Wondering if you can open multiple TFSA accounts? This post is for you.
Tax-free Savings Account (TFSA) is one of the smartest and most flexible ways to save and invest in Canada.
Since its introduction in 2009, it has continued to grow in popularity and now rivals RRSP in usage.
With a TFSA, your contributions will grow and compound tax-free. More importantly, you won’t have to pay any tax on your withdrawals.
In this post, we’ll answer the question of whether you can have multiple accounts, discuss some concerns with having more than one TFSA account, and how to manage them.
Can I have multiple TFSA Accounts?
The Quick and short answer is:
Yes, you can have as many TFSA accounts as you like.
In fact, millions of Canadians have more than one TFSA accounts. According to the data from CRA, 3.9 million TFSA holders had 2 or more accounts in 2017, the latest year for which the data is available.
That’s 28% of all TFSA holders. And the percentage continues to rise.
This is expected as new investing apps and more investment platforms become available to Canadians.
In my own case, I opened another TFSA account when WealthSimple introduced its trading app, Wealthsimple Trade, to take advantage of the commission-free trading. Others could have made a similar move to Questrade to buy ETFs for free.
But are there concerns with having multiple TFSA accounts you need to be aware of?
I’ll go over a few in the next section.
Concerns with Opening Multiple TFSA
So having two or more TFSA accounts is permitted by CRA, but there are a few things to consider
1. TFSA Limit is per individual
The annual TFSA limit or the total contribution room is per individual, not account.
For example, the TFSA dollar limit for 2021 is $6,000. If you don’t have any unused contribution room from prior years, it means your total contributions for 2021 can not exceed this amount.
Imagine a TFSA holder with 2 separate TFSA accounts. Contributing $3,000 each to both accounts is okay; but if they contribute $6,000 to both accounts, they’ll have to deal with TFSA over-contributions and the 1% penalty tax.
Remember there’s a tax-advantage with investing in a TFSA, so it makes sense that CRA puts a cap on the limit. Otherwise, everyone will open multiple registered accounts and never have to pay taxes on the investment returns.
2. Keeping Track of TFSA Contributions
Even if you know that the TFSA limit is per person and not per account, there’s another major concern: keeping track of all those TFSA contributions.
From the same CRA TFSA data referenced above, 106,000 Canadians had 5 or more TFSA accounts in 2017.
Without a system in place to track contributions, things can quickly get confusing and become a nightmare – especially if you make several contributions over different months.
You can check this post to download my TFSA contribution tracker, with detailed guide on how it works.
Finally, your investment fees may be higher with multiple TFSA accounts.
This is a bigger concern with managed accounts, but less relevant for self-directed investors.
Your account management fees will usually drop as your balances or deposits increases. For example, Questrade’s robo-advisor offering, Questwealth Portfolio has a 0.25% management fee that drops to 0.20% when your assets cross the $100,000 mark.
At Wealthsimple, the 0.50% annual management fee drops to 0.40% with a deposit of $100,000 and you get additional perks.
Splitting your TFSA across multiple accounts will reduce the opportunity to take advantage of these cost-saving strategies.
And if your TFSA provider has other charges such as a quarterly account fee, then consolidating your accounts at a single provider with lower fees will be prudent.
Should you open multiple TFSA accounts?
The short answer is: It depends.
If you’re saving or investing using managed accounts, you probably don’t need more than one TFSA account. You can potentially save some money on fees by keeping all your money with one provider.
For self-directed TSFA holders, the decision comes down to what you’re investing in. If you only invest using individual low-cost ETFs or the more diversified asset allocation ETFs, there’s no reason why you should keep multiple accounts.
A self-directed account at a low-cost brokerage like Questrade will serve all your investment needs. You can buy ETFs for free and still save on fees if you ever need to sell them.
If you also buy individual stocks, Wealthsimple Trade will be a perfect addition to your investing tools. It lets you buy and sell both stocks and ETFs for free. The available securities are limited but you’ll find many of the popular and most traded stocks on the platform. Plus new ones are constantly added.
