It is late November. It is time for me to withdraw all the cash dividends earned in 2020 by my TFSA. I have adequate cash in my account to withdraw in advance any dividends being paid in December.
I don't like to make my last withdrawal in December. Although this is allowed, I prefer to keep December as a buffer between the last withdrawal of 2020 and the beginning of the new, fresh year of 2021.
If I don't need the money now, why make the withdrawal now? Why not wait until 2021? The money withdrawn in one year from a TFSA can be returned, recontributed, to the plan the following year. The withdrawal from one year become additional contribution headroom in the following year. It augments the $6000 of headroom added this Jan. 1st following government rules.
I want as much contribution headroom as possible to facilitate the maximum in-kind transfer from my RRIF to my TFSA. Any over-flow that I am unable to transfer to my TFSA goes to my non-registered account.
Income tax must be paid on the in-kind withdrawal but as the amount transferred meets the minimum withdrawal criteria, there is no withholding tax. The tax itself does not become due until the following year when the tax must be paid in full.
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