags applied for MF only RRSP and full investment range RRSPs. I'm on the fence as technically, four pillars is correct while the "SD" tag is in relatively common use to highlight the range of choices.
> ...


To be fair, the industry does use the "self-directed" tag. I'm not suggesting the OP just made it up. 

However, the term doesn't really mean a whole lot.


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## Eclectic12 (Oct 20, 2010)

Four Pillars said:


> A lot of questions posted on these (as well as on my blog/email) are from people who can't be bothered spending 5 minutes to learn something on their own.
> 
> Usually I can't be bothered answering them.
> 
> ...


That's where it depends on the knowledge of whomever I'm interacting with. Some are learning where to check, may not have had the advantage of a family that was interested/encouraged questions or are not sure where to confirm their thoughts.

I should have prefaced my comment with the fact that compared to a lot of other products or registered accounts, IMO the TFSA has the easiest to understand rules, if one knows where to look (or google <tm>). That's why I'm confused that some people who have mastered the more complex RRSP, jump through hoops to make the TFSA more complicated than it is.


And yes, technically all investment accounts are self-directed. However, the industry seems to have promoted the "SD-" label to communicate the broader range of investment choice available , especially in the RRSP arena.

Plus I'm not used to thinking of a "savings" account as an investment.


Cheers


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## not_a_virus.exe (Feb 23, 2012)

A few things, by applying online will I be able to link my easyweb account with webroker? Are there any hidden annual fees? And ALL gains made through an investment TFSA are truly tax free? No hidden fine print? I know I'm being ludicrous here and don't expect to make this, but let's say I invest 5 grand into a stock, and come back with 7 grand, that extra 2 grand is all mine? And that won't hinder my contribution room at all?


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## Koala (Jan 27, 2012)

Eclectic12 said:


> That's where it depends on the knowledge of whomever I'm interacting with. Some are learning where to check,
> 
> 
> Cheers


To be fair to the OP, this is a huge problem, especially with the TFSAs! The government site isn't the easiest read, and I had some problems with broken links. It's hard to know what other websites can be trusted. Then I go to the bank and am given incorrect information. Who do I trust - my understanding from the website, or someone who's job is to deal with TFSAs?

3 different people, 2 different banks either gave me incorrect info that I had to question them on or simply didn't know and had to contact someone to find out.
When I tried to transfer a TFSA from one bank to another I was first told to write a cheque.
When I wanted to make sure that it wasn't just the principle but also the interest earned that could be withdrawn then contributed the next year someone didn't know.
Someone tried to convince me that it was better to put my spouse as a beneficiary instead of a successor. She told me that a successor doesn't get the same tax benefits when the TFSA goes to them.


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## Eclectic12 (Oct 20, 2010)

Four Pillars said:


> To be fair, the industry does use the "self-directed" tag. I'm not suggesting the OP just made it up.
> 
> However, the term doesn't really mean a whole lot.


And I wasn't thinking you were suggesting that it was made up.

I was just pointing out that it did not confuse me that the OP would be using a term that the industry has made up.


Cheers


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## Eclectic12 (Oct 20, 2010)

Koala said:


> To be fair to the OP, this is a huge problem, especially with the TFSAs!
> 
> The government site isn't the easiest read, and I had some problems with broken links. It's hard to know what other websites can be trusted. Then I go to the bank and am given incorrect information. Who do I trust - my understanding from the website, or someone who's job is to deal with TFSAs?
> 
> ...


I'm sorry you had problems but this is an example of why I'm confused that some haven't been able to find info that I was able to find easily.

In my case, knowing the TFSA was a registered account, I went to the Canada Revenue Agency web site in Mar 2009. A few clicks later, I was at the TFSA page. The web page did a good job of explaining the rules. I read it about five times as I kept thinking the rules were too easy and kept looking for restriction I'd missed.
Here are some links that have worked for me:
http://www.servicecanada.gc.ca/eng/goc/tfsa.shtml
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html

Other sources such as newspapers, magazines and Finance forums all outlined the same rules. I guess I was lucky as both my brokerage and my two banks were also providing the same information.


I can understand that it would be frustrating to have some many not able to provide answers. I'm wondering if you checked with CRA, after getting the run-around?



Cheers


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## Koala (Jan 27, 2012)

Here's a great example, going to your first link and then making my way to transfers I get this:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trns-eng.html
HTTP Error 404 - Not Found

Our Web server cannot find the file you asked for. You have either selected a broken link or tried to access a page whose Web address has changed. Please check the URL to ensure that the Web address is correct.

The second link, I get this:
I_f you want to transfer funds from one TFSA to another without tax consequences, a direct transfer must be completed by your issuer on your behalf.

If you want to transfer all or a portion of your TFSA from one issuer to another you should contact your issuer for additional information._

Great, I did that, they told me to write a cheque. I think it would have been fair if the average person thus assumed that writing a cheque going from one TFSA to another would count as a transfer and not withdrawal. Luckily, I didn't take them for their word and questioned them more.

