Tag: TFSA

What’s included in your “retirement bucket”?

RobHLeave a comment

My monthly retirement salary is calculated using a methodology called Variable Percentage Withdrawal, or VPW for short. You can read about the methodology over here, and you can follow an excellent real-time illustration of how it works over at https://tinyurl.com/vpwForwardTestFiniki.

Part of the “how it works” is calculating your total retirement savings on a monthly basis. For me that includes the real-time value of:

  • 5 different RRIF accounts (3 for me, 2 for my spouse)
  • 2 TFSAs (1 for each of us)
  • 3 non-registered accounts (one for me, one for my spouse, one that serves as VPW’s cash cushion)

But what’s not in it?

  • My day to day chequing accounts
  • A rainy-day savings account
  • A tax savings account
  • A short term investment account

Since I’m continually talking about what’s in my retirement portfolio (most recently here), I figured a few words of other assets I have might be helpful.

My day to day joint chequing account

This is the account my spouse and I use for day to day banking. It’s an account we’ve held at CIBC for decades. It’s the kind of account that charges no fees as long as a minimum balance is maintained. It doesn’t pay any interest on balances. I could still conceivably use it to write physical cheques, but I can’t remember the last time I used it for that. Like most day to day banking, it has inputs and outputs:

  • Inputs: RRIF payments, payments from my non-registered retirement accounts, my spouse’s salary, eTransfers
  • Outputs: Most bill payments (subscriptions, utilities, insurance, credit cards, taxes, charitable donations), eTransfers, transfers to other accounts

As I build my relationship with Wealthsimple, some of the day-to-day duties are being shared — depending on cash flow I will sometimes pay bills from Wealthsimple, and if my CIBC balance gets too high (not often, but it does happen sometimes) I will move money from CIBC to Wealthsimple since Wealthsimple pays interest and CIBC does not. And if I’m traveling in a foreign country, the Wealthsimple credit card comes into play1, and balances for this card need to be paid from a Wealthsimple account.

My rainy day savings account

Every month, without fail, I redirect some funds to my rainy day savings account2. This is a separate account that pays interest. The rainy day fund pays for unexpected (but never ending) expenses. These could be car related (major repairs), house related (renovations, repairs), or sometimes a large splurge (vacation related). There isn’t a hard and fast rule as to when to apply rainy day savings, but a good starting point is when the cash flow of the joint chequing account looks like it’s heading to dip below the threshold where bank fees start getting paid for day to day banking. I hate all banking fees. Discretionary3 spending from the rainy day account is a joint decision.

My tax savings account

Every month, without fail, I direct some funds from my chequing account to the tax savings account. As a retiree, my only income comes from

  • Monthly RRIF minimum payments, which get no special tax treatment4. It’s like income. The big difference between a RRIF paycheque and a salary paycheque is that a typical salary paycheque has tax withheld at the source, CPP payments, EI payments… A RRIF paycheque has none of that.5
  • Payouts from my non-registered accounts, which also don’t come with any withholding tax. Every payout typically6 generates a capital gain and even with a 50% tax break on capital gains, it adds up!

So yeah, there’s a good chunk of income coming in (all flowing in to my day to day chequing account) but no taxes. So to cushion the blow in April, I’ve set aside funds to pay the looming tax bill. And for simplicity, I keep this separate from other accounts so there’s no temptation to “borrow” from it or to “forget” to make a payment. Payments are automated, direct from the chequing account every month. Wealthsimple makes this sort of thing quite painless to set up. And it’s a straight savings account, paying a small amount of interest, about 50 basis points below Bank of Canada overnight rate.

Short term investment account

This is something I’ve set up after getting a small inheritance. I haven’t decided what to do with this money, but while I think about it, I have it invested in an account with a reasonable return without taking on too much risk. It’s like the rainy-day fund, but with a likely longer time horizon.

The firewall between retirement savings and everything else remains in place. But everything else is a bit more complex than you might expect at first glance!

