Great things you can do with your TFSA
A Tax Free Savings Account (TFSA) is far more versatile and powerful than you might think.
Now that we’re into the start of a new year (Happy New Year!) here are some great things you can do with your TFSA.
TFSA Backgrounder
The TFSA was first introduced in the 2008 federal budget.
It became available to Canadians for the 2009 calendar year – as of January 1, 2009. Launched part-way through The Great Recession (where markets collapsed significantly during 2008 triggered by a financial crisis), the account was designed as a savings account (hence the name) to encourage Canadians to save more money.
But the “savings” word in the name is very misleading, no?
Correct.
Since account introduction in 2009, adult Canadians have had a tremendous opportunity to save and grow their wealth tax-free like never before.
While this account is similar to a Registered Retirement Savings Plan (RRSP) there are some notable differences.
As with an RRSP, the TFSA is intended to help Canadians save money and plan for future expenses. The contributions you make to this tax-free account are with after-tax dollars and withdrawals are tax-free. Consider it like an RRSP account in reverse.
For savvy investors who open and use a self-directed TFSA for their investments, these investors can realize significant gains within this account. This means one of the best things about the TFSA is that there is no tax on investment income, including capital gains!
How good is that?!
Let me tell you…here is summary of many great account benefits:
- Capital gains and other investment income earned inside the account are not taxed.
- Withdrawals from the account are tax-free.
- Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, like future Old Age Security (OAS) income.
- Anything you withdraw can be re-contributed in a following year, in addition to that year’s contribution limit.
- While you cannot contribute directly as you could with an RRSP, you can give your spouse or common law partner money to put into their TFSA. Do it without any income attribution!
- TFSA assets could be transferable to the TFSA of a spouse or common-law partner upon death. More details below for you.
- The annual contribution limit is indexed to inflation in $500 increments, that happened in recent years….and more!
I’ve got my preference for which account I focus on for wealth-building purposes (related to the RRSP vs. TFSA debate, including what account I would suggest you max out your contributions to first) but let’s compare each first:
RRSP | TFSA |
| A tax-deferral plan. | A tax-free plan. |
| Contributions can be made with “before-tax” dollars as part of an employer-sponsored plan or “after-tax” dollars when a contribution is made with a financial institution. | Contributions are made with “after-tax” dollars.
|
| Contributions are tax deductible; you will get a refund roughly equal to the amount of multiplying your contribution by your tax rate. | Contributions are not tax deductible; there is no refund to be had. |
| If you don’t contribute your maximum allowable amount in any given year you can carry forward contribution room, up to your limit. | |
| If you make a withdrawal, contribution room is lost. | If you make a withdrawal, amounts withdrawn create an equal amount of contribution room you can re-contribute the following year. |
| Because contributions weren’t taxed when they were made (you got a refund), contributions and investment earnings inside the plan are taxable upon withdrawal. They are treated as income and taxed at your current tax rate. | Because contributions were taxed (there was no refund), contributions and investing earnings inside the account are tax exempt upon withdrawal. |
| Since withdrawals are treated as income, withdrawals could reduce retirement government benefits. | Withdrawals are not considered taxable income. So, government income-tested benefits and tax credits such as the GST Credit, Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) aren’t affected by withdrawals. |
| You can’t contribute to an RRSP after age of 71. Accounts must be collapsed in the 71st year. | You can contribute to a TFSA after age of 71. |
| The Summary: part of your RRSP is borrowed money (i.e., you owe the government taxation.) | The Summary: all of your TFSA is your money. |
Based on my personal investment plan, I feel the TFSA ultimately trumps the RRSP as a retirement vehicle to focus on first at any income level even though I contribute to both every year. All the money in the TFSA is mine to keep, grow and manage with no taxation withdrawal consequences.
Since inception, here are the annual and cumulative limits assuming no withdrawals over that period were made:
TFSA contribution limit 2009 to 2025:
| Year | TFSA Annual Limit | TFSA Cumulative Limit |
| 2009 | $5,000 | $5,000 |
| 2010 | $5,000 | $10,000 |
| 2011 | $5,000 | $15,000 |
| 2012 | $5,000 | $20,000 |
| 2013 | $5,500 | $25,500 |
| 2014 | $5,500 | $31,000 |
| 2015 | $10,000 | $41,000 |
| 2016 | $5,500 | $46,500 |
| 2017 | $5,500 | $52,000 |
| 2018 | $5,500 | $57,500 |
| 2019 | $6,000 | $63,500 |
| 2020 | $6,000 | $69,500 |
| 2021 | $6,000 | $75,500 |
| 2022 | $6,000 | $81,500 |
| 2023 | $6,500 | $88,000 |
| 2024 | $7,000 | $95,000 |
| 2025 | $7,000 | $102,000 |
I also know some couples who have their combined TFSA assets worth more than $400,000 in value.
Pretty impressive tax-free money!!
Q&A with Mark – What has worked for me/us over the years?
Well, we’ve bought various assets, namely Canadian stocks and ETFs over the years.
To date, we have avoided any TFSA withdrawals. Instead, like I referenced above, we use our TFSAs for owning equities and wealth-building purposes.
Q&A with Mark – What types of investments can you own inside the TFSA?
Thankfully lots!
Similar to the assets you can hold within a Registered Retirement Savings Plan (RRSP), the TFSA can also be used to help Canadians build significant wealth beyond just holding cash savings. You can own a number of different types of investments inside the TFSA:
- Cash
- Guaranteed Investment Certificates (GICs)
- Bond funds or bond ETFs
- Individual stocks
- Equity funds or equity ETFs
So, if you haven’t already thought about it, here are those great things you can do with your TFSA:
1. Save for your kids’ education
If you’ve already saved for kids’ education using a Registered Education Savings Plan (RESP) then you should know your TFSA is a great place to save even more for your kids’ education. As you know from my list above, you’ll have zero taxes on the growth within the plan and there will be no tax consequences with this account if your children choose not to go to college or university – like the RESP has.
When your kids become adults, encourage them to open a TFSA in their own name. This way they can start saving and investing tax-free as long and as much as possible.
