– I have a good dividend-paying stock and would like to move part of it
into a TFSA, where I have accumulated a few years of contribution room, and
the remainder into my self-directed RRSP, to which I haven’t contributed
for years. If my intention is to reinvest the money back into the same
company, but under both the TFSA and the RRSP umbrellas, am I making a
sensible move, or should I leave things as they are? I’m 60 years old and
drawing a pension. My spouse won’t retire for another five years, and we
manage well with our combined incomes for now. – Monica D.
– For starters, you don’t have to sell the stock to make the transfers. You
can contribute it in kind, assuming you have self-directed plans.
If you move the stock into either plan, it will be deemed a taxable event
by the Canada Revenue Agency, and you will be taxed on any capital gain.
The same will apply if you sell the shares. You should take that into
account before you act.
If you decide to proceed, your dividends and capital gains will be fully
sheltered in the TFSA. The RRSP will give you a tax deduction when you
contribute, but you’ll be taxed at your marginal rate when you make any
withdrawals, including on the original contribution. – Gordon Pape
is one of Canada’s best-known personal finance commentators and
investment experts. He is the publisher of
The Internet Wealth Builder and The Income Investornewsletter, which are available through the Building Wealth website.
The foregoing is for general information purposes only and is the opinion
of the writer. Securities mentioned carry risk of loss, and no guarantee of
performance is made or implied. This information is not intended to provide
specific personalized advice including, without limitation, investment,
financial, legal, accounting, or tax advice. Always seek advice from your
own financial advisor before making investment decisions.