I’ve fielded a dozen emails from clients and readers about the U.S. election and how it might impact their portfolios.

The short answer: Who knows?

A longer answer: The stock market probably doesn’t care as much about the election as you think it does.

Besides, there has been an election every four years for the last 250 years. What do people think is going to happen?

There will always be something going on in the world that causes anxiety for investors. What we need is to come up with an investing strategy that we can stick with through good and bad times, knowing that it will meet our long-term objectives.

Once you’ve decided on that investing approach, the first rule to know is:

“Your investing approach shouldn’t change based on current market conditions.”

It’s one thing to be nervous about high market valuations, inflation, or changing governments. We can use evidence-based thinking to calm our fears knowing that staying invested in a globally diversified and automatically rebalancing portfolio leads to the best outcomes.

We also know that markets frequently reach all-time highs. And, while US markets in particular are high, emerging markets and international stocks are still relatively cheap by comparison.

We also know that the best inflation hedge is a globally diversified portfolio of stocks.

Finally, when it comes to government changes we often look to the US where investors get nervous around presidential elections. Investors wanted to dump stocks when Trump got elected the first time in 2016. Then they wanted to dump stocks when Biden got elected in 2020. On both occasions it would have been disastrous to bail on stocks and move to cash.

In summary, the stock market probably doesn’t care who is President of the United States.

If your portfolio is sitting in cash today, I cannot stress enough to get your money invested right away and not worry about macro events that may or may not have an impact on the market. 

Otherwise you’ll always have a reason to panic and try to time the market (a slowdown in China, a European debt crisis, a regional conflict, the Dallas Cowboys winning the Super Bowl, etc.).

Stay invested in a low cost, risk appropriate fund and go enjoy your life!

This Week’s Recap:

10 years ago I sold all of my dividend stocks and switched to low cost index funds. Thanks to Bob Lai for giving me the chance to explain myself to dividend investors on his Tawcan personal finance blog.

We had a lovely 10-day holiday in Edinburgh, staying in the iconic Dean Village and exploring more of our favourite city.

This time we checked out the Edinburgh Zoo, hopped on a bus to Roslin to visit the famous Rosslyn Chapel, took a day trip to Glasgow to check out the University (our oldest daughter’s dream), met up with my friend and long-time freelance editor for drinks, and had some amazing vegan food in Edinburgh.

That’s it for trips this year, but we already have some travel plans for 2025 – including a week in Cancun in February and 10 days in Tuscany during Easter break. Summer is up in the air, but will likely include the Scottish Highlands and/or exploring more of England, specifically the Cotswolds.

My last weekend reading update looked at the TFSA snowball – an aggressive savings strategy to catch-up on unused TFSA contribution room.

Speaking of contribution room, it’s now official that the annual TFSA contribution limit will remain at $7,000 in 2025. That brings the total lifetime limit up to $102,000.

Promo of the Week:

Wealthsimple is fresh off of a wildly successful campaign in which they paid a 1% transfer bonus to customers who deposited or transferred money to their accounts.

Now they’re back with a new promotion, where you can get an iPhone or Mac when you register and move $100,000 or more to Wealthsimple.

• Register by December 13th
• Transfer or deposit $100,000 or more within 30 days of registering
• Once you qualify you can choose an iPhone or a Mac starting January 15th
• Deposit $100,000 – $299,999 and you’ll get an iPhone 16 or a MacBook Air.
• Deposit $300,000 – $499,999 and you’ll get an iPhone 16 Pro or a MacBook Pro.
• Deposit $500,000+ and you’ll get an iPhone Pro Max or a MacBook Pro with M4 Pro chip.

Get another $25 when you fund any Wealthsimple account with my referral code: FWWPDW

Good news for those of you with simple corporations – Wealthsimple has started to roll out early access for self-directed corporate accounts. For now, the entity must be a corp and must have only one beneficial owner and director (bummer for us, we’re joint owners).

I’m registering for the iPhone promo anyway in hopes they expand access to the self-directed corporate accounts. We’ve got $425,000 parked at Questrade that we’d love to move over to Wealthsimple.

