13 thoughts on “I maxed out RRSP and TFSA now what?”

  1. Once you get into non-registered investment accounts, what do you have to do at tax time?

    Do you just receive a T5 (?) automatically like a T4 from your broker for any capital gains/interest, or do you have to do something more complicated?

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  2. Thanks for this Bob. Can you tell me if VFV.TO would incur the 15% withholding tax if held in a TFSA? It’s a TSX version of VOO (US). Also some of these ETFs have stocks that pay different types of dividends so the withholding tax isn’t on the entire dividend but only on those specific holdings. Is there a website or tool that breaks these down for ETFs? Lastly, how is the reporting on these (I use Questrade and Wealthsimple Trade), or is it already deducted from the dividend we see coming into the account?

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    • If individual international stocks – RRSP to avoid the withholding tax.
      If ETFs with international stocks – RRSP, TFSA, taxable, it doesn’t matter since the distributions you receive already has the withholding tax deducted. If you hold the ETFs in taxable account you could recover it via the foreign tax credit. However, the distributions will be taxed at your marginal tax rate.

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  3. Great read, enjoyed it as your description of US/CAN holdings in a TFSA versus a RRSP is very clear. Does this also hold true for LIRA and RRIF.?

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  4. Great summary, Bob!

    A finer detail that I learned last year is to be wary of the US companies that issue a K-1 form at tax time. These are companies that are structured as partnership interests. I think of them like the companies in Canada that issue the T5013 (Brookfield anyone?).

    K-1 companies have distribution income taxed at the maximum rate (35%) and it’s very difficult to get it back (you have to file a US tax return). Holding these in your registered account doesn’t shield you either.

    Per my understanding, and without the help of a good accountant, Canadians are probably best not buying these.

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  5. Great Blog.

    I put all my Canadian ETF’s in non-Reg. If you don’t do this you aren’t taking advantage of the preferential tax treatment on Canadian Dividends. You can earn about $55K in Canadian Eligible Dividends tax-free in Ontario! This differs from province to province.

    I hold my fixed income (Bond ETFs) in my RRSP. You wouldn’t want to put them in TFSA because they will not grow as much as equities. TFSAs are tax-free so you want to maximize growth there. RRSPs are tax-deferred. You will have to pay taxes on that money eventually.

    US Equities go into RRSP and Non-Reg. Keep in mind that if you hold US ETF’s in RRSPs, you should hold ones that are traded on US stock exchanges such as ITOT or VTI as only these are exempt from the 15% foreign withholding tax. If you hold US ETFs traded on Canadian Stock Exchange like UXX, VFV or VUN, the foreign withholding tax exemption is lost resulting in a tax drag of about 0.26% per year. To keep things simple, I now only have my US ETFs in a registered account. I’ll get the withholding tax taken off, but I get it back when I file my tax return.

    International Equities go into my TFSA because they typically have higher yields compared to US Equities and foreign dividends are fully taxable.

    Asset location strategies such as this will add between 20-30 basis points per year to your return or $2,000 – $3,000 on a $1,000,000 portfolio. If your portfolio is less than 7 figures, it may be simpler to just go with an all-in-one ETF (VBAL, VGRO, etc) for simplicity, but once you hit the 7 figure mark it starts to make a difference to split your portfolio into separate asset classes.

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