Author Topic: TFSA interest and contribution room  (Read 1999 times)

StarswirlTheMustached

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TFSA interest and contribution room
« on: April 08, 2013, 05:40:12 PM »
It seems a simple question, but I couldn't find the answer here or on google: Does interest accrued in a TFSA count against your contribution room? I'd like to contribute the full amount, but I'd also not like to get hit with overage tax when the money grows beyond that.

I Love Cake

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Re: TFSA interest and contribution room
« Reply #1 on: April 08, 2013, 06:08:53 PM »
no it doesn't. You can deposit up to $25,500 by 2013 (if you haven't put anything in any of the previous years)

I've been doing TFSA and maxing each year and interest has no bearings on my yearly contribution

Jimbo

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Re: TFSA interest and contribution room
« Reply #2 on: April 09, 2013, 06:43:12 AM »
Hmm, that's weird. You guys talk about interests like TFSA were made for GICs or 'high'interest savings account.

Time to get on with the stock market and start talking dividends and capital gains. They both do not count against contribution ceiling and they yield something respectable.

Kazimieras

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Re: TFSA interest and contribution room
« Reply #3 on: April 09, 2013, 07:21:00 AM »
You can deposit up to $25,500 by 2013 (if you haven't put anything in any of the previous years)
A quick note that the limit is not simply $25,500 for anyone that opens a TFSA. That is the maximum contribution room had you opened a TFSA account in the first year they were available. How it works is that each year the amount you are allowed to deposit increases by $5,000 (or now $5,500 as of 2013). So if you opened one 3 years ago that would be 5k + 5k + 5.5k = 15.5k maximum.

Jimbo

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Re: TFSA interest and contribution room
« Reply #4 on: April 09, 2013, 07:27:13 AM »
Nope, that's not how it's calculated!

Who cares if you opened a TFSA or not, you are still entitled to it.

Every year where you are over 18, you are entitled to the maximum limit contribution. Assuming you were 18 when they were introduced (and you lived in Canada during that frame), then you can put in 25,500$.

Cecil

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Re: TFSA interest and contribution room
« Reply #5 on: April 09, 2013, 08:04:43 AM »
You can deposit up to $25,500 by 2013 (if you haven't put anything in any of the previous years)
A quick note that the limit is not simply $25,500 for anyone that opens a TFSA. That is the maximum contribution room had you opened a TFSA account in the first year they were available. How it works is that each year the amount you are allowed to deposit increases by $5,000 (or now $5,500 as of 2013). So if you opened one 3 years ago that would be 5k + 5k + 5.5k = 15.5k maximum.

No, it works the same way as RRSP room. You accumulate it regardless of whether you have 0 or 3 TFSA accounts.

Cecil

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Re: TFSA interest and contribution room
« Reply #6 on: April 09, 2013, 08:05:52 AM »
No, I've contributed the 5k limit in January each year, and my TFSA is now worth almost $34k. I will still have $5500 of room next year.

tomatoprincess

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Re: TFSA interest and contribution room
« Reply #7 on: April 09, 2013, 08:21:15 AM »
I heard that if you are in Cecil's position, even if you take out the 34k entirely, you can still contribute back that entirely (next year) and have the 5500 contribution room.

I couldn't find this information on the government's website, anyone know?

Posthumane

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Re: TFSA interest and contribution room
« Reply #8 on: April 09, 2013, 08:27:30 AM »
Yes, that is true tomatoprincess. I don't have a link handy at the moment, but any gains you accrue in the TFSA don't deduct from the contribution room, and any money you withdraw (including gains from previous years) adds back to your contribution room. The TFSA has this advantage over an RRSP.
2013 Savings goal met. 2014 savings goal: $100k.
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I Love Cake

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Re: TFSA interest and contribution room
« Reply #9 on: April 09, 2013, 09:11:05 AM »
You can deposit up to $25,500 by 2013 (if you haven't put anything in any of the previous years)
A quick note that the limit is not simply $25,500 for anyone that opens a TFSA. That is the maximum contribution room had you opened a TFSA account in the first year they were available. How it works is that each year the amount you are allowed to deposit increases by $5,000 (or now $5,500 as of 2013). So if you opened one 3 years ago that would be 5k + 5k + 5.5k = 15.5k maximum.