Weekend Reading:

From MoneySense: After rushing into the real estate market, I quickly learned I wasn’t ready for the real cost of home ownership.

Forever an optimist (like me!) A Wealth of Common Sense blogger Ben Carlson asks: Am I a permabull?

Financial planner Markus Muhs shares why dollar cost averaging is good for the soul.

In retirement, some income is not subject to withholding tax, and you may potentially owe tax after filing each year. Advice-only planner Jason Heath explains how to plan for taxes in retirement.

Are you afraid to begin investing? Millionaire Teacher Andrew Hallam explains why you should invest your money as soon as you have it. Hmm, sounds familiar.

Does your relationship with your financial adviser feel off? Financial planner Anita Bruinsma shares three red flags to watch for.

PWL Capital’s Ben Felix explains why you will probably lose money trading options:

Some advisors and investors like to play semantic games, saying passive investing doesn’t exist because even an index like the S&P 500 is “actively” reconstituted, while even the most passive investor still needs to “actively” contribute or rebalance. The point is that decisions need to be made.

Michael James on Money says that’s nonsense – passive investing does exist. I agree.

Finally, from HENRY to NENRY – Of Dollars and Data blogger Nick Maggiulli shares a cautionary tale about the low stability of high income.

Have a great weekend, everyone!

The federal government kept the annual TFSA contribution limit at $7,000 for 2025 – the same limit we had in 2024. It’s still good news for Canadian savers and investors, who as of January 1, 2025, will have a cumulative lifetime TFSA contribution limit of $102,000.

The Tax Free Savings Account (TFSA) was introduced in 2009 by the federal conservative government. The TFSA limit started at $5,000 that year – an amount that “will be indexed to inflation and rounded to the nearest $500.”

With inflation starting to cool off at an average rate of 2.7% in 2024 (versus 4.7% in 2023 and 6.3% in 2022) it will be a coin flip as to whether the annual TFSA limit will increase in 2026.

TFSA Contribution Limit Since 2009

The table below shows the year-by-year historical TFSA contribution limits since 2009.

Note that the maximum lifetime TFSA limit of $102,000 applies only to those who were 18 or older as of December 31, 2009. If you were born after 1991 then your lifetime TFSA contribution limit begins the year you turned 18.

You can find your TFSA contribution room information online at CRA My Account, or by calling Tax Information Phone Service (TIPS) at 1-800-267-6999.

TFSA Overview

The Tax Free Savings Account is a flexible vehicle for Canadians to save for a variety of goals. You can contribute every year as long as you’re 18 or older and have a valid social insurance number.

That means young savers can use their TFSA contribution room to establish an emergency fund or save for a down payment on a home. Long-term investors can use their TFSA to invest in ETFs, stocks, or mutual funds and save for the future. Retirees can continue to save inside their TFSA for future consumption or withdraw from their TFSA tax-free without impacting their Old Age Security or GIS.

Unlike an RRSP, any amount contributed to your TFSA is not tax deductible and so it does not reduce your net income for tax purposes.

• Your contribution room is capped at your TFSA limit. Excess contributions will be taxed at 1 percent per month
• Any withdrawals will be added back to your TFSA contribution room at the start of the next calendar year
• You can replace the amount of your withdrawal in the same year only if you have available TFSA contribution room
• Any income earned in the account, such as interest, dividends, or capital gains is tax-free upon withdrawal

How to Open a TFSA

Any Canadian 18 or older can open a TFSA. You are allowed to have more than one TFSA account open at any given time, but the total amount you contribute to all of your TFSA accounts cannot exceed your available TFSA contribution room.

To open a TFSA you can contact any bank, credit union, insurance company, trust company or robo-advisor and provide that issuer with your social insurance number and date of birth.

The most common type of TFSA offered is a deposit account such as a high interest savings account or a GIC.

You can also open a self-directed TFSA account where you can build and manage your own savings and investments.

Qualified TFSA Investments

That’s right – you’re not just limited to savings accounts and GICs. Generally, you can put the same investments in your TFSA as you can inside your RRSP. These types of allowable investments include:

• Cash
• GICs
• Mutual funds
• Stocks
• Exchange-Traded Funds (ETFs)
• Bonds

You can contribute foreign currency such as USD to your TFSA. Note that your issuer will convert the funds to Canadian dollars. The total amount of your contribution, in Canadian dollars, cannot exceed your TFSA contribution room.

