Self-directed investing with TFSAs or RRSPs

I'm not familiar with all the options for running a self-directed investment account. I know many banks charge an annual fee that can be as much as $100 annually. 

But once the portfolio value exceeds $25,000, the annual fee is often waived. This cutoff point is not etched in stone. Pay close attention to the fee schedule when pricing out all the costs

For instance, CIBC Investor's Edge self-directed TFSA and RESP accounts have no annual administrative fee. Investor's Edge also charges $3 less than many others for each online equity trade. That may not a lot but the $3 is better in your pocket than the bank's.

I understand Questrade charges no annual administrative fee for RRSP and TFSA accounts. Familiarize yourself with the rules governing TFSAs and RRSPs. As a new investor, you may find opening a TFSA is your best option. 

The last time I checked, one could contribute up to $6000 annually to one's TFSA but there is a possibility that you can contribute much more. Read what the Motley Fool said in January of 2020:

Here’s the catch: the annual TFSA contribution limit may not apply to you. That’s because the lifetime TFSA contribution is the number that really matters.

Unused contribution room rolls over from year to year. So if you didn’t max out your contributions in past years, that room is added to this year’s maximum.

For example, if you started a TFSA today and had yet to make a single contribution, you could potentially contribute $69,500, the sum of each year’s contribution maximum since the TFSA was first launched.

So, if your finances allow, make sure to hit the 2020 contribution maximum of $6,000. But if you left contribution room in past years, you may be able to contribute even more.

The other option is an RRSP. Funds contributed to an RRSP are not subject to income tax. The tax is not waived forever but only put on hold until the funds are withdrawn. If withdrawn in retirement, your tax rate may well be lower than that paid during your working years.

When retired, you may find you need three portfolios: an RRSP, converted to an RIF at 71, plus both a TFSA and a non-registered account. I can envision situations where this could be advantageous for younger investors as well.

To recap:

• Maintain a personal budget to know the state of your finances
• Open either a TFSA or an RRSP
• Manage your saved funds with a self-directed investment account. Use the lowest-cost provider. This may be CIBC or  Questrade.

If you don't know how to check your TFSA contribution room, Wealthsimple has a clear explanation. The entire article is worth a look but here is the core of their advice.

1. Go to the CRA My Account login

2. Log in with your preferred method. If you've set up your bank as a sign-in partner, this is the simplest way to access your CRA account.

3. Under the tabbed header, navigate to "RRSP and TFSA"

4. Click "Tax-Free Savings Account (TFSA)"

5. Click "Contribution Room"

6. Click "Next" at the disclaimer

7. I understand this value does not reflect any contributions or withdrawals made in the present year.