No, it works the same way as RRSP room. You accumulate it regardless of whether you have 0 or 3 TFSA accounts.

yup. You have that much room if you have never contributed.

And if you take money out then you can put it back in the NEXT calendar year (not the same year-I made this mistake but thankfully wasn't dinged with the fees)

I Love Cake

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Re: TFSA interest and contribution room
« Reply #10 on: April 09, 2013, 09:13:59 AM »
Hmm, that's weird. You guys talk about interests like TFSA were made for GICs or 'high'interest savings account.

Time to get on with the stock market and start talking dividends and capital gains. They both do not count against contribution ceiling and they yield something respectable.

Jimbo, care to shed some light? I know a TFSA can be used in the stock market (mine is all in a savings account-yup..that's right) but I am an investment DOLT. When I try to read these threads my eyes glaze over and I see dancing cake in my mind's eye.

I would love to invest in stocks that give dividends. But how does a newbie like me even start?

I have my montlhy RRSP contributions going into mutual funds. And on advise from people here I switched that from super safe to 'growth' which is aggressive. But All I did was call my bank up

So, if you can really dumb down the stocks/dividend investment talk I am all ears

Cecil

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Re: TFSA interest and contribution room
« Reply #11 on: April 09, 2013, 11:50:54 AM »
Hmm, that's weird. You guys talk about interests like TFSA were made for GICs or 'high'interest savings account.

Time to get on with the stock market and start talking dividends and capital gains. They both do not count against contribution ceiling and they yield something respectable.

Jimbo, care to shed some light? I know a TFSA can be used in the stock market (mine is all in a savings account-yup..that's right) but I am an investment DOLT. When I try to read these threads my eyes glaze over and I see dancing cake in my mind's eye.

I would love to invest in stocks that give dividends. But how does a newbie like me even start?

I have my montlhy RRSP contributions going into mutual funds. And on advise from people here I switched that from super safe to 'growth' which is aggressive. But All I did was call my bank up

So, if you can really dumb down the stocks/dividend investment talk I am all ears

I have a TFSA account with Questrade, which is an online discount brokerage. When January rolls around, I do an online bill pay from my bank account to my questrade account. The money shows up a couple days later.

Then I log into the trading website, choose the stock I want to buy (probably an index fund like VTI in my case), and figure out how many shares I can afford. Then I press the "Buy" button, and it's done. Takes less than 5 minutes.

Anything specifically you'd like more information on?
« Last Edit: April 09, 2013, 11:52:38 AM by Cecil »

I Love Cake

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Re: TFSA interest and contribution room
« Reply #12 on: April 09, 2013, 01:14:58 PM »
Hmm, that's weird. You guys talk about interests like TFSA were made for GICs or 'high'interest savings account.

Time to get on with the stock market and start talking dividends and capital gains. They both do not count against contribution ceiling and they yield something respectable.

Jimbo, care to shed some light? I know a TFSA can be used in the stock market (mine is all in a savings account-yup..that's right) but I am an investment DOLT. When I try to read these threads my eyes glaze over and I see dancing cake in my mind's eye.

I would love to invest in stocks that give dividends. But how does a newbie like me even start?

I have my montlhy RRSP contributions going into mutual funds. And on advise from people here I switched that from super safe to 'growth' which is aggressive. But All I did was call my bank up

So, if you can really dumb down the stocks/dividend investment talk I am all ears

I have a TFSA account with Questrade, which is an online discount brokerage. When January rolls around, I do an online bill pay from my bank account to my questrade account. The money shows up a couple days later.

Then I log into the trading website, choose the stock I want to buy (probably an index fund like VTI in my case), and figure out how many shares I can afford. Then I press the "Buy" button, and it's done. Takes less than 5 minutes.

Anything specifically you'd like more information on?