The only concern with Wealthsimple Trade is buying USD listed securities. You can’t hold USD cash in the app so there’s a currency conversion each time you buy or sell. The exchange fees can quickly add up if you buy a lot of USD stocks.
In this case, sourcing for your own USD cash or exchanging at low-cost using Norbert’s Gambit at Questrade will be cheaper.
So in conclusion, deciding on whether to have multiple TFSA accounts or not boils down to your personal preferences and how you want to invest.
Tips for Managing Multiple TFSA Accounts
If you currently have more than one TFSA account or planning to have more, here are a few strategies you can use to easily manage all the accounts and avoid TFSA penalties:
- Close old accounts: Reassess all your TFSA accounts and ask yourself why you need to keep them. If a brokerage no longer meets your objectives, simply move out your holdings and close the account. The good news is: You can always transfer between TFSAs without a tax impact.
- Use a TFSA contribution Tracker: A good one will let you track your contributions across different accounts and financial institution. The one referenced earlier will let you do just that
- Start the year with a Plan: Begin the year with a plan on how much you want to contribute and to which accounts. And if your financial situation changes during the year, for example your income increased, simply update your plan accordingly.
- Have a system in place: Be intentional with your accounts by creating a system, instead of contributing to your TFSA accounts at random. For example, hold all ETFs with one brokerage (Questrade) and keep individual stocks at another (WealthSimple Trade). It’ll reduce the chance of over-contributing to your TFSA and give you one less thing to worry about.
How about Multiple RRSP or RESP Accounts?
The same principles and concerns apply with RRSPs and RESPs.
You can open more than one RRSP accounts for your retirement savings and RESPs for your kids.
Having multiple RRSP accounts may even be unavoidable in some cases. For example, if you have a Group RRSP through your employer, you may have to open an additional one to maximize your RRSP contribution room.
For RESPs though, there are very few reasons to have multiple accounts. With a lifetime limit of $50,000, it is best to keep things simple by investing in a low-cost, well-diversified portfolio.
Check this post for a model RESP portfolio you can build using all-in-one ETFs.
In both cases, the same concerns and strategies with managing multiple TFSA accounts still apply. That is:
- mind your contribution rooms
- use a contribution tracker; and
- merge accounts and close old ones
- Registered Retirement Savings Plan FAQs
- RESP Contribution Limit 2021
- RRSP Over-contribution: Penalty & How To Fix Them
2021 TFSA Contribution Limit
The TFSA dollar limit for 2021 is $6,000. It remains unchanged from 2020 limit.
But the TFSA contribution room or limit is the sum of:
- The TFSA dollar limit for the year
- Any unused contribution rooms from prior years
- TFSA Withdrawals from the previous years
Someone that was 18, a resident of Canada when TFSA was introduced in 2009 and never contributed to the account will have a cumulative unused contribution room of $75,500 in 2021.
Unlike RRSPs, you don’t need to have earned income to accrue TFSA contribution room. And you can always confirm your TFSA contribution room by checking your most recent Notice of Assessment or login to your MyCRA account.
Some FAQs on Multiple TFSA Accounts
Yes, you can have a TFSA account at several banks or financial institutions and brokerages. TFSA limits deal with the total contribution you make, not the number of accounts.
The quick and easiest way to check and confirm your TFSA contribution room is by logging in to your account with CRA. Or check your most recent Notice of Assessment (NOA).
The limit is $6,000 for 2021. If you’ve been eligible since 2009 but never made a contribution, your total unused contribution room for 2021 is $75,500.
So in conclusion, can you open multiple TFSA accounts? The answer is YES. You can open as many accounts as you like.
But should you open more than one TFSA accounts? The answer to this question isn’t clear cut. If you decide to go the multiple TFSA accounts route, I hope some of the strategies in this post can help you make the process of managing the accounts easier.
You can check this post on TFSA FAQs for more answers to your TFSA-related questions.