No.RRSPs and TSFA are accounted separately, and a withdrawal from one, will be accounted as a withdrawal, no matter if it is used to make a deposit in a TSFA, or vice-versa.There are some exceptions, but none apply to your example: Transfers from and to TSFAs; and similarly, from and to an RRSPs, can be made such that the transfer is not accounted either as withdrawal or a deposit.When closing an RESP, the residual interests can be moved to an RRSP without penalty, provided you had some contribution room left.Withdrawal without penalty can be made from an RRSP for the purpose of returning to university or for buying a house.
Transfers between TSFAs and RRSPs are not allowed, because they are not intended for the same purpose, and as so don’t provide the same tax benefits.RRSPs are intended for retirement.As such, once money is contributed, you cannot withdraw it until then, without paying a penalty.
That is a significant inconvenience.However, in exchange, you get a big benefit: the ability to substract from your RRSP contributions from your taxable income.In other words, any fraction of your income you chose to divert to an RRSP instead of spending it, is going to be tax-exempt.
* TSFAs are much more lightweight.They do not provide any direct benefit when you contribute to it, so your contributions to TSFAs are taxable, just like any other bank account.The only special thing they do is that the interest and yield it accrues is not taxable, contrary to ordinary savings account.
That’s nice, but it’s not a lot.But you have no restrictions ont when and how much money you can withdraw.So, it’s a much lighter system, intended for medium-term savings.
Thus, allowing transfers from the “more restrictive” system to the “less restrictive”, would make no sense, as it would break the logic of the system.As for transfers in the opposite direction, they make sense, but the restrictions on TSFAs are already light enough that it wouldn’t make much sense to create a special mechanism for TSFA -> RRSP transfers.So these transfers can be done, but as a withdrawal from the first followed by a deposit in the second.
* It’s actually a little bit more complex than that.Income put in RRSPs is not tax-exempt, but tax deffered.It will be taxed… When you withdraw it from the account.
(Instead of the year it was earned.)The intent is that you withdraw it when you retire, but it can be whenever you want: You could withdraw from your RRSP if you lose your job and need to pay the bills, or to make a big purchase.It’s just that most of the time, the downside of that decision are bigger than the upsides: When you withdraw from an RRSP, the amount withdrawn is added to that year’s income.
If you’re at the top of your career, with already a big salary income, you’re in a high tax bracket, and your withdrawals are going to be heavily taxed.On the contrary, once in retirement, your income is usually low, such that your withdrawals are going to be taxed at a much lower rate.So, for big purchase, it makes little sense to withdraw from an RRSP, as this withdrawal is going to be heavily taxed.There is an exception, as mentioned earlier: There are special rules that allow you to withdraw from your RRSP to buy a house or to return to university, provided the amount withdrawn if refunded within the following ~15 years in equal yearly instalments.In case of bankruptcy, money in an RRSP cannot be taken by your creditors, except for the contributions made in the last year.Thus, if you face economic hardship/job loss, it might very well be better to declare bankruptcy, instead of paying the bills with withdrawals from an RRSP.
It’s something that you need to discuss with your bankruptcy trustee.Finally, except in the special cases above (buying a house or returning to studies), you DO NOT recover your contribution rights to an RRSP when you make a withdrawal (contrarily to an TSFA).
You can cash out your RRSP; and pay the 25% withholding tax.Then the other 75% can be lodged in a TFSA IF you have TFSA space.When you cash out the TFSA, there will be no taxation penalties.
Converting your RRSP to cash in order to invest in TFSA is not taxation penalty free.However, there may be some taxation relief if the amount cashed out is less than your personal deductibility limit of about $12,000 annually.
No.When you remove funds from an rrsp it is taxed in the tax year in which it was removed.
Thanks for the A2A.No.In effect, you would be withdrawing the money from the RRSP.