How much does each 'transaction' cost? Like 'brokerage' cost? I don't know if I am saying it right but the cost for someone to buy your shares and take your money

And, (OK, I'm going to sound really stupid) what is an 'index' fund? What is 'VTI'?

Is Questrade Cdn? Do you pay for your online account there? Like monthly fee? Does it operate same way as an online bank? Do they send the T3s (or T5s?) for your taxes each year?

thanks Cecil!

Jimbo

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Re: TFSA interest and contribution room
« Reply #13 on: April 09, 2013, 02:30:00 PM »
Wow Cecil, we do the same thing....

Except I do it throughout the year.... In a couple of chunks.

Questrade is great, with free buys of etfs. So no excuse not to do it. ETFs are like mutual funds (let's say...) but without the high commision charges.

So, open the TFSA with questrade or another low cost broker and buy, litterally, the whole stock market, with ETFs.


daverobev

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Re: TFSA interest and contribution room
« Reply #14 on: April 09, 2013, 02:50:44 PM »
Hmm, that's weird. You guys talk about interests like TFSA were made for GICs or 'high'interest savings account.

Time to get on with the stock market and start talking dividends and capital gains. They both do not count against contribution ceiling and they yield something respectable.

Jimbo, care to shed some light? I know a TFSA can be used in the stock market (mine is all in a savings account-yup..that's right) but I am an investment DOLT. When I try to read these threads my eyes glaze over and I see dancing cake in my mind's eye.

I would love to invest in stocks that give dividends. But how does a newbie like me even start?

I have my montlhy RRSP contributions going into mutual funds. And on advise from people here I switched that from super safe to 'growth' which is aggressive. But All I did was call my bank up

So, if you can really dumb down the stocks/dividend investment talk I am all ears

I have a TFSA account with Questrade, which is an online discount brokerage. When January rolls around, I do an online bill pay from my bank account to my questrade account. The money shows up a couple days later.

Then I log into the trading website, choose the stock I want to buy (probably an index fund like VTI in my case), and figure out how many shares I can afford. Then I press the "Buy" button, and it's done. Takes less than 5 minutes.

Anything specifically you'd like more information on?

How much does each 'transaction' cost? Like 'brokerage' cost? I don't know if I am saying it right but the cost for someone to buy your shares and take your money

And, (OK, I'm going to sound really stupid) what is an 'index' fund? What is 'VTI'?

Is Questrade Cdn? Do you pay for your online account there? Like monthly fee? Does it operate same way as an online bank? Do they send the T3s (or T5s?) for your taxes each year?

thanks Cecil!

Hi,

have a read of 'Canadian Couch Potato' - start here http://canadiancouchpotato.com/couch-potato-faq/

Basically instead of buying "one stock" you are buying a thing that contains a lot of stocks. The fund tracks an index. Basically it protects you from buying.. Enron. And losing it all. The large index funds rebalance (ie, if a company gets big, it gets more weight in the index) quarterly or twice a year... it just makes life easy, basically.

I Love Cake

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Re: TFSA interest and contribution room
« Reply #15 on: April 09, 2013, 06:16:39 PM »
Hmm, that's weird. You guys talk about interests like TFSA were made for GICs or 'high'interest savings account.

Time to get on with the stock market and start talking dividends and capital gains. They both do not count against contribution ceiling and they yield something respectable.

Jimbo, care to shed some light? I know a TFSA can be used in the stock market (mine is all in a savings account-yup..that's right) but I am an investment DOLT. When I try to read these threads my eyes glaze over and I see dancing cake in my mind's eye.

I would love to invest in stocks that give dividends. But how does a newbie like me even start?

I have my montlhy RRSP contributions going into mutual funds. And on advise from people here I switched that from super safe to 'growth' which is aggressive. But All I did was call my bank up

So, if you can really dumb down the stocks/dividend investment talk I am all ears

I have a TFSA account with Questrade, which is an online discount brokerage. When January rolls around, I do an online bill pay from my bank account to my questrade account. The money shows up a couple days later.