  1. No FX fees when I use this card. One of three I carry, which I talked about lately. ↩︎
  2. There’s actually a few of these held at different providers (Wealthsimple, Simplii) at the moment; this needs to be consolidated. ↩︎
  3. Renovations that aren’t urgent, for example. ↩︎
  4. I’m ignoring the fact that if you’re over 65 (I’m not) then you can split RRIF income with your spouse however you like. Because I planned ahead, my spouse and I are both the same age, and have very nearly the same RRIF value saved up, so even once I turn 65, the splitting may not be needed. ↩︎
  5. To clarify, if you take RRIF minimum payments (as I do) then there is no withholding tax. If you take more than RRIF minimum, then there is, and the amount withheld will depend on how much above the minimum you go. Full and complete rules outlined by the CRA (prepare coffee before reading). ↩︎
  6. A lot of the things I hold in my non-registered account I have held for a long time. And since it’s mostly boring index funds (I covered what’s inside a while back), they tend to increase in value over time. ↩︎

Portfolio Optimization In Practice

RobH2 Comments

My retirement portfolio is spread across multiple brokers and multiple accounts. And although I treat the portfolio as a unified entity when it comes to asset allocation (the concept is discussed here), different accounts have different allocations. The reasons are varied, but I would rank inertia as one of the big contributors — sticking with what’s there seems like a lot less effort than the other options.

What I think in important to point out is that the portfolio is still dealing with inflows and outflows every single month:

  • I pay myself RRIF minimum from my RRIF accounts, and this usually means selling some shares of XGRO
  • If RRIF minimum isn’t sufficient for my expenses (and it hasn’t been), then I have to liquidate shares from my non-registered account.
  • I contribute to our TFSAs every month
  • Questrade gives me free money every month as a reward for shifting assets their way (see how I did it here). This money shows up in my non-registered accounts1.
  • Dividends show up every month2; every quarter there is an even bigger distribution
  • And quarterly I convert some of my AOA holdings to XGRO within my RRIF using Norbert’s Gambit3. When I do this, it reduces my US and international equity holdings and replaces it with Canadian equity4.

So given all these ins and outs, there are always opportunities to tweak the asset allocations so that they remain close to my targets.

The targets, as always, are unchanged:

  • 5% Cash (mostly ultra short-term bonds)
  • 15% bonds
  • 20% Canadian Equity
  • 36% US Equity
  • 24% International Equity

Last week, a reader’s question (please send questions or comments to comments@moneyengineer.ca) led me to take a different look at what was in each of my retirement accounts (RRIFs, TFSAs, non-registered), and this week I acted on correcting a flaw in the way the accounts were structured.

The reader was actually asking about foreign withholding tax implications since the rules are different depending on whether the asset is held in non-registered, TFSA or RRIF but after spending a lot of time looking at it, I decided that, from a tax perspective, the portfolio was actually in reasonable shape. (If you want to dive into this yourself5, you can read https://www.finiki.org/wiki/Foreign_withholding_taxes and https://pwlcapital.com/wp-content/uploads/2024/08/2017-12_Ben-Felix_WP_Asset-Location-Uncertainty.pdf).

But this study did make me realize that the small allocation I had of bonds in my TFSA was wrong-headed. Since in my planning the TFSA is the LAST place I’ll head to fund my retirement, it follows that it should have the longest-timeline investments. So, for me, that means 100% equity is the correct allocation for the TFSA accounts. So what did I do?

  • I sold the bonds in my TFSA (XSH was the ETF), and put them in my RRIF (choosing instead to use XCB, a longer-duration corporate bond fund)
  • Of course, since you can’t add money to a RRIF, something had to be sold there. XGRO was plentiful, so that’s how I funded the bond purchase. From an asset allocation perspective, selling XGRO meant that I reduced my Canadian, International and US Equity exposure at the same time.
  • To compensate, the cash I generated in my TFSA by selling XSH was used to buy a combination of XIC (Canadian Equity) and XAW (US and International equity combined). XIC was already in the TFSA6. XAW is new but gives back the US Equity and International Equity I lost by selling XGRO7.

This is how the two accounts break down now, both from an ETF and an asset-allocation perspective. (In the asset allocation charts “Income” is the nomenclature I use for “bonds” and “Cash” means actual money as well as ultra-short-term bond funds like ICSH and ZMMK).

The result is my TFSA is now 100% equity, and the lower-growth cash-generating bonds are now all in my RRIF accounts. More efficient all around!

  1. Leaving the free money as part of the retirement portfolio was a conscious decision. I could have just as easily decided to withdraw the money every month. ↩︎
  2. Both ZMMK and ICSH pay monthly. They are both featured in my ETF all-stars. ↩︎
  3. You can read about it here. ↩︎
  4. AOA is 50% US equity, 28% International equity. XGRO is 36% US Equity, 24% International Equity. ↩︎
  5. It’s not a straightforward topic. In the end, the foreign withholding tax isn’t huge but as a cheapskate, it’s noticeable and can be higher than MERs of the ETFs you hold. ↩︎
  6. XIC helps tilt the overall Canadian equity allocations in the right direction. AOA tilts it in the wrong direction. ↩︎
  7. The current numbers don’t allow me to use an XEQT/XIC combination. Over time, this will change. ↩︎

RRIF, TFSA, non-Registered…what do you do with each?

