Profits from stocks inside Wealthsimple TFSA (Tax Free Savings Account) are tax free, but deposits to a TFSA account are limited up to a certain contribution limit ($6,000 on 2021). At the same time, investment losses inside a Wealthsimple TFSA account are not tax deductible.
TFSA was introduced on 2009 in Canada with an initial contribution limit of $5,000. The maximum deposit amount (contribution limit) rises every year with inflation.
Deposits to a Wealthsimple Trade TFSA account can be invested to most individual stocks and ETFs listed on both US and Canadian stock exchanges (NYSE, TSE, NASDAQ).
Deposits to a Wealthsimple Trade TFSA account are not automatically invested. Account holders can buy or sell stocks and ETFs inside Wealthsimple Trade TFSA anytime when the market is open.
- Gains inside a TFSA account are tax free. Losses are not tax deductible.
- Stock losses or gains inside TFSA does not affect contribution limit.
- Deposits to TFSA accounts are limited up to a certain contribution limit. CRA charge a 1% monthly tax for contributions above the limit.
- Possible investments in a TFSA include stocks, bonds, mutual bonds, ETFs (Exchange Traded Funds), savings accounts, etc. Wealthsimple Trade TFSA offers stocks and ETFs.
Wealthsimple Trade TFSA vs Wealthsimple Invest TFSA
Wealthsimple Trade is a self-directed account where clients can buy or sell stocks and ETFs (Exchange Traded Funds). On the other hand, Wealthsimple Invest is a managed account where Wealthsimple will automatically invest funds for a management fee of 0.5% per year for most account.
Money are automatically invested inside a Wealthsimple Invest account while Wealthsimple Trade gives you the choice on what specific stocks or ETFs to own. Wealthsimple Trade TFSA account offers most US and Canadian stocks and ETFs.
| Wealthsimple Trade TFSA | Wealthsimple Invest TFSA |
| Manually select specific stocks and ETFs (Buy or sell Mondays to Fridays) | Wealthsimple will automatically invest funds to different domestic and international stocks, bonds, and other assets. |
| $0 fee for every buy or sell trade of Canadian stocks and ETFs, 1.5% exchange rate fee for every buy or sell trades of US stocks and ETFs | 0.5% yearly management fee for amount less than $100,000 invested |
| Gains are tax free | Gains are tax free |
| Total combined deposits to TFSA accounts are limited up to a certain contribution limit | Total combined deposits to TFSA accounts are limited up to a certain contribution limit |
| Withdraw funds anytime | Withdraw funds anytime |
A survey needs to be filled when opening a Wealthsimple Invest account to determine the amount of risk a person is willing to take. Conservative portfolios will have more bonds than stocks while Growth portfolios on Wealthsimple Invest will be invested more on stocks than bonds. Wealthsimple Invest also offers a Balanced portfolio.
The type of portfolio will be determined after filling out a survey based on your financial goals.
Wealthsimple Trade is more common than Wealthsimple Invest. Most of this article will discuss Wealthsimple Trade TFSA accounts. Both Trade and Invest offers a TFSA account. Rules for TFSA account applies for both Trade and Invest TFSA accounts.
Multiple TFSA accounts can be opened, but the total deposits must be below the contribution limit. Assuming a contribution limit of $12,000, an individual can have 5 TFSA accounts with $2,000 each since the total deposit of $10,000 is below the limit.
Requirements to open a Wealthsimple TFSA
- 18 years or older
- Have a valid SIN number
- Resident of Canada
Non-residents can also open a TFSA account, but contributions are subject to 1% monthly tax for non-residents. (Source)
Some provinces like British Colombia have an age of majority of 19 years old. Although you have to be 19 years old to open a Wealthsimple TFSA account on some provinces, the amount of contribution limit starts when you turn 18.
