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Thread: Putting PSA Money into TFSA and then Withdrawing it Immediately

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    Default Putting PSA Money into TFSA and then Withdrawing it Immediately

    We recently received new benefits from the company, and I wanted to make sure this made sense and there weren't any pitfalls to this idea.

    I get 10 flex day credits I can use for vacation or PSA money (on top of the vacation I already have). I now have the ability to transfer these into a TFSA through SunLife.

    Is there any reason I should NOT flex these credits into a TFSA, and then immediately pull it out? There is a $25 fee for each withdrawal, I'd do it all in one go so its a $25 charge and that's it.

    Basically, I get too much vacation and don't have enough expenses to claim everything through the PSA in a year. Since the PSA is a taxable benefit, it does not change the tax implications whether I charged enough claims over a year to drain it, or to simply take it out all in one go.

    If for some reason I need additional vacation, I can always bank OT (I earn a lot of OT).

    I do not need additional retirement savings (at least at this time) as I have a defined pension.

    Thoughts?

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    And they won't offer you a cash equivalent?

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    Edit* just get them to pay you cash. It's odd that they wouldn't.

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    Quote Originally Posted by benyl View Post
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    Edit* just get them to pay you cash. It's odd that they wouldn't.
    Have you ever met the government? That's not how these things work

    Edit-

    I am sure this is a loophole that they will close next year, as it defeats the purpose of a PSA. I just want to make sure my money isn't going to get magically locked somewhere.

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    Who is your TFSA with that they charge you a $25 withdrawal? You need to move that somewhere else.

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    Quote Originally Posted by roopi View Post
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    Who is your TFSA with that they charge you a $25 withdrawal? You need to move that somewhere else.
    As mentioned, its a SunLife run account. I have no choice in the matter, and I don't want to actually use the TFSA for savings/investments anyways. This is simply a way for me to withdraw all of my "Personal Spending Account" money, which is, uh, sizable to say the least.

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    Does the transfer have to be through Sunlife..? If its cash, can they just do a transfer to a Bank TFSA savings account..? Im thinking its Sunlife as they have the company coverage/investments with them, hence they might be obliged to under contract to do it through them. But no harm in asking. But the $25 is around the normal fee when transferring between institutions.

    The only downside to not doing it that way really depends on the amount being paid in and your current TFSA limit.
    Just be mindful of your TFSA limit. It goes down when you put cash in, but when you take the cash out the reset happens Jan 1st.

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    Transfer to TFSA in Sunlife then do out of institution transfer to RBC and talk to RBC to initate it and tell them to cover the cost to move the cash over. They should if it's sizable.

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    Quote Originally Posted by mr2mike View Post
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    Transfer to TFSA in Sunlife then do out of institution transfer to RBC and talk to RBC to initate it and tell them to cover the cost to move the cash over. They should if it's sizable.
    I will consider this for future transactions (ie next year). Right now, the $25 is chump change.

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    May be I missed it before, never thought you are type of guy that works for government and has a DB pension.

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    Quote Originally Posted by Xtrema View Post
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    May be I missed it before, never thought you are type of guy that works for government and has a DB pension.
    Trust me, it pains me some days. But I'm also a business owner, and the majority of my friends are lefties. I've actually participated in a union protest even (when the PCs tried to wreck our pension) and have advocated for strike action before. Ya'll dun know me

    To update this, April 1st all the monies were dumped into a TFSA, chat messaged SunLife online, boom, "the cheque is in the mail".

    Very simple process. Appreciate the ideas for in the future to avoid the fees.

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    Kind of surprising that you’re not taking advantage of a tfsa, such a powerful tool. In future I would do a transfer to a tfsa trading account as not not screw up the whole “can’t recontribute till Jan 1st” thing and build up a nice little nest egg. No reason that someone around your age couldn’t be sitting on a 7 figure tfsa by retirement, and just getting a great tax free dividend yield every year without screwing up your other retirement benefits

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    Quote Originally Posted by ercchry View Post
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    Kind of surprising that you’re not taking advantage of a tfsa, such a powerful tool. In future I would do a transfer to a tfsa trading account as not not screw up the whole “can’t recontribute till Jan 1st” thing and build up a nice little nest egg. No reason that someone around your age couldn’t be sitting on a 7 figure tfsa by retirement, and just getting a great tax free dividend yield every year without screwing up your other retirement benefits
    Investing in my business right now. But TFSA is the next step for sure.