RobH1 Comment

My retirement fund is divided amongst a bunch of different accounts: RRIFs, TFSAs, non-registered. And although I present them as a monolith in my monthly updates (latest one here), I don’t treat them the same way and they have rather different things inside them.

I don’t claim to have a fully optimized portfolio; a thoughtful reader was asking me questions about tax implications of my current holdings, and I admittedly haven’t given a ton of thought to that. But I will in a future post 🙂 .

So, in other words, you’re getting my current thinking for what I hold where. It may not be ideal. But at least you see why things are the way they are.

Below you can see how my retirement funds are divided amongst my various investment vehicles. This one is accurate as of January 8, 2026, and is greatly facilitated by tracking my stuff in Google Sheets. There’s a basic template of what I use over here1.

Retirement portfolio, divided by account type, January 2026

So that’s where it’s at. How do I treat the three main segments of the pie?

RRIF

So the RRIF is clearly the largest piece of the retirement pie and will be around for some time, possibly for the rest of my life. At this point in time, I’m only taking RRIF minimum payments which are recalculated every year and are based on my age and the value of my RRIF on December 31 of the previous year.

I am taking RRIF minimum primarily because I want to avoid the hassle of spousal RRSP/RRIF attribution that I talk about here. RRIF minimum is quite a bit less than the expected return of this account given the holdings therein, mostly AOA and XGRO:

I periodically (once a quarter) shift funds from AOA to XGRO using Norbert’s Gambit2. How much? Well, at the beginning of the year, I see how much of my RRIF is in USD. I then multiply that by my RRIF age factor3, divide by four, and presto, I have a quarterly amount I should move.

All of my many RRIF accounts4 have XGRO, and on the day I make my payday calculations, I have a spreadsheet that calculates how many shares of XGRO I need to sell in each account given the current price of XGRO and the amount of CAD happens to be kicking around in a given account. In very rare circumstances, I might (as well/instead) sell AOA if I had a need for US cash5.

The small contribution of ICSH here is because I have a 5% “cash” asset allocation in my portfolio, and I needed someplace to keep this monthly income. RRIF seems as good a place as any, especially since all those monthly dividends are completely tax-free as a result.

In the coming years, the RRIF will take on more and more of my monthly spending needs. Once the attribution time period has lapsed, I’ll probably take more than RRIF minimum from here in an effort to reduce taxes for older me — once I start collecting CPP/OAS as well as RRIF payments, I could find myself in a taxation world of hurt. Making my RRIF smaller will help, but there is no free lunch. You either pay taxes while you’re alive, or your estate will pay them when you’re not.

Non-Registered Accounts

I really have two kinds of non-registered accounts in my retirement calculations, and they have very distinct usages. Let’s see the difference:

The “legacy” non-registered accounts are long-standing accounts that have grown over the years of accumulation. They are held in my name and my spouse’s name and taxed accordingly. These accounts, specifically the one in my name, account for probably 2/3 of my current income. Every time I withdraw from these accounts, I have to account for capital gains, which is fine, since the taxation treatment of capital gains is generous. You’ll also notice that this account is 100% equity. And as previously noted, the dividends thrown off these investments is not particularly noteworthy (not zero, but nothing a dividend-focused investor would get excited about). That’s why you see funds like HXDM and HXS here, to explicitly avoid dividends. This portion of my non-registered funds is targeted to eventually go to zero in the next few years, probably before I start collecting CPP. That’s a tax avoidance strategy, no idea if it will work out in my favour.

The “cash cushion” non-registered holdings are 100% in ultra-short term bond funds, which to my way of thinking, is equivalent to cash. This account exists because I use VPW as a decumulation strategy, and the cash cushion helps smooth out my monthly salary. Sometimes I add to the cash cushion (directly from my other non-registered account) and sometimes I pay myself from the cash cushion. You can read all about how it works at The Mechanics of Getting Paid in Retirement. Here I keep a bit of uninvested cash floating around in an effort to reduce the number of buys/sells I have to do here. The capital gains are quite minimal in these funds since both ICSH and ZMMK stay close to $50/share6 but it’s possible to make minor gains/losses7 depending on the exchange rate and day of month I make the purchase/sale.

