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Topic: TFSA--- Dividend income

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Author Message

Michael Krys
Wed Dec 14, 2016 12:09 pm

My wife and I are both retired seniors. The plan is to maximize our TFSA's (51 K) , then create an income producing stream in each TFSA. This would be an added income source to our pensions. And tax free. The dividend withdrawal would be made in the latter part of December of each year. Monies would be put into the TFSA's in January to "top" them off.
This would give us tax free added income and capital growth.
Does anyone have any ideas on this scenario?

Doug Stone
Tue Dec 20, 2016 1:00 am

What you describe does not seem to make sense. Why would you take money out of your TFSA in December only to put it back again in January? With total accumulated TFSA contribution room at $52k as of Jan 1, 2017, it will be a number of years before dividend income in the TFSA can be expected to exceed the next year's contribution room. You might want to talk to a financial advisor to review what you are trying to do and how to get there.

Michael Krys
Tue Dec 20, 2016 10:28 am

You are right. Shortsighted of me. I shall consider a financial advisor.....but am not holding my breathe. I would much rather take my time, read more, and do it myself.
I think I shall just withdraw annually, and not max out the TFSA.

Doug Stone
Wed Dec 21, 2016 1:04 am

It sounds as though you are concerned about your income. If this is the case then the solution seems straightforward: you have an income stream from which you were going to "top off" your TFSA; spend what you need and contribute the rest to your TFSA, along with any capital that is currently not tax sheltered (the initial max-out TFSA contribution you mentioned). Then you maximize your tax free growth on the money you don't need to fund your lifestyle.

A trickier question is likely to be what to invest in. Since you sound as though you are relatively new to the game, be very careful with that decision!

Michael Krys
Wed Dec 21, 2016 10:49 pm

Yes, I am new to this particular game.Thats why I have subscribed to services like this and am educating myself. Thankfully there are people like yourself who are willing to help with answers and recommends.
Thanks again and Best of the Season to you and yours

Mike Cooney
Tue Jan 3, 2017 12:39 am

Dividend income outside TFSA is almost tax free depending on income, if less than 45,000 the dividend tax credit will reduce taxes on dividend to zero.

My dividend income is in a NON registered account.
TFSA is made up of ETF for growth.

Curtis Tugnum
Tue Feb 7, 2017 11:53 am

Mike, reading your response, it seems to infer there is a tax disadvantage to receiving dividend income from within a TFSA vis a vis the same source held outside a TFSA. Please take a moment to clarify, as it directly impacts my decisions.. and likely others as well.

John Russell
Thu Mar 2, 2017 6:38 pm

I too am retired. I really don't know what you should do. But I can tell you what I do. In late February or early March I check in with My Account at the CRA to verify my contribution room. Then I make my contribution ($5,500 plus all previous withdrawals). I make my security purchase. The purchase usually doesn't use up my whole contribution, so after the transaction settles (3 days) I withdraw all the cash. Then I periodically withdraw the income generated by the securities. These withdrawals get added back to the following year's contribution.

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