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    Once the money gets registered for TFSA, you can never contribute that amount again. It's a one time deal

    Once you take it out, you basically forfeit the TFSA contribution and wasted an opportunity to invest money and not get taxed on any profits. That's the pitfall. I'm sure the government would be more then happy you took the money out.

    It takes money to make money. If you have no money in TFSA, you won't be able to make a lot of tax free money.

    For example. you put 50k on MEG. it goes from 5 points to 10 points in 2 years. you now have 50k tax free to spend as you like (or reinvest within the TFSA). you don't have to claim it as income. It's not just a savings account, it's an opportunity you should take advantage of.
    Last edited by JudasJimmy; 04-16-2019 at 11:09 AM.

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    nvm, googled my answer
    Last edited by hrdkore; 04-16-2019 at 11:03 AM.

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    Quote Originally Posted by JudasJimmy View Post
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    Once you take it out, you basically forfeit the TFSA contribution and wasted an opportunity to invest money and not get taxed on any profits.
    * For that calendar year. If you took out 10K, come January 1, you have 10K room + the following year's contribution room (6K/yr or maybe 6.5K if the trend continues).
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    Quote Originally Posted by JudasJimmy View Post
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    Once the money gets registered for TFSA, you can never contribute that amount again. It's a one time deal

    Once you take it out, you basically forfeit the TFSA contribution and wasted an opportunity to invest money and not get taxed on any profits. That's the pitfall. I'm sure the government would be more then happy you took the money out.

    It takes money to make money. If you have no money in TFSA, you won't be able to make a lot of tax free money.

    For example. you put 50k on MEG. it goes from 5 points to 10 points in 2 years. you now have 50k tax free to spend as you like (or reinvest within the TFSA). you don't have to claim it as income. It's not just a savings account, it's an opportunity you should take advantage of.
    This isn't correct

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    Quote Originally Posted by JudasJimmy View Post
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    Once the money gets registered for TFSA, you can never contribute that amount again. It's a one time deal

    Once you take it out, you basically forfeit the TFSA contribution and wasted an opportunity to invest money and not get taxed on any profits. That's the pitfall. I'm sure the government would be more then happy you took the money out.

    It takes money to make money. If you have no money in TFSA, you won't be able to make a lot of tax free money.

    For example. you put 50k on MEG. it goes from 5 points to 10 points in 2 years. you now have 50k tax free to spend as you like (or reinvest within the TFSA). you don't have to claim it as income. It's not just a savings account, it's an opportunity you should take advantage of.
    this is not correct for a TFSA. You get your contribution room back in the next year if you do a withdrawal.

    For example if you just turned 18 this year your room will be 6000. If you deposit 6000 and turn it into 10,000 then withdraw it all this year, next year your room will be 16,000 (10k from this year + 6k new from next year).

    Your statement is accurate for RRSP though - once you withdraw from there the room is gone forever.

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    Quote Originally Posted by sabad66 View Post
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    this is not correct for a TFSA. You get your contribution room back in the next year if you do a withdrawal.

    For example if you just turned 18 this year your room will be 6000. If you deposit 6000 and turn it into 10,000 then withdraw it all this year, next year your room will be 16,000 (10k from this year + 6k new from next year).

    Your statement is accurate for RRSP though - once you withdraw from there the room is gone forever.
    I don't think this correct either. You don't get your "growed amount" back. The second year you would have $12K in room.

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    Quote Originally Posted by sabad66 View Post
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    this is not correct for a TFSA. You get your contribution room back in the next year if you do a withdrawal.

    For example if you just turned 18 this year your room will be 6000. If you deposit 6000 and turn it into 10,000 then withdraw it all this year, next year your room will be 16,000 (10k from this year + 6k new from next year).

    Your statement is accurate for RRSP though - once you withdraw from there the room is gone forever.
    Thank you. I didn't know that. I'll research next time before talking

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