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I am retired. How do I move my nonreg capital to the TFSA?

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This is not a technique for wage earners who want to use the TFSA to save for retirement, rather it is for those already retired who have significant nonreg capital in addition to RRSP/RRIF capital.

The task/problem is to migrate some of your nonreg capital to the TFSA over time, without causing the nonreg to additionally deplete as the smoothing math will normally force it to do.

There are two methods to accomplish this: avoiding smoothing (setting the start of smoothing ahead) or preserving the smoothing math (see second method). The first method is as follows....

First, determine how much nonreg is going to be moved to the TFSA (at $5000 max per year).

Say you had 50,000 in nonreg and wanted to move most of it over. Allowing for 5000 per year (the TFSA maximum), then let's say the TFSA investment would grow to $50000 over the 10 years.

Next, set the 'Start Smoothing at Age' ahead for 11 years... 1 more than 10. (if you were 60, then set the SSAA to 71)

Next, enter the 10 years of TFSA investment (-$5000 indexed) in the TFSA (far righthand) column.

Remember... we arbitrarily chose 10 years because we had $50K in nonreg and 50K/5K (where 5K is the TFSA maximum) equals 10 years.

Next, enter those same 10 amounts (-$5000 indexed) in the non-reg contribution column.

Now comes the clumsy (trial and error) part... determining how much you should be drawing from your RRSP in order to deliver a "suitable" after tax income over those initial 10 years.

You will have to eyeball these RRSP withdrawals... they must be entered as negative numbers in the RRSP contribution column.

After you compute, examine the net income for those first 10 years... it will be 'ragged' due to the fact you have set the SSAA (start smoothing at age) ahead.

You will have to manually adjust those negative RRSP contributions discretely in order to get a suitably smooth ATI. This is the clumsy part, in case you hadn't guessed.

Remember, the results will still be tax accurate, but the after tax income in those first 10 years will look ragged.

(There is another way to effect this without having to set the SSAA out ahead in time... Second method)

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