2. Save for your short-term goals
Want to buy a new(er) PHEV or other car like we did in 2024?
Want to travel?
Want to fund some improvements in your home without going into debt?
Do it with tax-free money using your TFSA to park savings or grow savings for shorter-term expenses.
3. Fund your retirement
You may have guessed it, but this is my favourite.
My wife and I have been diligently using both TFSAs as a secondary retirement account along with our RRSP – since TFSA Day 1.
Although we’re not ready to fully retire yet, the TFSA will help us retire eventually.
Contributions to the TFSA make it the best great retirement account due to the types of investments you can hold inside this account coupled with tax-free growth – consider a bias to stocks or ETFs that hold global stocks for growth whenever in doubt.
I list those best of the best ETFs on this dedicated page:
Here are some options to consider when using the TFSA related to retirement income planning:
- If you have already reached your RRSP contribution limit – you may use your TFSA next. What I mean is, you can consider making RRSP contributions throughout the year and then using the RRSP-generated tax refund to contribute to your TFSA every spring. This way, you can grow both accounts over time!
- If you want to retire early or at least semi-retire like we plan to do in our early 50s…you may not be eligible to receive any workplace pension income or government benefits yet. You can consider using your TFSA assets to bridge the gap between early retirement and when those pension income streams start – making tax-free income withdrawals.
- If you have already reached retirement age (i.e., age 65 or so) and you’re already drawing a government or workplace pension, consider contributing to a TFSA – so you can be more tax-efficient in retirement. For example, most of you know you can’t own an RRSP past the year you turn age 71. (You have to convert it to a Registered Retirement Income Fund (RRIF) or payout annuity by the end of the year you turn 71, or take the RRSP money in cash (and pay tax on it)). Regardless of your age – you can keep your TFSA open – and keep contributing to it without any age restrictions. So, take some monies withdrawn from your RRSP or RRIF each year and put that money to work tax-free inside your TFSA. This means you are converting tax-deferred money into tax-free money to fight longevity risk.
4. Save for future, elder care or family-related costs
Who knows what the future holds.
This means beyond a general savings account a TFSA can be a great way to invest (and grow) money tax-free for future needs.
For example, say you have aging parents. If you’re not sure about their long-term healthcare costs, you can use your TFSA — or give your parents money to contribute to their TFSAs – to help cover future expenses.
5. Save for your own rainy day
Financial challenges happen from time to time. This means if you lose your job and your family income is compromised TFSA assets can help you and your family navigate any rainy day disaster with money already in your bank account.
Here are some other Q&As related to the TFSA you should know about!
Q1: Do you need earned income to contribute to a TFSA?
No. In fact, you can have your parents, spouse, partner, grandparent or other family member gift you money for your TFSA every year. Just ask them! 🙂 Again, you need to be 18 years of age or older to own an account.
Q2: Is there a deadline for TFSA contributions?
No. There is no deadline for a TFSA contribution. You just get more TFSA contribution room every year!
Q3: Where can I find out how much TFSA contribution room I have?
You can confirm your TFSA contribution room by contacting the Canada Revenue Agency (CRA). You can find it online if you are registered for CRA’s “My Account” services.
For more information, see “Where can I find my TFSA contribution room information?” at canada.ca.
I would also suggest you keep track of your own TFSA contributions – this way, if there is an issue or a discrepancy, you can discuss it with CRA or your financial institution.
Q4: What happens if I over-contribute? Is there a penalty?
Yes. CRA assesses penalties for over-contributions at a rate of 1% per month on the excess contribution.
Q5: Do investment gains in my TFSA affect my contribution room?
No. Investment income earned inside the account do not affect your TFSA contribution room. This means, if you invest wisely over time, you can potentially build significant wealth. Again, based on investing discipline I know some individuals that have over $200,000 in their TFSAs. I also know some couples who have their combined TFSA assets worth more than $400,000 in value, and growing…
Q6: Can I make withdrawas from my TFSA? What happens?
Again, TFSA withdrawals are tax-free, and you can use the money for any purpose.
As you have learned above, a nice feature is that amounts you withdraw from your TFSA can be simply replaced in a future tax year. The amount you withdrew (including gains you might have) will be added to your contribution room.
Q7: Can I have more than one TFSA?
For sure. But, you don’t get more personal contribution room. I would suggest keeping things very simple and just open one TFSA self-directed account.
The challenge with more than one TFSA is you’ll complicate your life by tracking your contributions and withdrawals. If you lose track, it’s a headache to fact-find. If you over-contribute, you’ll pay a penalty to CRA.
So, open one self-directed TFSA, focus on equities for wealth-building if you can, and run with that.
Q8: When I die, will my TFSA be taxed?
Well, if you name your spouse as the beneficiary without a “successor holder” designation — or if you name any other person or the estate as the beneficiary — the TFSA earnings from your date of death to when the estate is settled could be taxable.
Instead, consider naming an account “successor holder” designation. We set that up years ago…
As a TFSA successor holder – who can only be your spouse or partner:
- the deceased’s TFSA value is not included in their date of death/final income tax return;
- the successor holder will become the new holder of the TFSA immediately upon the deceased’s death;
- the successor holder will receive your TFSA assets, i.e. all earned income/assets up to the date of death sheltered within a TFSA account;
- all of the earned income after the date of death will remain sheltered within the TFSA (a HUGE benefit);
- after taking over ownership of the deceased’s TFSA, the successor holder can transfer all or a portion of the deceased’s TFSA account into their own existing TFSA account without impacting their TFSA contribution room; and
- after taking over ownership of the deceased’s TFSA, the successor holder can make tax-free withdrawals and make new contributions subject to their own unused TFSA contribution room limits.
That’s different than a TFSA beneficiary.
As a TFSA beneficiary:
- the beneficiary will receive the fair market value of the deceased’s TFSA account free of any income taxes;
- all of the income earned and increase in the TFSA assets values between the date of death and the date of the transfer to the beneficiary is taxable income and must be included in the beneficiary’s income tax return (a major drawback for spouses and common-law partners compared to the option above);
- beneficiaries can contribute a portion or all of the deceased’s TFSA assets up to the limit of their own unused TFSA contribution room; and
- if no beneficiary or successor holder is designated in the TFSA documents or in the deceased’s will, the TFSA assets will be paid to the deceased’s estate and disposed of in accordance with their will.
