# TFSA Question



## latebuyer (Nov 15, 2015)

People seem to say that you should withdraw from the TFSA last in retirement. Yet wouldn't it make sense to withdraw from your tfsa and then put your withdrawn rrif money there? (RRIF money you won't spend right away.) Presumably your tfsa has grown quite a bit so you may be able to deposit quite a bit of rrif money there. (I suppose i'm only 45 so there is room for the tfsa to grow.) Why would it be more advantageous to not withdraw from tfsa? What am i missing? I thought you could transfer a security from a rrif to a tfsa. Is that not useful?


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## fireseeker (Jul 24, 2017)

I'm confused by the process you describe. 
If you withdraw from your TFSA and then simply replace the withdrawn money (which you can't do in the same calendar year, BTW, you have to wait till the next year), you have changed nothing.
Also, withdrawing from a RRIF is a taxable event. It doesn't matter if you put that RRIF withdrawal into your TFSA, you'll still have to pay tax on the withdrawal. And it doesn't matter if you transfer a security -- you can do that, I think, but you'll still pay tax on the RRIF withdrawal value.
Now, if you have room in your TFSA and you don't need the RRIF cash -- but you have to make the minimum withdrawal -- then by all means park it in the TSA (after tax).
But you can't shift money or securities from your RRIF to your TFSA without paying tax.


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## My Own Advisor (Sep 24, 2012)

Personally, we're planning the following draw down plan:

1) RRSP + RRIF before workplace pensions, then 2) workplace pensions (in 60s+) and non-reg. account, then 3) workplace pensions + TFSAs (after non-reg. account is gone likely in our 70s or 80s).

I don't think it makes very much sense to withdraw from the TFSA "until the end" but your mileage (and others) may vary. 

Any money you withdraw from the RRIF, which is taxed but not spent, can absolutely be contributed to your TFSA assuming you have TFSA contribution room.


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## latebuyer (Nov 15, 2015)

Thanks maybe i'm confused. What would the advantage be of transferring a security versus selling it? Could you transfer just a portion of the security?

Just thought of an advantage, if its losing money you wouldn't have to sell.


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## fireseeker (Jul 24, 2017)

The only advantage is that you might save $9.95 (x2) on transaction fees, assuming your FI will do the swap for free.
But you still have to pay tax on any withdrawal (whether cash or security and whether in whole or in part) from a RRIF or RRSP.


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## Eclectic12 (Oct 20, 2010)

latebuyer said:


> ... Why would it be more advantageous to not withdraw from tfsa? What am i missing?


People assume their TFSA assets will grow tax free. TFSA withdrawals remove assets for at least a period of time from tax free shelter (i.e. no tax free growth).

Unless the RRIF withdrawal is too small to cover all expenses/gifts etc. ... I suspect most people will think that losing the tax free growth for a period of time will put one behind versus keeping all the TFSA assets with their growth tax free without interruption.


Cheers


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## OnlyMyOpinion (Sep 1, 2013)

Just to add, if you are thinking way ahead (right to the light at the end of the tunnel), TFSA assets come into an estate tax-free, while the full value of an RRSP/RRIF comes in as taxable income.
So from an estate/inheritance perspective, dying with a large TSFA is preferable to a large RRSP/RRIF. 
I would add though that there is no guarantee that a future government won't decide to tax this golden egg. In fact I would almost bet on it.


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## milhouse (Nov 16, 2016)

I think generally speaking, one would want to use up your TFSA account last because it offers tax sheltered growth (vs non-registered accounts) and has the most flexibility (vs RRSP/RRIF/Pension equivalents with min and sometimes max withdrawal limits). From a practical perspective, some may want to use their TFSA in conjunction with their regular base RRSP/RIF withdrawals to hedge against irregular spends: car purchase, house repairs, big trips, etc to keep within tax brackets if you don't keep a large cash stash in an HISA.


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## Eclectic12 (Oct 20, 2010)

latebuyer said:


> ... I thought you could transfer a security from a rrif to a tfsa. Is that not useful?


Possibly ... the security would have to be one that one wants to keep, longer term with confidence it will keep growth. 

The risk is that the transfer happens at a high price. This means a high income to report/be taxed and a high amount of TFSA contribution room being used up by the transfer. Should the security then crash - one will have used up their contribution room for little benefit.

The advantage is that if keeps growing, it will be tax free. There is another advantage in that should you suspect a crash is coming, selling in a TFSA is not a taxable event like selling in a taxable account.




latebuyer said:


> Thanks maybe i'm confused.


Since you mention TFSA value growth in the first post in a way that suggests RRIF money can be sheltered - I suspect the conversion of withdrawal amounts to added contribution room is being confused with the annual allotment that gives a net gain that RRIF dollars can use.

The problem with this idea is that for $1 withdrawn from account value, $1 is given back as contribution room. Should taxable income be able to cover everything - the potential for lost tax free growth and/or bad adjustments to investments to fund the withdrawal provide challenges to success.

Using the annual allotment to shelter RRIF money, on the other hand - is an advantage.




latebuyer said:


> ... What would the advantage be of transferring a security versus selling it? Could you transfer just a portion of the security?


A couple of times when I was short of cash but had taxable investments that I wanted to keep long term, I maxed my TFSA by transferring the shares "in-kind" to my TFSA. As part of the transfer, I was asked how many shares (so only whole shares can be transferred) as well as what price from that day's trading to make the transfer at. My discount broker does this for free.

https://www.taxtips.ca/personaltax/investing/transfersharestorrsp.htm


The annoyance I hit was for one security, I had DRIPs providing new shares from the dividends paid. The transfer was before the new shares arrived so that the taxable account went from x shares to 0 shares to 11 shares. I still had TFSA contribution room available to transfer the DRIP shares but having to do two transfers were annoying.




latebuyer said:


> ...Just thought of an advantage, if its losing money you wouldn't have to sell.


Assuming the security will recover - there is a double advantage.

The first advantage is that the low value on withdrawal from the RRIF is keeping the income to report low. The second that where the transfer to the TFSA happens quickly, there is likely to be almost no capital gain to report.

Then there's also the saving of two commissions (sell in RRIF, buy in TFSA after cash transfer).


Of course this depends on the security recovering or staying flat in the TFSA. Should it lose value from what it was transferred in for then be sold - one has destroyed contribution room without any benefit (ex. sold for a loss in a taxable account will mean a CL that can be claimed against CG). The in kind transfer is a tool that can be used but like everything else - it can help or it can hurt.


Cheers


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## Mookie (Feb 29, 2012)

If a retiree has money in RRSP/RRIF, Non Registered, and TFSA, they should draw down funds in the most tax efficient way possible. In retirement, this is generally accomplished in two ways: 


By keeping your taxable income as low as possible, but also as even as possible from year to year
By keeping your money tax sheltered as long as possible
With an RRSP/RRIF, you have some degree of control over how much taxable income you trigger each year. Depending on your circumstances, in order to accomplish #1 above, you sometimes have to trigger RRSP/RRIF income earlier than the required minimum mandatory withdrawals dictate. If some of this money is not needed currently for living expenses, then you should tax shelter it in your TFSA. In fact, it makes sense to continue contributing the annual maximum to TFSAs by moving funds annually from RRSP/RRIF and non-registered accounts for as long as you have the money to do so.

I don’t see why any retiree would ever withdraw funds from their TFSA while they still had funds in RRSP/RRIF and Non-Registered accounts.


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