How To Transfer From An RRSP To A TFSA —And Why You Shouldn’t

Ask an Investing Expert: an investor wants to know the right way to do the wrong thing

When transferring a stock from an RRSP to a TFSA, is there any advantage whether it is in a loss or gain position? Why or why not? – Darryl

If you hold a stock in your RRSP and you want to hold it in a TFSA instead, there is no way to simply transfer it from one account to the other. At least, I am unaware of any brokerage that will allow you to do this.

Instead, your only choice would be to first “deregister” the shares, which means transferring them in kind from the RRSP to a non-registered (taxable) account. This would be considered a withdrawal from the RRSP, which means the full market value of the holding will be taxable as income. Your brokerage will be required to withhold at least 10% for taxes, and you will probably also pay a fee for the transaction.

Once the shares are in a non-registered account, you could then transfer them in-kind to your TFSA. Note that if they appreciate slightly during the time it takes you to arrange all of this, you will pay tax again on any capital gain. If the shares fall in value, however, you will not be able to deduct any capital losses.

With all of this in mind, Darryl, you’ve probably figured out that it doesn’t make sense to do this. If you hold a stock in your RRSP that you want to keep for the long term, it’s likely best to simply leave it there. Or, if you have plenty of cash in your TFSA, you could simply sell the stock in the RRSP and then repurchase the same number of shares in your TFSA. This would not trigger any tax consequences, and any future growth in the stock’s value would be tax-free.