Again, consider some estate planning with your TFSA. It could be the last account you tap for tax-free income later in life after your RRSP/RRIF assets are gone and spent. You’ll read more about that in the articles below since the RRSP/RRIF is a tax liability. Best to get money out while you can in early retirement if you have other income streams.
More reading on this subject can be found here.
Great things you can do with your TFSA summary
There are many great things you can do with your TFSA, in any investing year. Inside our TFSAs we:
- max out contributions to this account, every year, and will do so again in 2025,
- we tend to buy and own only equities inside our TFSAs for long-term growth,
- we own dividend paying stocks for ever growing income, and
- we own some ETFs for extra diversificaiton.
What have we been buying inside our TFSAs?
My link above shared we’ve been buying more units of low-cost ETF XAW in recent years, since I already have a pretty robust basket of Canadian dividend paying stocks inside my RRSP and my taxable account.
XAW allows me to diversify away from Canada very easily. That trend is going to continue into 2025 and likely beyond.
In using this approach, it is my hope that our combined TFSA assets could be worth close to $500k in the coming years, as all TFSA equity assets continue to compound away uninterrupted.
With that type of wealth-building power on your side, I hope you consider investing inside your TFSA in the coming years too.
Your future self will thank you!
Thanks for reading and sharing and let me know if you have any questions on this updated post.
Mark
What did you buy inside this account, this year? What are you owning inside this account for long-term wealth building including passive income or lazy capital gains growth?
As per item 2 in the list of great things you can do with a TFSA, in October 2024, we did use some of our TFSA funds to purchase a PHEV. On January 2nd, we initiated in-kind transfers from our non-registered accounts to pay back these TFSA withdrawals, plus the $7,000 ea. additional room. Once we know the exact value of the transferred funds, we’ll use cash to top-up the TFSAs so no room goes unused. We didn’t use the non-registered funds in 2024 because the gains would have fallen in a higher tax bracket. With the gains now being realized in 2025, we can manage our other withdrawals to remain in the lower tax bracket.
If the RRSP is recognized as a tax deferral plan (as it is), then it should be appropriate to think of the TFSA as a tax pre-paid account for most people. Under the right conditions, I’m fairly sure that the RRSP can beat out the TFSA. This is where having a detailed plan can guide people to which account is best for them if they can’t fully utilize the available room each year, and even if they can, it might be beneficial to put the money into one account earlier in the year than the other.
Nice stuff, Bob.
Are you enjoying your PHEV? We like ours – since 90% of our driving is within 25-50 km of our home when we’re not walking/biking, etc.
Smart work on TFSA use for capital expenses, tax-free. I see this/hear this quite a bit.
I do see the RRSP as a tax-deferral mechanism since I have not yet paid tax on the RRSP value/growth…and I would agree with you, the RRSP can beat the TFSA as long as you always reinvest the RRSP-generated tax refund every year. It’s that simple in my book. Otherwise, you are giving up the government loan. I wrote about that in 2013 and I still feel that way.
https://www.myownadvisor.ca/managing-the-refund-well-is-the-linchpin-in-the-rrsp-vs-tfsa-debate/
Any investing plans for 2025?
All my best to you. 🙂
Mark
Hi Mark,
Yes, we do really enjoy our PHEV. We think a lot more than we used to about how much fuel we were burning every day in our pre-electric days, and with it, all the CO2 we were pumping out. Our overall driving experience feels notably better. Even with the energy cost savings, I doubt we’ll ever recover the additional cost of buying the PHEV over a gas-only vehicle, but that was never the point anyway. Perhaps in 10 years, we’ll be a few dollars ahead. We have found that below around -17°C, it quickly switches to ICE mode once we drive out of the garage. A fully electric vehicle would have its range cut by 50% in these temperatures, and that would barely get me to my sister’s and back, just over 100 km away.
On the investing front, there won’t be much happening, since we went fully ETF late last year. I feel happier now that we’ve made this move, with less fretting over the ups and downs of individual stocks. It’s also a step towards simplifying things for my wife in the event I’m hit by the proverbial bus tomorrow. I will be tilting our portfolio to dividends with XEI, not by much, but enough to maintain the dividends in the region I had them before.
All the best to you too, Mark.
Bob
Ya, we like our PHEV since while the mileage/efficiency is not as good in the winter, quite a reduction from warmer months, it’s still very good since the majority of our driving is within the city and certainly < 50 km here and there. Totally, see the same thing: colder weather it quickly switches to ICE mode once we drive out of the garage. All good, by design. We own ours outright, no car loan/car paid in cash so hopefully we don't need another vehicle for another 10-12 years. We shall see?! Yes, I was very boring on the investing front recently...not buying much but I will share more in this week's Dividend Income Update. Oh, fully ETFs now? Good for you. Individual stocks are not for everyone but my hybrid approach is still helping us realize our goals so we'll stick to it. XEI is a good income fund for sure - a nice blend of income and growth and I recall I own about 8/10 of the top-10 holdings in that one already. All my best and stay in touch in 2025! Mark
Hello mark,
I recently discovered your website and have only just begun to dig through it. A big thank you for what you do for others and hopefully, there is a lot of good that comes to people. We are all on the same journey, just at different places in time, and it is refreshing to see someone willing to help.
Too many times I have talked with people about investing and they come off like a secret agent with murky answers.
Fianacial sucsess is to be shared and not hoarded. IMHO
Your mention of the sucsessor made me check our TFSAs and again, thankyou! This oversight has been corrected and we are now protected against the taxman.
I have been happy to read of your, and your wifes, financial sucsess!
Best for 2025.and onward.
Phil
Very kind, Phil.
Yes, I believe I have something to offer all DIY investors via this site, my good, my not so good with investing/some mistakes to share, and everything in between.
Indeed, we are all on our own path and sharing can help others in many ways.