If you receive dividend income from a foreign country inside your TFSA, the dividend income could be subject to foreign withholding tax.

Gains Inside Your TFSA

Some investors may be tempted to put risky assets inside their TFSA account to try and earn tax-free capital gains. There are two advantages to this strategy:

1. Earn tax-free capital gains
2. Potentially increase your available TFSA contribution room

For example, I maxed out my annual TFSA contributions in 2009, 2010, and 2011. That meant contributions of $15,000. I invested these funds in dividend paying stocks, which, over time, increased the total portfolio value to $19,500.

I withdrew the entire amount in mid-2011 to top-up the down payment on our new house. When the calendar turned to 2012, I had a new lifetime TFSA contribution limit of $24,500.

How did I have $24,500 in unused TFSA contribution room available even though most other Canadians had $20,000?

Any TFSA withdrawals are added back to your available TFSA contribution room at the beginning of the next calendar year. That amount was $19,500. In addition, the 2012 TFSA limit of $5,000 was added to my overall TFSA contribution room for a total of $24,500.

Losses Inside Your TFSA

The risk cuts both ways, though.

Let’s say the dividend stock picks inside my TFSA incurred a loss of $4,500. I contributed $15,000 but they’re only worth $10,500 when I need to withdraw the money for my house down payment.

The next calendar year, after I withdrew the funds, I would have only saw $10,500 added back to my TFSA contribution limit, plus the new 2012-dollar limit of $5,000 – for a total TFSA limit of $15,500.

The other downside to an investment losing money inside your TFSA is that you cannot claim a capital loss.

“In kind” TFSA Contributions

You can make “in kind” contributions to your TFSA – for example transferring stocks or funds held in your non-registered account to your TFSA.

According to the CRA, you will be considered to have disposed of the security at its fair market value at the time of the contribution. If that value is more than the original cost of the security, you will have to report the capital gain on your income tax return. However, if the value is less than the original cost, you cannot claim the resulting capital loss.

The amount of the contribution to your TFSA will be equal to the fair market value of the property.

This can be an excellent strategy for seniors and retirees to transfer securities from their taxable investment account and into their sheltered “tax-free” TFSA.

Transfer from your RRSP

You can also transfer an investment from your RRSP to your TFSA. Again, according to the CRA, you will be considered to have withdrawn the investment from the RRSP at its fair market value.

This amount is reported as an RRSP withdrawal and must be included in your income for that tax year.

“The tax withheld on the withdrawal can be claimed at line 437 of your income tax and benefit return.”

If the transfer from your RRSP to TFSA takes place immediately, the same value will be used as the amount of the contribution to the TFSA. If the contribution is delayed or deferred, the amount of the contribution will be the fair market value of the investment at the time of that contribution.

TFSA Over-Contribution Penalty

Unlike the RRSP Over-Contribution limit of $2,000, TFSAs have no such room for error.

Some Canadians have run afoul of the CRA for over-contributing to their TFSA. The excess contributions are subject to a 1% penalty tax per month. For example, if you’ve over-contributed $1,000 you would have to pay $10 per month.

If you receive a TFSA excess amount letter from the CRA you should remove the excess amount immediately. Go to your My CRA Account for your room limit as of January 1, or complete Form RC343, Worksheet – TFSA contribution room if you have contributed to your TFSA in the current year.

TFSA Impact on Government Benefits

The TFSA has been a tremendous boon for seniors and retirees. The main advantage is that any income earned inside your TFSA, or amounts you withdraw from your TFSA, won’t impact means-tested government benefits such as Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).

That means retirees could get a portion of their retirement income from their TFSA and not have that amount increase their total net income. This is beneficial to either preserve GIS benefits or to avoid the dreaded OAS clawback.

TFSA income or withdrawals will also not affect employment insurance benefits, or your eligibility for other credits such as the Canada child benefit (CCB), the working income tax benefit (WITB), the GST credit, or the age amount.

