Blessed by the Potato

Do you have cash/GICs in your TFSA? Wish it was stocks/bonds/mutual funds you were sheltering instead? Or are you invested in an account with one institution and want to move it without having to pay transfer fees? This may be a good time to withdraw from your TFSA so you can recontribute in the new year. This is known as the December Shuffle.

Any withdrawals you make from your TFSA get added back to your TFSA room the following calendar year. This makes the December Shuffle handy: you can withdraw near the end of December, wait just a few days for January to roll around, and deposit back into your TFSA at a new institution.

You can of course transfer at any point during the year you want to, but many institutions charge more for a transfer than they do for a withdrawal, which makes this strategy useful in that way. PC Financial for example, charges $50 to transfer your money out to another TFSA, but you can make (at least, AFAIK) one free withdrawal per year. And trying to withdraw and re-contribute can mean waiting a long time outside of the TFSA at other times of the year — a withdrawal in January may mean waiting almost a whole year until you can put it back in the following January.

Remember that you’ll get another $5000 of TFSA in the new year [at the time of this post; $6000 as of 2021], so be ready to contribute (and potentially re-contribute) in January.