All my best to you and good news about TFSA successor holder. 🙂
Mark
Mark,
Thanks for this great post. A great source of information and timely, as I did my sell order last night on my RBF2010 in my non registered account for a subsequent transfer to our TFSA’s. Was going to ask on the foreign withholding taxes which are lost for holdings in a TFSA but see you’ve answered that also. I wish TFSA’s were an option to me at the start of my career. Happy new year.
CJ
Very kind, CJ.
Yes, I find the withholding taxes on Canadian-listed ETFs that own foreign stuff, while annoying, a small price to pay for overall, long-term convenience to be honest.
Indeed, can you imagine if these accounts were around for the last 20 or 30 years?
At the end of the day, really, I think the RRSP vs. TFSA debate is somewhat foolish. When in doubt, pick one, save hard, invest and move on.
Sure, I have my preference but regardless it doesn’t matter.
If anyone can ever invest in both, well, great. 🙂
Happy 2025 to you and your investing progress.
Stay in touch,
Mark
Quick question Mark. With XAW holding international including US companies are there any withholding taxes when held in a TFSA?
Thanks and keep up the great work . Just love your posts as I always learn so much.
Hey Rod,
Yes, with any Canadian-listed ETF like XAW, XEQT, etc. that holds some U.S. companies or U.S. ETFs inside those ETFs as holdings, there are some withholding taxes – no way to get around that in registered accounts for sure.
https://www.morningstar.ca/ca/news/254089/what-etf-investors-need-to-know-about-withholding-taxes.aspx
That said, the best place to own some U.S., international, and emerging-market stocks through ETFs is in a taxable account but that also complicates things a bit…
Thoughts on asset location?
At the end of the day, the withholding taxes paid is a small annoyance for simplicity and diversification – those needs trump the withholding taxes and tax headaches for me. 🙂
Mark
Hi Mark,
Always enjoy reading your blogs. The TFSA is a great investment account. I’ve been able to luckily bring mine up to 170K and will be withdrawing it shortly to payout my mortgage that’s soon up for renewal. Not sure how this will feel given all the years it took to build it up but I also am looking forward to being mortgage free! Plus, I’ll have a 170K contribution room to recontribute back to the account which is a great feature of the TFSA.
Hey Max, any other ways you’ve considering paying off your mortgage vs. TFSA withdrawals?
I can appreciate the allure of being mortgage free though! 🙂 Nice work.
Mark
Only through accelerated weekly payments which I’ve been doing but considering renewals rates are over 5%, I just feel it’s the right time.
Totally understand.
We should be debt-free within the year if we keep at it but balancing that and trying to max out TFSAs + RRSPs every year = not easy!
Mark
Thanks for this post. I checked the beneficiary designations on my husband and my accounts to confirm we both had “successor” designations and one was a successor and the other not. We’ve now corrected that so thank you!
Excellent stuff! A good designation to have!
Mark
We have only 9 dividend paying stocks in our TFSAs. Total value $680,000. That gives us over $36,000 in dividends. We usually take the dividends out and spend them, then replace them at the beginning of the following year with RRIF withdrawals, along with the maximum allowable contribution. Then we buy new or add to our holdings just once a year. The TFSA is the best investment vehicle we have in this country. Make good use of it.
Nice.
Just to clarify, if the total value of both TFSAs = $600k or that’s the entire portfolio value?
If so, that’s incredible…geez.
I see a lot of retirees moving RRSP/RRIF $$ out in their 60s, and whatever they don’t need, investing inside their TFSA(s). Seems very smart to me!
Mark
That is just the value of the two TFSAs. Have not disclosed entire portfolio value.
Incredible work 🙂
Mark
It’s just the value of the TFSA’s. Ended 2024 with 190,000 of total contributions, and $800,000+ in current value. It is the greatest investment vehicle we have in our country.
Phenomenal. You are more proof this is “…the greatest investment vehicle we have…”.
Have a great 2025!!
Mark
Outstanding job within your TFSAs!! That’s like an 18% compound annual return on the annual contribution limits. Fantastic!
Outstanding job within your TFSAs!! That’s like an 18% compound annual return on the annual contribution limits. Fantastic!
Thanks Henry. You have to have some good fortune to get that kind of return. I used to get my annual bonuses in PBH shares when they were on the rise. Always put them in the TFSAs. Then when I retired bought my usual better dividend payers. This was a good strategy for us because you don’t have to worry about capital gains when selling in these accounts.
Good stuff 🙂
Mark
Awesome! You also have to make smart decisions to make your own luck. Well done!
I hold 17 cdn blue chip dividend producing stocks in my TFSA approximately equally weighted that generate an average of about $650 in dividends per month. Every month I add 1/12 of the contribution limit to my dividends and then use the combined amount to purchase shares in the lowest weighting holding. This strategy forces me to buy low and adds discipline to helping me maintain a diversified portfolio
Excellent. I suspect we own many of the same stocks and I’ve simplified my holdings inside my TFSA over time. We’re at about 15 stocks inside the TFSAs (both of them now) + low-cost XAW. Pretty much on autopilot now for compounding power.
Hi Mark: That is a nice list of stocks to have but I think that Inter Pipeline Limited will now be missing from your list as it was taken over by BIPC. Thanks for straightening out the TFSA successor rules. When I made my will the last time the lawyer mentioned that it would be taxable but if I can name a successor and it isn’t taxable then all the best for the estate. I only have a few stocks in my TFSA and have put off buying more but have some cash sitting there so I should buy something this year. Again thanks for the great article on TFSA’s and now its time to get back into the vacation vibe or your wife will shoot you.
Yes, I like and own BIPC myself. Probably not as many shares as you have though!?
And, yes, I have to get off this laptop and visit with her ASAP! 🙂
Mark
Hi Mark,
I decided to try out a modified BTSX in my TFSA this year. I purchased roughly equal $ amounts of the 10 highest yielding TSX60 ex-bank stocks and then replaced the 2 bank stocks, CM & BNS, with a holding in “Hamilton Enhanced Canadian Bank ETF (HCAL)”. All dividends this year will be added to my “BMO Low Volatility US Equity ETF Fund F4 (BMO37110)” holding.
