In a TFSA, I hold a mutual fund that holds U. Tax-Free Savings Accounts can be great.
Most of the time, your investment returns are tax-free. Sometimes, however, you may end up paying tax—and not even notice. Blue chip stocks tend to pay dividends and U. Canadian dividends and interest are specifically tax-free in a TFSA, when earned, when withdrawn, whenever.
Non-Canadian dividends, including those paid by U. Whether you own U. Despite the similarity to U.
Not for the faint of heart: The $, TFSA and whether it’s right for you | Financial Post
Roth IRAs, the IRS apparently has better things to worry about than Canadian investment accounts. Of note is that the IRS does not levy withholding tax on U.
They respect the tax-free status of investment earnings in an RRSP.
Right now, the average dividend of the Dow Jones 30 stocks is 2. And despite the tax efficiency of Canadian stocks, the diversity of the Toronto Stock Exchange is lackluster. On that basis, I would not avoid U. You will no doubt end up with a more volatile, less diversified portfolio. And based on the historical data, your pre-tax returns may be lower as well. Start with your overall asset allocation first when deciding which investments to hold in which accounts, Stephen.
Decide how much to allocate to Canadian stocks, U. Just build your portfolio.
If you have an RRSP and a TFSA, you may be better off with your TFSA mostly or exclusively in Canadian stocks so that your RRSP and TFSA dividends are all tax-free. What if Canadian stocks go down but U.
If you have an RRSP, a TFSA and a non-registered account, you may be better off with your TFSA in U. As an example, U.
U.S. Stocks in a TFSA? [Canada] : investing
Or that any stock is likely to grow your RRSP balance and eventual tax payable more than a bond or GIC. Just start with the appropriate asset allocation overall for your investments and then aim to optimize the overall tax efficiency and plan for your eventual withdrawals. Jason Heath is a fee-only, advice-only Certified Financial Planner CFP at Objective Financial Partners Inc. He does not sell any financial products whatsoever.
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TFSA vs RRSP: Which one is Better for You? Updated for
Home Investing Investing U. How retirees can use TFSAs to save on tax On that basis, I would not avoid U. Can I reset my TFSA?