# A few more TFSA Qs!



## Siwash (Sep 1, 2013)

Hey folks,

I'm still trying to completely understand the TFSA before I jump in. My wife an I can contribute $51,000 today (another $11,000 by Jan 1). 

I just finished reading "The Great Canadian TFSA Race" article in Money Sense. Various investors put their money into investments of all colours (small cap, dividends, REITS, etc..). What I am trying to understand is the following:

If Investor X invests $50,000 into Company Z and parks that investment into an TFSA then that company's shares increase say 20% over 2 years, does investor X pay taxes on the capital gain if he cashes in after 2 years? 

I just read some of those stories and one guy's portfolio increased to $345,000! 


So in other words, if your investment grew that much, would you be paying a single penny in taxes if you then liquidated it?

Thanks very much and please bear with me! This is all new to me! I am just about to open a TFSA with the wife and we are trying to maximize our investment (as safely as possible while still hoping for some capital gain).


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## stardancer (Apr 26, 2009)

As long as the investment is in a TFSA, the gain is not taxable. If you cash it out (withdraw from the TFSA) you will not pay tax on the capital gain, as the gain was made within the TFSA. On the other hand, if the value of the company decreases and you sell, you get no credit for the capital loss, because it is within the TFSA.


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## Siwash (Sep 1, 2013)

stardancer said:


> As long as the investment is in a TFSA, the gain is not taxable. If you cash it out (withdraw from the TFSA) you will not pay tax on the capital gain, as the gain was made within the TFSA. On the other hand, if the value of the company decreases and you sell, you get no credit for the capital loss, because it is within the TFSA.


Great, thanks.. that's what I thought..

We are most likely just going to invest in a GIC that pays the maximum amount (3% Peoples) since this is for a future home purchase (we are renting now)

Thank you.


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## My Own Advisor (Sep 24, 2012)

@Siwash, Smart move to keep savings secure if using for a future home purchase (soon).


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## Siwash (Sep 1, 2013)

My Own Advisor said:


> @Siwash, Smart move to keep savings secure if using for a future home purchase (soon).


I know… But I hear/read stories that seem too good to be true and/or require a LOT more knowledge about investing - and they can be tempting. 

Going to play it safe and we will need tis money in 2 to 3 years for a home… We will be dipping into some index investing, though… $10,000 or so in TD e-Series in the new year with the additional $11,000 in TFSA eligibility. 

Within days, we are going to each open TFSAs with People's Trust and max that contribution out then dump the rest in a HISA (probably also Peoples or similar)

Thanks folks… this can be daunting when you're a newb like me.


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## wendi1 (Oct 2, 2013)

Moneysense should have balanced that article with people who gambled and lost (lots more, I think). 

Warren Buffet is a smart dude, "First rule of investing, don't lose any money."


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## Siwash (Sep 1, 2013)

Just read Garth Turner's blog ("Greater Fool"). Tonight's topic was TFSAs. Here's a piece of what he stated:

_"So, about a quarter of Canadians actually have made deposits, and 80% of those are in interest-bearing junk, like GICs or HISAs…No profits will be taxable, which means you are a complete fool for putting the funds into a savings vehicle paying you 2%…it should be stuffed with growth-oriented assets like equity ETFs, and not... revolting GICs…"_

http://www.greaterfool.ca/2013/11/24/crash-course/comment-page-1/#comment-272588


Thing is, my wife and I want to access that cash in 2 or 3 years, maybe 4 max. We rent now but want to buy a home. People on this forum have recommend we park HISA or GICs (at 3% from People's of example) because we need to protect and guarantee the capital. I just don;t think the ETFs he recommends are beneficial or advantageous for 2 to 4 year investment windows… Am I off base? Don't know what else we can invest in for such relatively short time. We intend to put $51K (split $25,500) of GICs into the TFSA then with the additional $11,000 come Jan 1, buy up some TD e-Series indexes. 


Now his blog comments are making me doubt this approach.. 

Thoughts?


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## Synergy (Mar 18, 2013)

^ If you need to money in 2-3 years you'd be a "fool" not to park your money in a safe / guaranteed investment! 

