Tuesday, November 24, 2009

Hooked up with a TFSA

Better late than never.

I'm hooked up now with one of those fancy new Tax-Free Savings Accounts. Is it saving or savings? Lemme check.

Savings. I'm picky about that kind of stuff, since so many people say "Daylight Savings Time" (wrong) instead of "Daylight Saving Time" (right).

These RRSP alternatives were announced for the start of 2009. Here we are in late November and I'm just getting on board now. Why now?

I've been reading lots of advice lately about company stock plans. On one side, some people suggest you should have no more than 10% of your net worth (or portfolio holdings, I forget) in stock of the company you work for. On the other side, there's advice that says you should have absolutely none. The logic being, you already have a ton of financial risk working for a company -- why make it worse by having your money invested in the same place?

None of the advice I've read says to keep as much as I have been keeping. My company stock stockpile is currently worth almost half as much as my entire RRSP portfolio. Ouch. I'm over-invested in my company.

Most of the advice says to take advantage of your company's matching buy-in when it comes to stock, and I've been doing so -- 25% in year 1, 33% year 2, and next year it'll be 50% free money. But the advice also says to sell your shares as soon as you can, and invest the money in something more sensibly diversified.

So, to make a long and drawn-out narrative succinct, it's occurred to me that I could sell my company stock and put it over into a plain old TFSA.

There's one thing holding me back, though. My company stock is still trading at less than what I paid. It's currently about $2 per share below my book value. I haven't done the math to figure out how much "free" stock I have, and whether that mitigates that capital loss.

The capital loss will show up anyway. And I guess I can carry that forward for another couple of years, just in case I make money on the company stock next year.

Also -- there's my greed. I'm signed up for a TFSA with ING Direct. They have a kick-start program which offers to match interest earned on contributions made before the end of 2009. But the interest rate paid on the savings account is just over 1%. Yeah, I know, times are tough, we should be grateful that our money's even around. One per cent isn't so bad. Oh, fuggit, it's piddly! My greed says "the stock will go up! Screw the 1% solution!"

So, for now, I've put 3/4 of my accumulated "emergency fund" from my usual bank into my ING TFSA.

Any financial wizzes out in the blogosphere have any insight or advice to sway my opinion?


PS -- if you use my referral to sign up for the ING TFSA or investment savings account, you get a free $25. And I get a free $25. I think both of us would like that very much. My Orange Key number is 34063495S1.


  1. If I recall correctly, you need not put your TFSA funds into a lowly savings account but could go with a GIC or mutual fund or even transfer your stocks directly (indirectly??) to your TFSA---and hold them there. Not sure if the latter idea makes sense from a capital appreciation point of view--but something to look into. Savings at 1%!!!!, not a great way to get rich

  2. True true.
    If fees weren't a concern, I'd love to have my TFSA money put into mutual funds or ETFs. But fees are a concern. Given the amounts that're being handled, fees could quickly eat up any gains made.

    I could transfer the stocks 'in kind', but I'd still be in the same position of holding too much of a single stock, and my company's stock, at that.

    Anyone more familiar with the ING lineup?

  3. But if you keep adding to your TFSA at a rate of $5000/year the gains will outweigh the fees.....

    However - if you invest in the mutual funds you have to agree to not touch the money for 3 years and if this is your emergency fund, cash is the way to go so it is accessible.