HCAL is getting a lot of attention with that yield, just be mindful that some of your money might be your own coming back? – Return of Capital? but if not, it does use leverage for sure to juice the returns.
https://hamiltonetfs.com/wp-content/uploads/2022/08/HCAL-EN-IR2022.pdf
Not a bad thing overall, just some investment risk to be mindful of!
Mark
How are things otherwise? Cheers.
Yes the 1.25x leverage they apply serves to magnify the returns which can be good or bad depending on if the return is positive or negative. To date since inception in Oct 2020 HCAL has outperformed all of the other Cdn bank ETFs. In 2021 there was no return of capital in the distribution, the breakdown was ~2% dividend and 98% capital gain. They haven’t published the 2022 breakdown yet. I realize there is a lot of 2023 left to play out but, so far, my replacing CM & BNS with HCAL has worked to my favour by about 1.7% TR. I don’t feel there is much risk in my TFSA strategy this year. Just having a bit of fun .
Overall things are kinda mixed of late. My returns continue to outperform my benchmarks in TR and my dividend growth has been decent. Heathwise things could be better. I tore my left rotator cuff in Sep 2021 while golfing of all things. I got back to near 90% thanks to physio. Then I tore my right rotator cuff in 2022. The damage was more severe with it than it was with my left shoulder and there is some permanent loss with my range of motion. End-all I’m right handed but my left arm is now my stronger arm. Thankfully there is very little pain and I plan to start golfing again soon come hell or high water.
You sound very savvy Bernie, and know the risks, all good 🙂 Not much risk as long as you’re not changing your approach too much!
Yes, 2023 investing year has lots of legs yet!
Sorry to hear about the rotator cuff(s). That’s a long journey back from what I hear from others…congrats on being almost there and getting some decent range of motion.
I will start excercising my golf swing more when home from vacation in a few days. I use this product/no affiliation at all to increase my flexibility and keep up my swing speed with the driver. That’s about 105 mph which isn’t too bad for late-40s/50-ish. 🙂
https://sklz.com/golf/golf-swing-trainer/gold-flex-trainer-48-48.html
Looking forward to the golf season already!
Mark
Mark thanks for the TFSA post, very informative, but you are on holidays. I guess that showsyour dedication to helping everybody become better investors. This year’s contribution for my wife and I are in REITS as pay outs will not be taxed as they are in non registered accounts. Keep up the good work, I have been following your posts for a long time and really enjoy them.
I try to reply to readers as much as I can – Murray. It’s fun to run the site and interact with passionate DIY investors. What can I say?
Soon, off to the plunge pool – don’t worry 🙂
All my best Murray and thanks for your kind words. It is very much appreciated.
Mark
Hi Mark, I love TFSA accounts! Sometimes we get lucky and are able to time the market well. I transferred our TFSAs from EQ to our discount broker accounts just before Covid hit. Started investing the money in March of 2020 and finished in April. I have been contributing the max since then and our combined dividend income is over $17000/year. One of the stocks I bought a lot of was CNQ, paid around $17 in March. Now I’m watching it closely, wondering when (or if) I should sell some of it and buy less cyclical dividend stocks. I could potentially increase our dividend income, but worry I will miss out on high dividend growth and special dividends. Timing is hard!
Love the TFSA for investing as well, Howard.
Incredible timing, Howard!! Geez 🙂
Well, I continue to let many of my winner run per se, like CNQ that might be going higher over time, but I try to ensure any one stock doesn’t go much higher than 5% of my entire portfolio to avoid individual stock selection risk. I suspect a bunch of juicy CNQ special dividends are coming in 2023. So, you could sell but I think if you do you will miss out on some….not advice, just give it a few months 🙂
Thinking August 2023!
https://www.cnrl.com/investors/dividends/
Cheers,
Mark
Yes, the august dividend was a nice surprise. I guess one of the reasons I am considering reducing my exposure to oil and gas is all the talk about climate change and the need to move away from burning oil and gas. This might be a good issue you could write about, how (and when) to transition our portfolio considering the pressure (by government and environmental groups) to move away from fossil fuels. I should also mention that due to the large increase in CNQ share price, it now comprises over 20% of our entire portfolio. I am a fan of Henry Mah who teaches that holding small numbers of quality dividend growth stocks is safe, and since I only hold Canadian stocks, that does limit your choices. I currently hold only 12 stocks, and like you feel that maybe 5 to 10% max for one stock would be more appropriate. So finding alternatives for oil and gas/pipelines stocks will not be easy. Maybe it’s time to look at US stocks.
Hey Howard,
Have a look at the Mark Mills video:
https://www.myownadvisor.ca/weekend-reading-more-dividend-raises-and-vacation-edition/
You’ll see that while there is some concern around oil and gas “going away” it’s not very likely to happen in our lifetimes…
Let me know your thoughts after you watch the video. It’s outstanding.
CNQ is a great company, it will go up and down in price, I hold a bit as well but it’s only 3% of my entire portfolio, but growing a bit higher as the price moves higher too…
I know Henry rather well. I wrote a foreword for one of his books. I like Henry’s approach overall but I personally like and think more diversificaiton is better for folks – most folks.
I recall Henry owns about 12 stocks. I personally find about 25-30 names to be better to avoid concentration risk but again, that’s a personal choice!
To your point, if you want to own big O&G names, in large % in your portfolio, and you want income too from those companies, there are only a handful to own: CNQ, ENB, TRP, PPL.
Thoughts?
Mark
Mark, I watched the video (it’s a long one) and even though my research indicates That Mark Mills has definite interests in the oil and gas industry, it is possible that the data he presents is accurate. So yes, the inconvenient true might be that we have to continue burning oil and gas to support the worlds need for energy. I definitely don’t want to get into any climate debate here (but it seems this winter in Ottawa has been ridiculously warm), but if it happens the “alarmists” are correct and we start to see higher frequency of extreme weather, do you think investors will start to shun big oil and gas even though we can’t live without it? Also, I worry about how our big insurance companies will do if the flooding/wild fire/wind storms do get much worse.
My stock list is as follows: ENB, CNQ, TRP, PHX, CPX, EMA, BCE, T, POW, MFC, CM, BNS. I just sold KEY due to no dividend growth for three years, I bought more BCE so no real drop in dividend income.