TFSA

The TFSA, per the plan prepared for me by my fee-based advisor, (part of the steps I took to figure out that I had enough to retire) is the last account to decumulate. I continue to contribute to my TFSA monthly, like I have ever since TFSAs were a thing. That would be an “expense” I could cut if needed, I suppose. It tilts heavily towards equities8:

Besides XEQT, you currently see XSH, a bond fund9. This exists in order to keep my target asset allocations in line, and because I don’t really want the monthly distributions landing in a taxable account. Perhaps that holding would be better in my RRIF? There’s also XIC here, which is a Canadian equity fund, necessary to offset the heavy US equity contribution made by AOA.

  1. Over the holidays I’ve started on a new template that makes heavy use of pivot tables, which I do like quite a bit. ↩︎
  2. You can track my progress over at Tracking Norbert’s Gambit Costs with Questrade ↩︎
  3. Per https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/t4rsp-t4rif-information-returns/payments/chart-prescribed-factors.html, it’s “1 divided by (90 minus my age)” until I turn 70. ↩︎
  4. Hopefully in a week or two it will be down to five. ↩︎
  5. I do have a USD bank account (via CIBC) and a US credit card (ditto) to avoid FX charges, but my shiny new Rogers Red card also provides sufficient cashback on USD transactions to wipe out the extortionate FX rates charged by credit card companies. ↩︎
  6. Reverts to around $50 on its ex-dividend date, late in the calendar month. Except January, where ICSH doesn’t distribute at all, instead distributing twice in December. ↩︎
  7. Losses are unlikely because I trade frequently enough to fall under superficial loss rules. Best explanation of how this works at https://www.adjustedcostbase.ca/blog/what-is-the-superficial-loss-rule/ ↩︎
  8. Longer timeframe = higher risk acceptable = more equities ↩︎
  9. Here is a bit of problem. XSH is a short term bond fund; by rights, this should be a long term bond fund since the timeline of the investment is longer. Sigh. I picked this one because (a) it had corporate bonds and (b) it had a very low MER. ↩︎

News: Questrade Contest offers free money

RobHLeave a comment

Yup, it’s another promotion. Keep that gravy train going! This time, it’s a contest, so no guarantees, but the rewards are pretty nice if you happen to be so lucky.

  • $175k for your TFSA: (Ts and Cs here)
  • $50k for your RESP: (Ts and Cs here)
  • $40k for your FHSA: (Ts and Cs here)

In each case, all you need to do is to open and fund a new TFSA/RESP/FHSA account ($250), or contribute more than $250 to an existing account, or send a postcard with an essay (yes, really) before the end of the year. One entry per client, per investment vehicle. But you can only win ONE of the three prizes (shucks).

I wonder which contest will actually have the best odds? I contribute to my TFSA every month, so I guess I have a shot, too…

Death, Taxes and Estates: Part 1

RobH4 Comments

I am not a lawyer, accountant or tax expert. Your situation may be a lot different than mine. Seek professional guidance if needed.

What happens to our investments when we die? Having lost both my parents in the past 2 years, I’ve (regrettably) had a lot of exposure to the ins of outs of estates and how they work.

Being Ready for the Inevitable

Fact: we’re all going to die. Pretending this isn’t true isn’t helpful to your survivors. So there are some concrete things you should have in place before that happens.

  • Have a will. Whether DIY, software-assisted1, or prepared by a suit, just get it done — here’s a nice step-by-step guide. And if you do have one, is it up to date? Take a look.
  • Have the will name exactly one executor, with alternate executors in the event your first pick isn’t available . Hearing multiple stories from multiple sources about how much extra work and delay having joint executors causes, I cannot recommend this all-too-common approach. You’re not “playing favourites” by naming one person2.
  • Make sure your executor knows how to get a hold of the will. Be very specific, and repeat this information frequently so it’s top-of-mind.
  • Make sure your RRIFs/RRSPs/TFSAs name successors and/or beneficiaries. I covered that topic in more detail here.
  • Make sure any life insurance policies name a beneficiary
  • Make sure your workplace pension3 names a survivor4.
  • Prepare a death binder5 with all assets clearly specified — provider name, account numbers, name on the account. Is the list really long? Maybe it’s time to trim that list down. Every provider on that list will create work for your executor. So if you want to be kind, keep the list of providers small. Make sure your executor knows where to find it.
  • Have a month or two of expenses in cash that is accessible by those who survive you, like in a joint chequing account. Assets held solely in your name will be frozen when you’re dead, possibly for weeks or months.
  • Set up someone (your executor, for example) as your authorized representative with CRA. This makes dealing with taxes much easier for those that you leave behind. How? Read here.