I think the blogger would have been referring to people with a longer term time horizon - 10+ yrs.


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## Siwash (Sep 1, 2013)

Synergy said:


> ^ If you need to money in 2-3 years you'd be a "fool" not to park your money in a safe / guaranteed investment!
> 
> I think the blogger would have been referring to people with a longer term time horizon - 10+ yrs.



That's what I thought… His retort was "are you serious…? There are all sorts of ETFs with varying degrees of risk.." So I think he understood I intend to access that cash in 2 to 4 years. Maybe I'm missing something? I suppose everyone has differing tolerance levels to risk. I don't think my wife (or I!) would want to take a chance with that cash. Even if we could make 5%, 6% even 7%. 

Thoughts?


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## OnlyMyOpinion (Sep 1, 2013)

Siwash said:


> Just read Garth Turner's blog ("Greater Fool"). Tonight's topic was TFSAs. Thoughts?


Thoughts - Garth Turner probably doesn't care as much about your money as he does in flipping you a 'bloggable' comment that keeps readers coming back. Oh gosh I see he has books for sale on his site, wonder what motivates his luminous personality.
Suggest you stick with the plan you've decided works for you, not for him.


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## Siwash (Sep 1, 2013)

OnlyMyOpinion said:


> Thoughts - Garth Turner probably doesn't care as much about your money as he does in flipping you a 'bloggable' comment that keeps readers coming back. Oh gosh I see he has books for sale on his site, wonder what motivates his luminous personality.
> Suggest you stick with the plan you've decided works for you, not for him.


I think you're right! There's time to invest…and we will be putting $11 K into index funds in the new year… Money that we won't need with long-term objectives.

And, once we do tap into that $50,000 for the home, does that mean that the TFSA then be topped up again?


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## OnlyMyOpinion (Sep 1, 2013)

Yes, withdrawn amounts can be placed back into your TSFA:
See the CRA's example at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/xmpl-eng.html#xmpl2

But note their typo, should read 2012 not 2011:
Step 2: Calculate TFSA contribution room at the beginning of 2012
Unused TFSA contribution room at the beginning of 2011 ($4,500) + Total withdrawal made in 2011 ($4,000) + 2012 TFSA dollar limit ($5,000) = TFSA contribution room at the beginning of 2012 ($13,500)


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## HaroldCrump (Jun 10, 2009)

The words _Garth Turner_ and _investment advice_ do not belong in the same sentence.
It is perfectly ok to use the TFSA for holding GICs you need in 2 - 3 years.


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## Eclectic12 (Oct 20, 2010)

Siwash said:


> ... And, once we do tap into that $50,000 for the home, does that mean that the TFSA then be topped up again?


Yes ... the key with the TFSA is that the amount withdrawn can only be added back the *following* year. (People seem to miss this for some reason).

So where I withdrew money in 2011, the amount withdrawn could only be put back on Jan 1, 2012 at the earliest.


Also - I find it useful to treat the available TFSA contribution room like balancing a chequeing account. Each Jan 1, add in the new TFSA room granted plus withdrawals from the previous year. As contributions are made, subtract them from the available TFSA contribution room. This will keep one current on what's available.


Cheers


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## Siwash (Sep 1, 2013)

HaroldCrump said:


> The words _Garth Turner_ and _investment advice_ do not belong in the same sentence.
> It is perfectly ok to use the TFSA for holding GICs you need in 2 - 3 years.



Ouch!! Haha! I've actually been reading his blog, Great Fool, pretty regularly since the summer.. I thought his advice was sound, but what do I know… 

thanks to all for the info!

Cheers


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## My Own Advisor (Sep 24, 2012)

For what's it's worth...we saved for our downpayment using HISAs. Took us 3 years.


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## Synergy (Mar 18, 2013)

Siwash said:


> That's what I thought… His retort was "are you serious…? There are all sorts of ETFs with varying degrees of risk.." So I think he understood I intend to access that cash in 2 to 4 years. Maybe I'm missing something? I suppose everyone has differing tolerance levels to risk. I don't think my wife (or I!) would want to take a chance with that cash. Even if we could make 5%, 6% even 7%.
> 
> Thoughts?