Hopefully the climate models are a bit aggressive, but I like to try to plan ahead with my portfolio so I don’t have to make changes in a panic.
I totally get that…plan ahead. I’m trying here too.
Ottawa has been very warm overall this winter. More to come, climate has been changing for some time, and no slowing it down now really, just my opinion. We’re past the tipping point with too many people on the planet and too many resources being used. It’s about some adaptation now IMO. Not stopping things let alone slowing things down.
Part of the reason we moved to a condo is to have a smaller environmental footprint to be honest – less waste and space.
I firmly believe we’ll have more energy solutions but not a removal of O&G. Not in my lifetime. I could be wrong.
Insurance costs will go higher, energy costs are going to go higher over time and the cost of living, generally, is going higher.
To combat that, I too own a mix purposely of energy, utilities and insurance companies. Those costs are just simply, going higher and as a consumer they will pass on those costs to clients. Just the way it goes.
So, I too, own these: ENB, CNQ, TRP, CPX, EMA, BCE, T (Telus not AT&T!) :), POW, MFC, CM, BNS.
Never owned KEY and prefer CNQ and SU as large-cap companies with the pipelines. You can look into PPL or BIPC as well but not investing advice of course!
Happy to discuss 🙂
Mark
Mark, I withdrew US$30,000 from my TFSA late December 2022 with the intention of replacing the amount in Canadian $. How does one calculate the amount available to put back in, i.e. what exchange rate does CRA want us to use? Would really appreciate your response.
Thank you for a great letter.
Adam, not advice, but withdrawals will be calculated usually by brokerages at Bank of Canada spot rates. All brokerages are not created equal however!
You already know you can hold and settle trades in U.S. dollars in your TFSA. You can also contribute and withdraw in U.S. dollars based on the brokerage. So, what will happen is equivalent Canadian dollar value that is recorded on the day of the transaction will be reported to the CRA.
When in doubt, call your brokerage and double-check the mechanics per se in how they record any tranaction in CDN $$ or USD $$ so you know the process.
I hope that helps and let me know what you find out of course!
Mark
Hello Mark, Thank you for taking the trouble to give valuable information. Much appreciated.
I followed your suggestion to contact the brokers iTRADE from Scotia and RBC-DI, Ontario branches. You asked me to let you know what I find out.
ITRADE said they would “….automatically apply the spot rate”. When asked to define that term, they simply repeated “…. well, it’s the spot rate”. I understand that to mean it’s not necessarily a fixed rate, but should fall within a tight range, and should allow a tax payer to plan contributions to registered accounts. To be prudent, perhaps one should under-contribute by a small amount to avoid problems.
RBC-DI said they apply the spot rate which should be very close to mid-rate at the moment you transfer funds. They confirmed CRA does accept that rate , that there should be no problems.
Thank you for your service which so many of us find most valuable.
All the best,
Adam
Excellent stuff, Adam. Pretty much what I thought and makes sense for the big banks.
re: spot rate.
The spot rate is essentially the real-time price / on the spot for the instant settlement regardless of when things actually settle in a few business days. So, it’s better – you know what you are getting – since price fluctuations can occur (each business day) as you know between the settlement date.
I appreciate your kind words and also your updates from brokerages – I can pay that information forward 🙂
Mark
Hi Mark! Great info and thanks for sharing! I have had a BMO Investorline Acct for years but have struggled to figure out how to add ETF’s (not really a stock guy as I don’t know enought about them) to it……it is the paperwork that I cannot seem to figure out and when I have sent messages to BMO “Help,” I have never been able to actually talk to someone but instead get some criptic message to go here and go there! The other thing I am trying to figure out is which/what ETF’s are eligible to go into TFSA (I know many offered by BMO are but i did receive a list several yrs ago that offered many non-BMO options). I have $20,000 to invest in my TFSA (have tons of room in it to do so) and would like to buy 4 x $5000 ETF’s……DRIP them and then somehow be able to add to them monthly? Is this possible? I am 59/currently on LTD benefits (likely til 65) and if so, will retire w 33 yrs of service for the BC Provincial gov’t. Thanks again and have a wonderful week!
I would call BMO InvestorLine if you have a self-directed account. They should be able to share what ETFs you could buy, including commission-free ETFs 🙂
Should current?
https://www.bmoinvestorline.com/selfDirected/pdfs/no_commission_fee_etfs_en.pdf
Any reason you need or want 4 ETFs in your TFSA? Curious? Not that it’s right or wrong – personal finance and investing is personal! 🙂
Thanks for your readership.
Mark
Hi Mark
One question no one seems to know about TFSA’s. I max my contributions every year. I now have a balance that exceeds the limit of 81,500. I actually have two TFSA’s. I have been emptying one into the other. Now combined I have contributed at year end 2022 the max
As I remove the gains from the first one, it increases the contribution room the next year. Keeping in mind I maxed the 81,500 in 2022 between the two TFSA’s, my contribution room, from the CRA web site for 2023 is 11,500. ( this years 6.5K plus 5K I took out last year). The CRA says its up to me to validate, so I am concerned that if I drop 11.5K in my TFSA this year, the 5K will be seen an over contribution. If you do the math from day one and add up my contributions they will total $ 93K. Do you know the answer?
Hi Johnny – as long as your total, personal TFSA contribution limit has not exceeded the CRA max, regardless how many TFSAs you own – you should be all good!
You can also merge TFSAs / transfer between TFSAs.
https://www.getsmarteraboutmoney.ca/invest/savings-plans/tfsas/tfsa-basics/
I personally think less accounts/less TFSAs is better. Less mistakes and less to keep track of but you might have had a great reason to keep both TFSAs – all good.
Yes, CRA implies all investing decisions are yours vs. theirs including knowing the tax implications.
You can always use the link I provided in the post to determine what CRA has on file for you for your TFSA contribution limit vs. an over contribution. I hope that helps a bit!
Mark
One important aspect of the CRA TFSA limit is that it is often out of date with respect to your contributions, leave about six months after any deposits or withdrawals before you trust the value. I was burned by this and overcontributed once, I noticed the problem and fixed it by withdrawing quickly enough that the CRA didn’t penalize me but the penalties are severe if you don’t fix the problem quickly.