I did get my questions answered, and for the most part I already knew the information from the website before going in (with the exception of how a beneficiary is different for a spouse compared to a non-spouse). My reading comprehension is above average, so I could see where people are running into issues, especially if they have reading or comprehension problems.

I will agree that some of the very basic TFSA information appears to be everywhere (like if you make withdrawal you have to wait until the next year to recontribute). Other information is a little harder to find, especially if someone is lazy, doesn't want to click on a few links for information relating to one aspect and wants the information quickly.

I'll stop ranting for now, at least on this thread


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## Eclectic12 (Oct 20, 2010)

Koala said:


> Here's a great example, going to your first link and then making my way to transfers I get this:
> http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/trns-eng.html
> HTTP Error 404 - Not Found
> 
> ...


Weird ... both at home and at work, I have yet to have a "page not found" error from either site. IAC, the first link is to Service Canada's page, where I do not see a transfers link. The second link to CRA's page has a transfers link, which so far is working.

Do you have a proxy or firewall between you and the web site?


As for the transfers - both pages say the financial institution must do the transfer, so IMO that should rule out a cheque. If a cheque worked, why say anything about "direct transfer must be completed by your issuer"?

Now why the tax tip on the RRSP transfer page which is slightly clearer, is not on the TFSA page is another question.


> Tax tip
> You have to transfer certain payments directly - to ensure that these funds are transferred tax-free, you must ask the payer to transfer them directly.



I can agree the "basic" info is out there, including "re-contribute the following year". Yet if you search CMF or other sites - a lot of people still are saying "what do you mean next year?". Or the often repeated "With interest on savings at 1.5%, the TFSA is useless."


I'll stop my rant as well. 


Cheers


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## indexxx (Oct 31, 2011)

not_a_virus.exe said:


> A few things, by applying online will I be able to link my easyweb account with webroker? Are there any hidden annual fees? And ALL gains made through an investment TFSA are truly tax free? No hidden fine print? I know I'm being ludicrous here and don't expect to make this, but let's say I invest 5 grand into a stock, and come back with 7 grand, that extra 2 grand is all mine? And that won't hinder my contribution room at all?


Yes, you can link your accounts. Not sure about what fees may apply to a particular account you're looking at- but there should not be any for linking (remember, they want you to place your money with them). I simply transfer cash from my RBC savings into my Questrade TFSA and start buying investments, no fees aside from the $4.95 trade fee with QT. 

ALL gains are 100% TAX-FREE forever, yay for us! Any gains are all yours, and DO NOT hinder your contribution room. In fact, ANY amount you withdraw (including gains) is then added to your next year's contribution room. So say you invest $10,000 and hit a ten-bagger stock; you could withdraw one hundred thousand dollars tax free, open a business, and re-invest $100,000 of your profits into your TFSA the next year (in theory- so if you know how to hit a 1000% stock and then generate $100,000 in a business in its first year, please call me...).


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## Eclectic12 (Oct 20, 2010)

indexxx said:


> Yes, you can link your accounts. Not sure about what fees may apply to a particular account you're looking at- but there should not be any for linking (remember, they want you to place your money with them). I simply transfer cash from my RBC savings into my Questrade TFSA and start buying investments, no fees aside from the $4.95 trade fee with QT.
> 
> ALL gains are 100% TAX-FREE forever, yay for us! Any gains are all yours, and DO NOT hinder your contribution room. In fact, ANY amount you withdraw (including gains) is then added to your next year's contribution room. So say you invest $10,000 and hit a ten-bagger stock; you could withdraw one hundred thousand dollars tax free, open a business, and re-invest $100,000 profits the next year (in theory- so if you know how to hit a 1000% stock and then generate $100,000 in a business in its first year, please call me...).


+1 on the now fees for linking.

As for TFSA strategies, with the drop in investments in late 2008, I chose to transfer "in kind" a couple of stocks that I still thought were good and than had dropped to around what I paid for them.

The end result was that my CG was about $200 and the stock has rebounded from about $8 to about $14, while paying $0.84 distributions a year.


Cheers


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## indexxx (Oct 31, 2011)

BTW, here's two links with good, basic info on TFSAs. I'd also recommend you read David Chilton's newly revised "The Wealthy Barber Returns" (great general investing info for Canadians, including TFSAs, and a fun read) as well as either Tax Free Savings Accounts or Ultimate TFSA Guide by Gordon Pape. 

http://www.moneysmartsblog.com/tfsa-rules-and-contribution-limits-for-2010/

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

links to info about the books:

http://www.amazon.ca/Tax-free-Savings-Accounts-Gordon-Pape/dp/0143171968

http://www.amazon.ca/Wealthy-Barber-Returns-David-Chilton/dp/0968394744/ref=pd_cp_b_2


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