TFSA Contribution Limit
- Unused contribution limit are carryforward to future years
- Withdrawals from TFSA accounts are added back to the contribution limit on January 1 of the next calendar year
- New contribution limit amounts are added every January 1
- Deposits to TFSA accounts above the contribution limit is subject to 1% monthly tax until withdrawn
TFSA Yearly Contribution Limit Table
| Year | Contribution Limit |
| 2021 | $ 6,000.00 |
| 2020 | $ 6,000.00 |
| 2019 | $ 6,000.00 |
| 2018 | $ 5,500.00 |
| 2017 | $ 5,500.00 |
| 2016 | $ 5,500.00 |
| 2015 | $ 10,000.00 |
| 2014 | $ 5,500.00 |
| 2013 | $ 5,500.00 |
| 2012 | $ 5,000.00 |
| 2011 | $ 5,000.00 |
| 2010 | $ 5,000.00 |
| 2009 | $ 5,000.00 |
If a person met the requirements to open a TFSA account on 2017 and never contributed to a TFSA account, the unused limits from 2017 to 2020 are added to the TFSA contribution limit on 2021 for a total of $29,000.
Assume the same individual deposit $10,000 to a TFSA on 2021 and invested on stocks and other assets. on the same year, some stocks are sold and $2,000 is withdrawn from a TFSA account. The contribution limit for 2022 will be the unused amount ($19,000) + withdrawals on 2021 ($2,000) + new contribution limit for 2022.
To skip calculations, your TFSA contribution limit is also stated on your CRA account. CRA updates the amount listed every January or February.
Total withdrawals from the previous year and the new TFSA limit amount are added to the new contribution limit every January 1.
How to Buy Stocks on a Wealthsimple Trade TFSA account
Withdrawals from Wealthsimple TFSA
Stocks and ETFs can be sold anytime inside a Wealthsimple Trade TFSA account whenever the market is open. Stock exchanges in US and Canada are open Mondays to Fridays (9:30 am to 4:00 pm Eastern Time) except holidays.
After selling stocks or ETFs, funds can be withdrawn anytime from a Wealthsimple TFSA account. Withdrawals from a Wealthsimple TFSA account usually arrives on the bank account after 1-3 business days.
Visit the canada.ca page about TFSA for more details about TFSA accounts.
Wealthsimple TFSA Fees
Wealthsimple TFSA charges a fee of 1.5% for exchange rate for every buy or sell trades of US stocks and ETFs. On the other hand, trades in Canadian dollars, deposits, and withdrawals have $0 fees. Lastly, Wealthsimple Invest TFSA portfolios (managed account) charges a management fee of about 0.5% every year.
TFSA Savings Account
Aside from stocks and mutual funds, a TFSA can also be used as a regular savings account. Stocks and ETFs have generally more risk and higher upside potential. TFSA Savings account pay a constant interest income every month.
Similarly, contribution limit rules apply to TFSA Savings account. Multiple TFSA accounts can be opened as long as the total deposits to TFSA account are below a certain contribution limit for a calendar year.
Funds on a TFSA Savings account can also be withdrawn anytime. Withdrawals can be done by transferring funds from a TFSA Savings account to a regular savings or chequing account.
TFSA Savings account require people to be at least 18 or 19 years old while a regular savings account may be accessible at a younger age. Also, deposits on a TFSA account are limited up to a certain contribution limit whereas there is no limit on deposits to a regular savings account.
Interest income from a TFSA Savings account are tax free while interest income from a regular savings account are taxable.
What is Wealthsimple TFSA rate?
Rate of returns on a Wealthsimple TFSA varies since returns on stock investments are unpredictable. High dividend stocks usually pay around 4% in dividends per year. In the past 100 years, S&P 500 ETFs (500 US stocks) have returned around 8-10% per year on average. Stock market crashed around 45% on both 2008 and 2020.
The financial crash of 2008 made the stock market (S&P 500) crash close to 55% from market top to bottom. The more recent 2020 COVID stock market crash made the S&P 500 index crash 35% from the top on February 2020 to March 2020. By December 2020, the stock market recovered all losses and even gained around 10% from the top of February 2020.