Divorced my broker and optimizing my accounts. Canada specific review.
Posted: Tue Jun 27, 2017 11:20 am
The folks at Toronto Dominion (TD) pissed me off for the last time and I have finally moved over to Questtrade, Canada's lowest cost broker with free ETF buys. I've been reading lots of Canadian Couch Potato regarding withholding taxes and Norbert's Gambit and want to double check that I understand everything correctly before I incur commissions to "fix" my accounts once and for all. Related reading: Withholding Tax, Asset Allocation. In summary, my international holdings are subject to a 15% tax on dividends that adds about 0.2 - 0.35 % tax drag to my ETFs. These are recoverable in certain accounts and in certain ways.
My desired portfolio, which I'm open to changing having discovered Tyler9000 and everything he does.... is 33% U.S.A, 33% International Developed (I do not trust undeveloped country companies and think the developed ones will lead the charge here anyway) and 33% Canadian. I manage the 33% in Canada, ie. do not index. 100% equities cause I'm bold and young.
TFSA (Tax-Free Savings Account): I'm maxed out and it currently holds my U.S.A total stock market index (Ticker: VUN.TO) and my International Developed total stock market index (Ticker: VIU.TO). From my reading.. it would be optimal to hold my growth Canadian Equity here. Tax-free growth. Unrecoverable withholding tax in TFSAs so I don't love holding my International Developed here but I can't find another place for it. Obviously being tax-free beats saving a few measly basis points. I have half a mind to move my TFSA all over to Canadian Equity and then use my CASH account to catch up with my VIU allocation.
RRSP (Registered Retirement Savings Plan): Also maxed out. It currently holds my Canadian equity. I want to perform Norbert's Gambit to convert this account to USD and buy VTI. This should save me the 15% foreign tax on U.S.A dividends and something like .35% in MER total. This account will hold exclusively total market U.S.A as it can only hold 18% of my income. Tax-free growth.
CASH: Currently holds the left-over Canadian equity used to maintain my 33/33/33 split as well as a significant amount of cash. This account performs best with Canadian registered dividend payers for a 50% back tax-credit on dividends followed by both U.S.A and International indexes as I can claim back the withholding tax on my annual tax return.
In summary, TFSA is for Canadian Equity, RRSP is for U.S.A equity in USD and lastly, CASH is to make up the difference to maintain the desired global allocation with an eventual preference towards Canadian dividend payers to take advantage of the tax credit. In reality, my CASH account will be for buying International Developed & U.S.A for the rest of this year until my allocation catches up. Does this jive? Am I putting too much thought into avoiding foreign withholding taxes or does this make sense? For what it's worth, the rest of the world has greatly outperformed Canada so I could use a re-balance in that direction anyhow.
Help from a fellow Canuck would be much appreciated.
My desired portfolio, which I'm open to changing having discovered Tyler9000 and everything he does.... is 33% U.S.A, 33% International Developed (I do not trust undeveloped country companies and think the developed ones will lead the charge here anyway) and 33% Canadian. I manage the 33% in Canada, ie. do not index. 100% equities cause I'm bold and young.
TFSA (Tax-Free Savings Account): I'm maxed out and it currently holds my U.S.A total stock market index (Ticker: VUN.TO) and my International Developed total stock market index (Ticker: VIU.TO). From my reading.. it would be optimal to hold my growth Canadian Equity here. Tax-free growth. Unrecoverable withholding tax in TFSAs so I don't love holding my International Developed here but I can't find another place for it. Obviously being tax-free beats saving a few measly basis points. I have half a mind to move my TFSA all over to Canadian Equity and then use my CASH account to catch up with my VIU allocation.
RRSP (Registered Retirement Savings Plan): Also maxed out. It currently holds my Canadian equity. I want to perform Norbert's Gambit to convert this account to USD and buy VTI. This should save me the 15% foreign tax on U.S.A dividends and something like .35% in MER total. This account will hold exclusively total market U.S.A as it can only hold 18% of my income. Tax-free growth.
CASH: Currently holds the left-over Canadian equity used to maintain my 33/33/33 split as well as a significant amount of cash. This account performs best with Canadian registered dividend payers for a 50% back tax-credit on dividends followed by both U.S.A and International indexes as I can claim back the withholding tax on my annual tax return.
In summary, TFSA is for Canadian Equity, RRSP is for U.S.A equity in USD and lastly, CASH is to make up the difference to maintain the desired global allocation with an eventual preference towards Canadian dividend payers to take advantage of the tax credit. In reality, my CASH account will be for buying International Developed & U.S.A for the rest of this year until my allocation catches up. Does this jive? Am I putting too much thought into avoiding foreign withholding taxes or does this make sense? For what it's worth, the rest of the world has greatly outperformed Canada so I could use a re-balance in that direction anyhow.
Help from a fellow Canuck would be much appreciated.