Excellent points and yes, cautioned others including my parents on this recently. CRA is out of date by many months and it’s very good to keep track of such things yourself – always – just in case.
I appreciate that comment to share with others.
What are you investing in, this year?
Mark
Already transferred $7k to my TFSA today and deployed in XQQ (Nasdaq 100 ETF). I’ve been reading the TFSA Trouncers series of articles in the Globe and while the bet-the-farm on one stock is not realistic to emulate, the articles gave me a new perspective on how much you can have in your TFSA account. I calculated my TFSA would be $20k higher if I just purchased XIU and dripped every year, annoying to be beat by simplicity. I will keep my current DRIP dividend stocks (RY, NA, NTR, CM, BNS, T, TD) chugging away in the TFSA but I’m going with easing into pure growth index ETFs for any new contributions. Live and learn so trying a new approach for my TFSA from this point forward.
Zack, smart. XQQ or ZQQ is great fund/ETF to own.
I’ve also come to appreciate the simplicity with owning low-cost ETFs beyond my basket of Canadian stocks: own RY, CM, NA, BNS, CM, etc. in my portfolio for growing income. All good, I get ya.
Continued success to you in 2025. Keep me posted.
Mark
Great article Mark,
RRSP vs TFSA lots of online articles but in your opinion for someone who can’t max both of them on a yearly basis what would you think is best to max out first ? I read a lot about the yearly income determines which one an individual should choose but is there such a table or calculator that could help you to make the right choice ? part of me don’t want to over contribute to rrsp knowing that income will be taxed in retirement and if i keep both rental properties i know for sure my total income will be high , i thought about asking an accountant or perhaps a financial advisor . so yeah like to hear what you think about it .
Thanks
100% believe the TFSA should be maxed out first.
https://www.myownadvisor.ca/ill-maximize-my-tfsa-first-thanks/
Remember that TFSA income is not-income tested, you’ve already paid tax on said money; so income and withdrawals are tax-free.
I hope to update that post again soon for more reasons but it still stands true today 🙂
thanks Mark
just read your 2011 post and it makes a lot of sense and looking forward for an updated version of it too 🙂
I have a different way of handling the compounding issue. In January I make the maximum contribution—purchase securities—remove left over cash. I then periodically make withdrawals during the year. In January the following year I make the maximum contribution plus accumulated withdrawals—make my purchases and repeat.
The cash that the TFSA generates is put to work (compounding) in my non-registered account rather than sitting idle in the TFSA.
“The cash that the TFSA generates is put to work (compounding) in my non-registered account rather than sitting idle in the TFSA.”
I think that’s smart. I put my cash to work inside the TFSA every year via investing vs. cash.
Happy investing John!
I guess I didn’t explain my situation properly. My TFSA room is maxed out. It generates $308 a month. I can’t buy anything for $308, so I withdraw it to my non-registered account to pay down my margin. So you see overall I maintain a $0 cash position. (no idle cash). (You may question my use of margin, but that is a different discussion.)
I now understand John. My question would be, why not keep your $308 (per month) inside your TFSA, so when you add in 2020 TFSA room, you have potentially $6,000 + $308 and then some, to invest in new assets?
Yes, margin investing is a different discussion and animal. Do you need to do that? Leveraged investing?
I have decided to stop reinvesting my dividends in my non registered account and take my cash and transfer it into my TFSA and reinvest it there. Do you see any issue with that.
Nope, no issue here. We’re all different and nothing wrong with taking dividends as cash and being strategic with that income. All the best!
Agreed Kanwal. There are so many great benefits to the TFSA, I try and max it out each and every year.
Mark: Is there a post about what others did to get to where they are today? Maybe a post on what worked for them and what did not? and what they have invested in or hold today? What others are doing to prepare for the next correction, etc. Maybe a post that allows others to tell their journey or story?
I do have a “Retirement” page to show readers how some folks successfully invested towards their journey:
https://www.myownadvisor.ca/retirement/
Is that what you are looking for? Or something from me personally? I don’t consider myself a “success” yet until I/we realize our goals.
I can consider more stories like this from folks for sure.
Yes, That link is helpful. Thank-You!. For me – I have the knack of making money. Its very hard for me to explain – but its like a system in my brain that just knows how to make money. But – once I get the $$$$ – sometimes I run out of areas / ideas to park it or where to put it to good use. (at the moment – i have exhausted all the usual stocks / holdings). I also like keeping some of my $$$ moving at all times to avoid hits. But when in doubt – I do nothing – and this goes against who I am and what has worked for me in the past. The joy for me is being able to take risks and having it work out. Not really with stocks – because I can’t control them. But with basically anything-else. I know its a good problem to have – as money does create time but it also creates other issues for me. Don’t get me wrong – I don’t feel like I have enough $$$ yet to feel secure. (for some reason its an insecurity). Thanks again for listening to me babble. Feels good to let some stuff out! Thanks for doing what you do and one day, I might write in my story – and if I do – most of you would not believe the odds I over came or understand why I keep going.
All good Mike. Continued success to you!
Lloyd: ” I used to just go with the net worth of the portfolio.”
As were we until I discovered Income Growth investing. Watching daily prices, looking to sell if the stocks went up, then trying to buy something else and repeat. Which never generated any real income or net worth. Once we switched all that changed and over time we were able to retire with more income than we needed. Others may have gotten there with other strategies, but we stopped checking prices and only recorded the market value at yearend, just as a matter of interest. Market value or even Total Return has little no meaning to us other than a paper figure.
Yeah, I also focus on the income generated from the portfolio. I figure that’s tangible money I can spend in a few years with small risk of depleting the capital.
Just a side note. Just in the past month the market value of our TFSA has dropped by $2,000 in each account, but who should care. If one considers their TFSA as a long term investment they should ignore the price up’s and down. If one invests for the income, I’d only be concerned if the income generated by the funds dropped, which it has not in our case.
Good point. My concerns about a capital loss in a TFSA are from a 72 year old’s perspective. There is the risk that a loss may never be recouped or claimed against capital gains. Using your $2,000 example I would have already paid tax of $300 (@15%). But as you say, over the long term it wouldn’t make any difference.