TFSA Beneficiaries and Death of TFSA Holder

There are two types of TFSA beneficiaries:

1. A survivor who has been designated as a successor holder
2. Designated beneficiaries, such as a survivor who has not been named successor holder, a former spouse or common-law partner, children, and qualified donees

A successor holder is a spouse or common-law partner of the holder at the time of death and is named by the deceased as the successor holder of the TFSA.

The successor holder acquires all of the rights of the holder, including the right to revoke any beneficiary designation. This spouse or common-law partner becomes the new TFSA account holder.

The TFSA continues to exist and both its value at the date of the original holder’s death and any income earned after that date continue to be sheltered from tax under the new successor holder.

The successor holder can make tax-free withdrawals from the deceased holder’s TFSA account. He or she can also make new contributions to that account, subject to their own unused TFSA contribution room.

Investing Ideas for your TFSA

The TFSA is an incredible savings tool. Low income earners should primarily use their TFSA to save for retirement, while higher income earners should maximize their RRSP contributions first, but ideally contribute to both their RRSP and TFSA.

Related: A Sensible RRSP vs. TFSA Comparison

Here are my recommendations for the best TFSA investments for long term savers:

Invest with a Robo Advisor: Robo-advisors offer Canadians an easy and hands-off way to automatically invest for the future. Open a TFSA at a robo-advisor like Wealthsimple and you can invest in a diversified portfolio of index ETFs for a management fee of 0.50 percent, plus the MER of the ETFs, for a total cost of about 0.65 percent.

DIY Invest with ETFs: Investors who are more inclined to take the wheel themselves can open a self-directed TFSA account at a discount broker like Questrade and build their own investment portfolio. With the introduction of one-ticket asset allocation ETFs from the likes of Vanguard, iShares, and BMO, it’s never been easier to build a globally diversified portfolio on the cheap. Vanguard’s VBAL, for example, represents the classic 60/40 balanced portfolio and comes with a MER of just 0.24 percent.

Invest in bank index funds: Maybe you’re more comfortable staying at your home bank and investing through an advisor. Know that every bank offers its own suite of index funds, which are considerably cheaper than their actively managed cousins and tend to outperform. Open a TFSA account at your bank and insist on getting a portfolio of index funds. TD’s popular e-Series funds are the most highly rated and lowest cost of the bunch and will cost around 0.45 percent. Expect the other banks’ index funds to cost closer to 1 percent.

As for me, I’ve explained before exactly how I invest my own money, holding Vanguard’s All Equity ETF (VEQT) across all accounts – including inside my TFSA at Wealthsimple Trade. I prefer to use my TFSA for long-term investing rather than as a place to stash cash in a high interest savings account.

Tax free growth for the win!

I’ve been toying with a savings concept that I’m tentatively calling the TFSA snowball. It’s a play on Dave Ramsay’s “debt snowball” method (his one positive contribution to society) where borrowers pay off their smallest loan balance first, then roll those freed-up payments into the next smallest balance. Rinse and repeat until debt free.

Related: I prefer the debt avalanche where you tackle the highest interest rate balance first.

While it’s rare for my clients to be that heavily indebted, many of them are striving to catch-up on unused TFSA contribution room. After all, money is finite and we can’t do everything all at once. Heck, my wife and I are on our third game of playing TFSA catch-up in the last 15 years!

Indeed, you might have a period of income interruption from a parental leave or career change. Maybe you financed a vehicle and had to temporarily pause TFSA contributions. Perhaps you just had other spending or saving priorities and the TFSA got neglected.

Whatever the case, the TFSA snowball concept is meant to treat your unused contribution room like a five-alarm emergency. That’s right, you’ll aggressively attack these contributions as if you were paying off high interest credit card debt. Within reason, you’re going to throw everything you have at your TFSA until you’ve caught up on all of that unused contribution room.

What’s the payoff? Well, it’s a similar feeling to paying off your consumer debt. All of the money you were allocating towards debt repayment can now be redirected towards savings goals. Same with the TFSA.

Once your TFSA is fully maxed out, you can only contribute the annual limit afterwards – which will feel like a modest amount compared to your previously aggressive contributions.