The blogger is correct - there are all sorts of ETF's with varying degrees of risk. However, the question is; do you want to take on *any RISK* with money you'll need in 2-3 yrs for a measely few percentage pts on a relatively small amount of money - over a relatively short period of time. Do the math, way the risks. Personally I'd opt for a *guaranteed / no RISk* investment in such a situation, but there are others that will roll the dice and try their luck. Do you feel lucky


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## Siwash (Sep 1, 2013)

Synergy said:


> The blogger is correct - there are all sorts of ETF's with varying degrees of risk. However, the question is; do you want to take on *any RISK* with money you'll need in 2-3 yrs for a measely few percentage pts on a relatively small amount of money - over a relatively short period of time. Do the math, way the risks. Personally I'd opt for a *guaranteed / no RISk* investment in such a situation, but there are others that will roll the dice and try their luck. Do you feel lucky


I'm with you… I am taking the safe route… just like to weigh all options and learn… 

People's Trust has a 3% TFSA. Not bad… their 1-year GIC is 2.1% - not bad either.. we'll add a few thousand bucks to our cash… in 3 years.. 50 K in TFSA and 50 K in the GIC.


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## heyjude (May 16, 2009)

Siwash said:


> I'm with you… I am taking the safe route… just like to weigh all options and learn…
> 
> *People's Trust has a 3% TFSA.* Not bad… their 1-year GIC is 2.1% - not bad either.. we'll add a few thousand bucks to our cash… in 3 years.. 50 K in TFSA and 50 K in the GIC.


What is a 3% TFSA? Is it a GIC within a TFSA? 

The TFSA is the type of account, the GIC (or HISA, or fund, or whatever) is the security within the account.


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## Eclectic12 (Oct 20, 2010)

heyjude said:


> What is a 3% TFSA? Is it a GIC within a TFSA?
> 
> The TFSA is the type of account, the GIC (or HISA, or fund, or whatever) is the security within the account.


This link suggests it is a HISA, with interest paid monthly:
https://www.peoplestrust.com/high-interest-accounts/savings-accounts/tax-free-saving-account/

The "today's rate" is empty at the moment so I couldn't confirm that it is still at 3%.


Cheers


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## heyjude (May 16, 2009)

Eclectic12 said:


> This link suggests it is a HISA, with interest paid monthly:
> https://www.peoplestrust.com/high-interest-accounts/savings-accounts/tax-free-saving-account/
> 
> The "today's rate" is empty at the moment so I couldn't confirm that it is still at 3%.
> ...


I checked the link too, before posting. In general, if the attractive rate is not posted on the website, it is probably no longer available.


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## Siwash (Sep 1, 2013)

heyjude said:


> I checked the link too, before posting. In general, if the attractive rate is not posted on the website, it is probably no longer available.


Geez, as of just the other day (maybe Sunday!) 3% was being offered…


Oh well… my luck..


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## Siwash (Sep 1, 2013)

Eclectic12 said:


> This link suggests it is a HISA, with interest paid monthly:
> https://www.peoplestrust.com/high-interest-accounts/savings-accounts/tax-free-saving-account/
> 
> The "today's rate" is empty at the moment so I couldn't confirm that it is still at 3%.
> ...


It might still be available! If you click on the link to start the account, this is what appears in the interest box (3%)


https://forms.peoplestrust.com/purchaseadeposit/?tfsa


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## heyjude (May 16, 2009)

If that's true, it's a great rate for a HISA and I would jump at it.


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## Siwash (Sep 1, 2013)

heyjude said:


> If that's true, it's a great rate for a HISA and I would jump at it.



Emailed them today… It's a variable rate and can change at any time without out notice.

Still, will be going for it… Application is an online process… makes me a bit nervous as I've always only dealt with the big banks...


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## liquidfinance (Jan 28, 2011)

Siwash said:


> It might still be available! If you click on the link to start the account, this is what appears in the interest box (3%)
> 
> 
> https://forms.peoplestrust.com/purchaseadeposit/?tfsa



I just checked and under "Today's Rates" They are still quoting 3%


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