Author: Financial Awakening Blog
If you still haven’t read Step 1 – Plan ahead. Imagine where you are when you retire, I highly recommend you to read it first.
Withholding tax
TFSA has been a great investment vehicle for Canadians. It can help you to make more money without paying tax. However, it also has its weakness. For instance, if you loss money from TFSA, you cannot claim the capital loss. Another problem appears when you invest in US stocks.
One of my friend told me that he is going to purchase US securities with TFSA. I will have to let him know that there are some differences when you invest in US stocks instead of CA stocks with TFSA.
One major pit fall is that you are going to pay US withholding tax on the dividends. The withholding tax is 15% and we will not get it back. On the other hand, if you invest the US stocks in RRSP, you do not need to pay any withholding tax. That being said, if the stock you are going to purchase do not pay dividends, then it makes no different to you.
I was once tempted to purchase US stock. However, when I looked at the exchange rate difference between buy and sell US currency, I stopped right there. I really don’t want the bank to make so much easy money with all my hard work.
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