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Tuesday, March 3, 2015

Two contributions in kind to my TFSA at TD Waterhouse

A few days ago, Derek Foster finally gave sign of life and wrote a newsletter about the TFSA, and that we should all contribute to it, that too much people do not invest inside their TFSA. Well, it happen that I am one of these people. 

To start the year 2015, I had $23 738.83 contribution room left for my TFSA.

I even have more contribution room inside my RRSP, but I no longer want to invest inside a RRSP. First of all, RRSP is complete bullshit. You get a tax credit for the year you invest in the RRSP, but 30 years later, bad surprise, heavy tax come once its being touched, so there's no real gain. And anyway, I don't want to benefit from my money when I will be old and grey and that my whole sexy body will be hurt because of gravity. I want to benefit from my money now while my body is still fresh and shining. And for that, the TFSA is the perfect tool.

We never know when a bad luck can happen, job loss, or health problem, or whatever else. And when those things happen, we need money NOW. Not later. That's one of the biggest reason why I am against the idea of investing inside a RRSP. I do invest in the RRSP with my current job, but that's all.

So today, I listen to Derek Foster and I decided to invest inside my TFSA. I did a contribution in kind of my current investments in Exchange Income Corporation (EIF) and Firm Capital Mortgage Investment Corporation (FC) that I hold inside my non-registered account.

To make a contribution in kind - that mean to take existing investments that are from a non-registered portfolio and make them transferred to a TFSA - is really easy. You just need to call your broker, tell which stock you want to transferred, give your order and in a day or two, the investment will be inside the TFSA. The broker will ask a funky question: do you want to place the transferred for the stock at its highest or lowest level value of the day? To that, I suggest to always answer the lowest because the lowest you go, the more you have left in contribution room for the TFSA. Also, if you currently experience a capital gain on the investment you want to get transferred over the TFSA, you'll pay tax on that - that's another reason why to always answer the lowest value of the day.

With EIF, I was experiencing just a few dollars gain and for FC, it was a small capital loss.

EIF had a margin value loan of more than 1k. If you have a non-registered account with a margin, you need to make sure to have enough in cash reserve inside the non-registered portfolio to take the place of that 1k value that will be soon gone.

A contribution in kind is free of charge at TD Waterhouse.

While holding a margin link to a non-registered, stuff are always complicated, but things will go smoothly if you enjoy dealing with stress and if you are good dealing with market shit.

I guess everything had been said. lol

I had applied to a job. So far, I got a phone interview. And I also did a test. No answer yet, but I believe in my chances because I prayed God to help me.


Anonymous said...

When will you learn? Don't contribute something with a capital loss to a tfsa. You cant claim the loss. I guess you like paying taxes, because you just threw away money.

You should have sold and taken the capital loss, and then contributed the money..

Sunny said...

You are the one who understand nothing! I wanted to keep FC in my portfolio, it was a very small capital loss on FC, not even $100, no worth to sell to buy again, 2 times $9.99 fee... Actually 3 times, if you count the initial commission.

Ask your questions and maybe you won't be looking like an idiot on my blog. What do you think?

BeSmartRich said...

Haha. I laughed when you said your sexy body will be hurt because of gravity. Thanks for that! I kinda see you point not investing in RRSP if you want to benefit from your money now but RRSP can be one of the most strongest tools in investing as a Canadian as the compounding does a magic to its value over the years.

I am quite sure withdrawing RRSP when people retire would minimize unfavorable tax consequences as they would not have much income to be taxed on without regular jobs. As you said, it also reduces current tax payable by bringing down your marginal tax rate too. Just my two cents.



Anonymous said...

Isn't 2 x $9.99 less than $100?

Louis-Paul David said...

The logic for RRSP is that if your tax rate is higher now than it is when you withdraw it's a good move. Depending on your current tax rate, it can make a lot of sense.

Put money in the RRSP, get the return and invest it also. This means you have more money working for you.

Anonymous said...

Low income earners like herself, dont benefit as much from RRSPs, so the TFSA is likely the better choice.

Sunny said...

I may have a small income, but at least I am smart to hell.

Anonymous said...

Both RRSP and TFSA have their pro's and con's depends on what type of investor you are. Those who doesn't understand google it, tons of info. about them both (withholding tax, foreign stocks, etc etc...). For the one who tells her sell and re-buy instead of transferring in kind. First, as she have mentioned its a VERY SMALL capital loss, secondly there is a thing call "market volatility" that no one can predict. What if the shares she sold rebound etc etc... and now she might have to repurchase at a higher price which can be greater (loss) then her capital loss. Anyhow, you are greatly on track Sunny and RRSP can still have its benefits but not much on Canadian equity and as you have mentioned RRSP = future money vs TFSA = present money its really what as it is.


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