My Situation

My parents held no real estate, and all their assets were held in DIY investments (RRIF, TFSA and non-registered accounts). They each had a will and named the other as the executor with me as the alternate. They dealt with two providers — one for their DIY investments (BMO Investorline) and one for their day-to-day banking (CIBC). So in terms of complexity I think I had it pretty easy.

Dealing with the death of the first parent

My Dad’s death was not a surprise, and because of this I was able to maximize his TFSA contributions before he died. Dad did hate paying taxes.

Although my Mom was legally the executor, I did almost all the work involved. Most providers seemed to be pretty good about dealing with me once they got confirmation from my Mom. The key documents and facts you’ll be asked for in almost every encounter are the same, so have these ready each and every time:

  • Date and place of birth of the deceased
  • Date and place of death of the deceased
  • SIN number of the deceased
  • A death certificate (this is issued by the funeral home, typically)
  • The will
  • Funeral home invoice (if applying for a death benefit)

Dealing with the bank was easy. One 30 minute meeting6 and all was sorted.

As many DIY financial services providers don’t have brick and mortar locations, high quality digital versions7 are also generally accepted. In the case of BMO Investorline, I had to visit a BMO branch8 with the documents so they could send them as “true copies”. How a provider with no affiliation with a bank does this, no idea9.

In the case of any DIY investment held in the deceased’s name — those assets get frozen upon notifying the provider. This can be problematic if one is relying on those assets to say, pay rent, or pay for funeral arrangements.

The unexpected complication arose from the non-registered joint account — it didn’t just “convert” to removing one person’s name from the account — you have to open a new, individual account, involving all the same paperwork as though you were a new client, and then transfer the joint assets “in kind” to the new account. During this time, the funds were not accessible. This is beyond annoying, but I suspect this is the same regardless of who your provider is. My mom lost access to her joint account for about 6 weeks while this was settled.

Taxes for the death of the first parent

The tax return you file for a person who has died in this scenario is called (ominously) the Final Return. A person who dies is treated as though they sold all their assets on the day of death. I did not file a T3 Return10 return for my Dad, since all the assets passed through to my Mom. If he had had non-registered assets held solely in his name, I think I would have had to.

  • For a RRIF or RRSP, this means CRA assumes you sold all the holdings on the day you died and recognized it as income11
  • For a non-registered account held solely in one name, CRA assumes you sold all the holdings on the day of death and recognized any capital gains at that time.

I was able to successfully file the Final Return for my Dad using Wealthsimple’s tax software12. The Final Return cannot be eFiled — you have to print it and send it using snail mail.

Adjustments after the death of the first parent

After my Dad died and my Mom had all the combined TFSA/RRIF assets in place, we updated her TFSA and RRIF to name me and my siblings as beneficiaries by filling out a form. This proved to be helpful in reducing the tax bill a bit when she died. More on that in a future post.

  1. “willful.” seems to be a trendy option nowadays: https://www.willful.co/ ↩︎
  2. One could argue the opposite — just give the duties to your least favourite relative as a last vengeful act ↩︎
  3. Some workplace pensions provide death benefits and/or an ongoing survivor pension, but only if you take the trouble to name a survivor in that pension. ↩︎
  4. And if you do, I’m envious 😉 ↩︎
  5. Paper is probably less trouble than trying to provide a file location/passwords, but YMMV. ↩︎
  6. Prearranged online of course. You can’t just walk into a branch to do anything these days. ↩︎
  7. You’ll get good at this workflow or go crazy trying. Take photo on phone, airdrop to laptop, compress/convert image so it can get through email… ↩︎
  8. Do NOT assume that the brokerage has anything to do with the bank with whom they share a logo. I learned this the hard way with BMO/BMO Investorline. ↩︎
  9. Maybe notarized documents? Let me know at comments@moneyengineer.ca. ↩︎
  10. AKA “Estate Return”. A person who dies becomes a new tax entity, typically named Estate of <dead person> ↩︎
  11. Which is why you name a successor for your RRIF — this tax penalty is thereby avoided ↩︎
  12. It was because Intuit Quicktax could not handle this scenario that I ended my decades-long relationship with them. ↩︎