Then I log into the trading website, choose the stock I want to buy (probably an index fund like VTI in my case), and figure out how many shares I can afford. Then I press the "Buy" button, and it's done. Takes less than 5 minutes.

Anything specifically you'd like more information on?

How much does each 'transaction' cost? Like 'brokerage' cost? I don't know if I am saying it right but the cost for someone to buy your shares and take your money

And, (OK, I'm going to sound really stupid) what is an 'index' fund? What is 'VTI'?

Is Questrade Cdn? Do you pay for your online account there? Like monthly fee? Does it operate same way as an online bank? Do they send the T3s (or T5s?) for your taxes each year?

thanks Cecil!

Hi,

have a read of 'Canadian Couch Potato' - start here http://canadiancouchpotato.com/couch-potato-faq/

Basically instead of buying "one stock" you are buying a thing that contains a lot of stocks. The fund tracks an index. Basically it protects you from buying.. Enron. And losing it all. The large index funds rebalance (ie, if a company gets big, it gets more weight in the index) quarterly or twice a year... it just makes life easy, basically.

thank you-I will investigate. And thanks for clarification-that makes buying stocks a lot less heart palpitation inducing. Kinda like mutual funds

Cecil

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Re: TFSA interest and contribution room
« Reply #16 on: April 10, 2013, 09:53:41 AM »
Hmm, that's weird. You guys talk about interests like TFSA were made for GICs or 'high'interest savings account.

Time to get on with the stock market and start talking dividends and capital gains. They both do not count against contribution ceiling and they yield something respectable.

Jimbo, care to shed some light? I know a TFSA can be used in the stock market (mine is all in a savings account-yup..that's right) but I am an investment DOLT. When I try to read these threads my eyes glaze over and I see dancing cake in my mind's eye.

I would love to invest in stocks that give dividends. But how does a newbie like me even start?

I have my montlhy RRSP contributions going into mutual funds. And on advise from people here I switched that from super safe to 'growth' which is aggressive. But All I did was call my bank up

So, if you can really dumb down the stocks/dividend investment talk I am all ears

I have a TFSA account with Questrade, which is an online discount brokerage. When January rolls around, I do an online bill pay from my bank account to my questrade account. The money shows up a couple days later.

Then I log into the trading website, choose the stock I want to buy (probably an index fund like VTI in my case), and figure out how many shares I can afford. Then I press the "Buy" button, and it's done. Takes less than 5 minutes.

Anything specifically you'd like more information on?

How much does each 'transaction' cost? Like 'brokerage' cost? I don't know if I am saying it right but the cost for someone to buy your shares and take your money

And, (OK, I'm going to sound really stupid) what is an 'index' fund? What is 'VTI'?

Is Questrade Cdn? Do you pay for your online account there? Like monthly fee? Does it operate same way as an online bank? Do they send the T3s (or T5s?) for your taxes each year?

thanks Cecil!

They support all Canadian accounts, you can hold Canadian or US cash in your registered accounts, and buy or sell Canadian and US listed securities.

As of a couple months ago, buying ETFs is free. Selling costs $0.01 per share with a minimum commission of $5/trade. A drop in the bucket, really. No other fees.

They send me all the tax paperwork, they send me annual reports from all the companies I have shares in, etc.

An index fund is like a mutual fund, but it's listed on the stock exchange, which makes it easier to buy. "VTI" is the symbol for ETF from a company called Vanguard, and it's essentially the same as their mutual fund VTSAX, which is designed to track the value of the US stock market.

The advantage of ETFs is that their annual fees are very low. Many mutual funds charge 1-2% annually! If you have $100k invested, you're paying $1-2k every year, regardless of how well your fund does. VTI charges 0.06%.

I Love Cake

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Re: TFSA interest and contribution room
« Reply #17 on: April 10, 2013, 10:09:45 AM »
thanks Cecil-good to know. I am reading through the Couch Potato website

Kazimieras

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Re: TFSA interest and contribution room
« Reply #18 on: April 10, 2013, 10:18:17 AM »
Hmm I stand corrected. Sorry for the mistake!