If I withdraw some cash from my TFSA this year, can I re-deposit it in a future year? | Tax Free Savings Accounts | Discussion forum

Norman1 said
With a brokerage TFSA account, one should be able to park the cash into a related ISA within the account.

For example, if it is a BMO InvestorLine TFSA account, then one should be able to put the cash into BMT104 (BMO High Interest Savings Account).  

Agreed....no reason to withdraw the cash from a TFSA and put it in a fully taxable 'HISA' when you can just put it in an ISA through your brokerage. The TDB8150 thru TD pays 2.9% and I'm assuming most others pay close to the same rate.....which is comparable to what most banks pass off as "High" interest savings accounts.

In answer to your question, yes, any amount withdrawn from a tfsa can be recontributed in a future year, i.e. it effectively gets added as future contribution room.

Yes, put the $120k back in any future year, withdrawals get added to contribution limit next year no matter your "lifetime" limit.

piggybank said

Hi Norman and Bob. Thank you for your reply. My TFSA is with wealth simple trade 
 

Does Wealth Simple not have an ISA (Investment Savings Account) you can access in your investment TFSA ❓

Most Brokerages have ISAs ... and they pay pretty good interest ❗

Dean

Maybe we need to back up for a moment.
Why do you want this money in a savings account? Is it because you anticipate needing quick access to it? Do you intend to keep it in TFSA for long term but just don't want the risk of ETF? In other words, what is your goal for this money?

Answers to these questions affect the recommendations, at least from me.

No savings rates are guaranteed to last except occasional promotional rates for short term.
If you want a guaranteed rate, you need to get a GIC. You can transfer the money you are concerned about to a financial institution which issues GICs. If transfer fees are prohibitive, you might be better off to take out the cash now and open a new TFSA at another financial institution in January. If withdrawal fees are prohibitive, why not just reinvest it where it is and put next year's contribution into another financial institution in a GIC or savings account instead? Next year's amount is likely to be $6500.
With a transfer, you retain the TFSA room provided by the interest earned continuously, but if you withdraw, you lose the room that interest gained outside the TFSA might have provided. It probably wouldn't be a large amount, but you can't get it back.

Be aware that WealthSimple is always going to want to sell you another ETF because that's the business they are in. It doesn't mean it's necessarily wrong, but it does mean you have to ask yourself if it's what you want.

Just to clarify, I only mentioned rate not being guaranteed because I thought you said earlier that this was a priority for you. Maybe I mis-read.

Thanks for the responses. I hear that you do want to be able to access this money quickly for reinvestment purposes. Therefore a GIC is not a good idea, with the possible exception of cashable GICs, which you may want to look into. I guess it depends how long you think the recession will last as the penalty for early cashing is usually high. Hubert is a bit of an exception with its one year GICs where the most you can lose is the interest from one quarter and the rates are fairly high.

Are we really talking about approx 10K, or is it your entire TFSA that you now have available? If it's only 10K, then you might as well leave it where it is. I don't think it's worth the nuisance of moving it, considering all circumstances.

If it's a larger amount and you decide to move it, you may run into minimum account fees at WealthSimple. I don't know what they do about that.

Is it an option for you to move it to a different broker? You may not want to do that. The rates mentioned earlier at BMO etc might be worth it if you don't reinvest for another year or so.

I don't think there is a simple answer to your question. We don't know how much the fund you have chosen is going to pay, as far as I know. Do we? We don't know how long the recessionary circumstances are going to last. (My guess is it will be a long one, but what do I know? And I don't know at what point your system will tell you to reinvest.)

Hopping around from one savings account to another outside of a TFSA also has its risks - although it can be a fun sport!

It may be time for you to do a little math. Consider your marginal tax bracket. If you are
receiving OAS, will it affect your OAS? In other words, how much of the money you earn outside TFSA will you lose?
Norman1 will do a better job of these calculations than I, but let's say you earn 3% outside the TFSA and lose 25% of it to taxes/clawback, leaving you with net 2.25%. On 10K, that is $225; on 100K, it is $2250. If you'd kept the money inside a TFSA, whatever interest it earned would be yours to keep PLUS all of whatever that income earned in future years. You CAN recontribute what you took out in future years but you can't do anything about the interest earned outside the TFSA except possibly use it to fund next year's new contribution.

There are a lot of unknowns in this equation but perhaps you should think about likely numbers to get a better idea of what to do.

Something else to consider is time lag if you move money out of WealthSimple. It might be difficult for you to act immediately to reinvest when you get the signal to do so, and especially if it's in another TFSA You would have to wait for money to move back to WS. It shouldn't take long if in non-registered cash but make sure you use an FI that offers chequing so that you can quickly write a cheque if needed. Hubert doesn't offer chequing.

It may well be that you are better off staying put considering your longer term commitment to the ETF strategy. You might also want to look at other brokerages for the savings options, but these rates are very much subjet to change and you probably have other reasons for wanting WS.

piggybank said
Let's say I have $10,000 in free cash in my Wealthsimple TFSA. Let's say I just purchased HSAV ETFs with that free cash. Could you kindly tell me what you think about this transaction? Was there something better I could have done, based on the context I provided in this post of mine? Thank you, Loonie, and all others. 🙂  

Going back to posts #13 and #14, the yield of the Cash ETFs will vary depending on the underlying yield of the holdings. There is no guarantee of what the yield is from day to day, month to month, year to year. It will trend in the direction the BoC overnight rate is trending. That is about as good as one will get if immediate liquidity (like a HISA) is important.

I don't know if WealthSimple Trade has buy/sell commissions on these ETFs but if it does, you have to factor that into your net yield. In a TFSA, it likely doesn't matter which of the Cash ETFs you buy albeit HSAV is easiest because I believe it does not have monthly distributions. It uses derivatives (I think) to covert interest to cap gains.

I am not fond of transfers in/out of accounts, especially registered accounts. It takes paperwork, sometimes incurs administrative costs and for sure has some 'return' leakage while funds are in transit.