John: 76 and decided long ago to stick with solid DG stocks in all our accounts. Doesn’t eliminate the chances of losses but certainly minimizes them. All stocks will drop on a correction, but as long as the Income continues or grows the price will recover.
If I worried about the daily up and downs in our portfolio, I would be a mess. Our TFSAs have dropped almost $2,500 year to date, each. Am I worried? Heck no. I know with lower stock prices I will DRIP the following stocks, at cheaper prices, and those stocks will pay more dividends next month and quarter:
Bank of Montreal (BMO)
Bell Canada (BCE) x2
Capital Power (CPX)
Enbridge (ENB)
Fortis (FTS)
H&R REIT (HR.UN)
Smart REIT (SRU.UN)
Innergex Energy (INE)
InterPipeline (IPL)
Laurentian Bank (LB)
National Bank (NA)
Power Financial (PWF)
Telus (T) x2
If the dividends are cut or reduced, then I get concerned but until then the income month after month and year after year keeps growing.
Lloyd: In our worksheet summary we show the Original Shares bought (Initial purchases and any additions), the Dividend reinvested shares and Total shares. We do this for all our holdings and calculate our Average Cost or ACB. I know its not needed for the TFSA & RRIF, but it doesn’t take any additional work and I like to see how many shares we get from our reinvestments.
Okay. It never occurred to me to show growth by number of shares. If a person said they had two shares of growth it wouldn’t sound all that impressive unless they added that it was BRK.
I have my spreadsheet calculate how much income the DRIPped shares generate on an annual basis, but I don’t count the total number of shares I get. It wasn’t until I started reading MOA that I even kept track of the income that was generated. I used to just go with the net worth of the portfolio.
I might be missing something but what is point of counting the added shares? Dollars I get, but if a stock/fund has a high price as opposed to a low price, you’re going to get less shares for the same dollar dividend.
As you know Lloyd, I focus on the income generated from my portfolio. I don’t really count my reinvested shares.
Missed the Reinvestment of dividends. With our accounts we added 210.3692 shares in mine and 282.6727 in my wifes. I love the Full Dividend reinvestment as those fraction of shares do add up. Clearly she picks better stocks than I did. In addition mine generate $4,380.76 in dividends and hers 4713.35.
Jeepers…that’s crazy. Well done. I might earn about 30-40 shares per year via reinvested dividends. You’re a machine!
Hey Cannew: Knowing you only hold 13 stocks (blue chip) – How did you get to $4700 in divs in the one TFSA? I just can’s see how you did it with those types of stocks. With the max contribution being $57,500 – you would need to have doubled your $57,500 original investment to $115K x 4% = $4600 divs.
Mike: I hold 4 stocks in my TFSA and my wife 5. The dividends are just from reinvesting and increases since inception. As an example, the 1st stock I bought in 2009 was BNS and I added the max to it for the next 4 yrs ($25,500). BNS is now generating $2.179 alone and returning me 6.04% on my invested dollars (includes the reinvestment of dividends). I don’t care what it returns on today’s price. That’s the power of Compounding and Rising dividends.
I keep telling people to stop looking at what the yield of a stock is today and projecting it into the future, but few understand the concept of investing over time and compounding.
Compounding is magical for sure. That’s a good chunk of BNS dividend income. I own enough BNS to DRIP inside the TFSA for x1 share. Hopefully adding to BNS more in the years to come.
Cannew: Very interesting and thank-you for sharing. With the TFSA’s I took a different route than you. I planned (in 2009) to only put in “growth” stocks – and each year after – continue to only focus on building the $$$ value of our plans. (not worried about collecting any divs – just yet). Because I have enough $$ in a non reg account (collecting divs) – I decided to be a little risky with the stocks I placed in the TFSAs. (looking for growth). Only recently have I sold off the growth stocks and reinvested in Div payers. Here is what ours looks like today (rounded). Mine: value $130K – $5975 Divs. Wife: value $145K – $6550 Divs. *We took two different paths that worked well for us both. But will add – that your way probably was less risky than mine and easier on the nerves.
Hi Mark! any tips on what to invest in? TFSA
I like both CDN dividend paying stocks inside the TFSA myself, that’s my bias (not a recommendation) and for those not into that, some low-cost Exchange Traded Funds. With my BMO partnership, you can save a few hundred bucks with them – opening a self-directed TFSA.
Back to you – what are your saving and investing goals? I think once you define that you’ll know better what to invest in. Plans come before products.
Ask more questions, happy to try and answer where I can.
Nice post. By far I think the tfsa is the best account for canadians. The only downside is the tax on foreign dividends. Other than that its solid.
Cheers
Rob
Thanks very much!
One way I found to hold US equities inside your TFSA and not concern yourself with the withholding tax is to hold non dividend paying US stocks such as Berkshire Hathaway B shares. Yes, you can have your cake and eat it
Very true Brian and great point. I don’t hold any ETFs or stocks that don’t pay dividends or distributions though. BRK.B is almost an index fund 🙂 Smart call.
“When your kids become adults, encourage them to open a TFSA in their own name. ”
It may be difficult to convince some kids to invest in their own TFSA at eighteen. A strategy I used is to offer to match any deposits made in their TFSAs with the stipulation that the matched funds are to be left there for the longer term.
I absolutely love the TFSA program. I’m sure they may be a downside but I can’t think of any.
Fair point Lloyd. I was lucky – my parents knew of the RRSP and encouraged me to open one up after I get my first job. It certainly takes a lot less money invested at age 20 or 25, to build wealth, than it does at age 35 or 40.
It’s great that gains inside a TFSA are tax free. The downside is that losses are fully taxed. You can reduce the possibility of losses by investing in “risk free” or low risk investments, but then your return is reduced, thus lowering taxes saved.
“The downside is that losses are fully taxed.”
There is that. I don’t usually sell much so capital losses never occurred to me. Classic example of a myopic view on my part.
Absolutely love the gains inside TFSA = tax-free 🙂 So is the growth! So, bring on dividend increases and gains!