The extra cash flow is now freed-up to fund other goals, like a new car, dream vacation, extra mortgage payments, lifestyle creep, non-registered investments, etc. The choice is yours!

*this chart presumes the annual TFSA limit increases by $500 in 2026 (to $7,500) and then again in 2029 (to $8,000)

The table above is our own TFSA snowball plan. Aggressive contributions of $28,000 per year (each) for the next three years, followed by a $13,000 contribution (each) in 2028 to fully max our TFSAs.

The payoff after three-and-a-half more years of TFSA catch-up is that we’d only have to contribute the annual limit from 2029 onwards and can redirect those extra catch-up contributions towards other goals.

Right now that’s loosely earmarked for the mortgage – extra lump sum payments to pay off the balance earlier. But the timing also coincides with our kids entering post-secondary years (yikes!) and so we might not want to commit all of those funds until we know exactly where the kids are going and what their funding requirements will be.

We could also simply pay ourselves less, since we topped-up our personal income to do the TFSA snowball in the first place.

Or, without the pressure to save more, we could decide to work a bit less and intentionally earn less income. Like a Coast Fire plan.

There’s also a vehicle purchase to consider – or some modest home renovations.

Who am I kidding? The funds will probably go towards enhancing our travel budget!

In summary, like an aggressive debt repayment plan, a conscious effort to catch-up on unused TFSA contribution room for a few years can dramatically improve your financial picture and give you a host of options to consider afterward.

What are your thoughts on treating your unused TFSA room like a five-alarm emergency? Let me know in the comments.

This Week’s Recap:

I’ve updated my annual reminder on how to crush your RRSP contributions next year by using the T1213 form to reduce withholding taxes at the source. This is a secret weapon for many of my higher-earning clients who contribute significantly to their RRSP each year. Why not get your tax refund upfront on every paycheque instead of waiting until you file your taxes?

Last week I wrote about lifestyle creep not necessarily being a bad thing.

We’re off to our favourite city in the world – Edinburgh – next week for a 10-day holiday. It’ll be our fourth time back to “the most beautiful of all the capitals of Europe.” We can’t wait!

“This is a city of shifting light, of changing skies, of sudden vistas. A city so beautiful it breaks the heart again and again.” – Alexander McCall Smith

Weekend Reading:

If you’re still working and contributing to CPP, or if you’re retired and still waiting to take CPP, your expected CPP benefits increase based on wage inflation. But if you’re already receiving CPP benefits, your annual increase is based on price inflation.

Typically, wage inflation is about 1% higher than price inflation. But that was not the case in 2022 when prices rose faster than wages. That year, Fred Vettese pointed out, was an anomaly where you would have been better off taking CPP in December instead of January so you’d benefit from the price inflation bump instead of the wage inflation bump.

Complicated stuff, right? So what about this year? Fred Vettese is back to answer that question now that the data is out. 

Of Dollars and Data blogger Nick Maggiulli is doing the lord’s work busting the persistent myth that Vanguard, BlackRock, and State Street are a secret cabal that control the world.

Here’s what football (soccer) fans can teach investors:

“One of the biggest behavioural challenges fans and investors face is the tendency to overreact. Fans often make snap judgments, calling for managerial changes or criticising players after just one bad game. Investors, too, can fall into the trap of panic-selling during a market downturn or impulsively chasing after the latest “hot” stock, fund or theme.”

How do people react to financial advice? It depends on who is receiving it, who is giving it, and what it consists of.

Money Architect’s Russell Sawatsky tackles a thorny issue for DIY investors – at what age do you hand over the reigns?

Will buying a home make you happier? The evidence is mixed, at best:

A Wealth of Common Sense blogger Ben Carlson answers a reader question about whether they need five years of cash reserves in retirement.

Here’s Carlson again discussing the perils of planning for early retirement:

“Your two best forms of risk management in retirement are diversification and flexibility with your plan. Every strategy comes with trade-offs. Unfortunately, there is no investment panacea that offers 100% certainty during retirement.”

Finally, here’s Jason Heath with the ins and outs of consolidating your registered accounts for retirement income.

Happy Thanksgiving, and have a great weekend!