Can you lose all your money in a TFSA?
Your holdings may be insured, but if not, it's not a risk worrying about
Q: I never thought of the TFSA as an investment, because I use my RRSP to invest. I use my TFSA as a savings account but does that mean the money isn’t protected? Could I lose all that money?
—Maria Vasilescu, Kitchener, Ont.
A: If you hold cash or GIC rates in your Tax-Free Savings Account (TFSA), it is covered by the Canada Deposit Insurance Corporation for up to $100,000 in the event that your bank fails. If the money is invested in mutual funds, ETFs or stocks, it is not covered. But that isn’t the risk I would be worrying about. Instead, focus on what types of investments you hold, regardless of whether they are in your TFSA or your RRSP. If the purpose of the TFSA money is to save money, say for a new car or a house down payment, keep it in something really low-risk like GICs or cash. If the purpose is to invest long-term for your retirement, a diversified portfolio will move up and down over time, but it isn’t likely to go to zero. Unless, perhaps, a meteor hits planet earth and then we will all have bigger problems to worry about.
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Should you take your money out of a tax free savining account with the way the stocks are doing , put it in a savings account until the stock market picks up and then put it back in your tfsa
I had the same question. Seems weird to just leave money in a TFSA when the stocks are dropping so badly. Is there a downside to just withdrawing everything into a savings account and then reinvesting when the stocks recover…hopefully by the new year??? There doesn’t seem to be a penalty and you can just recontribute it on Jan. 1.
Do cash holdings in the TFSA count against the 100K CDIC coverage limit applied to aggregate savings/chequing accounts or does it have its own 100k coverage?
From my understanding, it is not a great idea to withdraw when stocks aren’t doing great IF you think those same stocks will rebound (as long as you are in it for the long haul).
Think of it this way.
Lets say on January 1 you spend $100 on $1.00 per unit stocks (you get $100 of them – yay).
February 1st the stocks take a 25% hit and are only worth $0.75 on the dollar of what you paid (you now have 100 stocks but if you sell you only get $75.00).
You have a choice. Option A) Sell and cut your losses – get $75.00
Option B) Ride it out. Lets say stocks go up and down some, but eventually recover to where they were when you bought on October 1 of the same year. Your 100 stocks now worth $100 again – yay! Now if they go up at all, you will be making money.
If the person from Option A sees the stocks has stabilized, and buys another 100 stocks for $100… great EXCEPT – they just essentially spent $125 on those stocks (because of their earlier loss), and now need the stocks to rise to $1.25 each to break even.
Whereas, the person in Option B may actually be sitting quite pretty. Perhaps each month they kept putting $100.00 in to buy stocks when they were down. Back in February if they did that, the stocks they bought for $0.75 each have now made them some money!
This is just a simplified version – but I hope it helps some.
Can someone tell me what happens when you overcontribute to a TFSA and lose all the money? Any remedies other than the 1% per month taxes on the over contribution?
Thanks for the question Vito,
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where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
I lost 18 000 wtf what should i do in 1 year