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Wealth Builder
Gordon Pape writes on common-sense wealth-building strategies.

By Gordon Pape  | Friday, November 09, 2018

Q – I’m in my mid-50s and interested in selling some of my RRSP mutual funds. I’ve had them for at least 10 years. So, I think I have had them long enough to not get charged a penalty fee for selling them within a couple of years. Do they get taxed the same rate as if I had capital gains from selling stocks in a company? I also have a TFSA question: If I put $5,000 in my TFSA and buy stock that doubles in price to $10,000 and then take out the $10,000 from the TFSA, can I put $10,000 back in without a penalty? Even though the original contribution was $5,000? – Randy W.

A – Profits aren’t taxed at all within an RRSP. You only pay tax on any money you withdraw from the plan (or from a subsequent RRIF). Those withdrawals are taxed at your marginal rate at the time you withdraw. For the TFSA, yes you can contribute the $10,000 again, as long as you don’t do so in the same calendar year. The $10,000 withdrawal will be added to your contribution room in the year following your withdrawal.

Emergency fund

Q – Can you advise on emergency funds? It would be nice to have about $10,000 stowed away; however, I don’t like the idea of keeping it in cash. What are your thoughts on keeping it invested in a few large caps or ETFs with good downside protection? If a major emergency occurred, like a major market pullback, and I needed funds, would this be too risky? If so, what would you advise? – Aaron

A – The key word here is “emergency.” That means you need the money immediately, so it must be highly liquid and risk-free. That translates into cash. Even the most carefully constructed stock/ETF portfolio is not immune from a market crash. Look what happened in 2008. Everything in the market went down, including the blue chips. I understand you don’t want to hold cash. But if it’s a true emergency you need the funds for, you’ll want your money in cash or cash equivalent.

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 Investor newsletters, which are available through the Building Wealth website.

For more information on subscriptions to Gordon Pape’s newsletters, check the Building Wealth website.

Follow Gordon Pape on Twitter at and on Facebook at

Notes and Disclaimer

© 2018 by The Fund Library. All rights reserved.

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.


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