After much deliberation, I decided to close out my TD e-series RRSP and transfer the amount to my Questrade RRSP. It was a tough decision, I love the TD e-series, but the amount of tax I paid on my foreign income (US dividends taxed at my marginal rate) was the last straw and I would like to reserve my RRSP for US dividend paying companies. Here’s a step-by-step on how to transfer TD e-series to Questrade.
The dividends are only going to get bigger and bigger as time goes on, so I thought it would be a good idea to put them in the RRSP tax shelter before the foreign income tax bill starts compounding even more.
Related: How are dividends taxed in Canada?
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What is the TD E-Series?
If you’re new to investing, you might have heard of the TD e-series funds. They are basically the “OG” of the DIY investing world. Back in the day, TD e-series were cool before ETFs were cool.
The TD e-series funds are mutual funds that track the index. They skipped the middle man (the brick and mortar bank) so that you can save money on costs.
It costs zero dollars to buy (no commissions) these mutual funds and you could do PPP Pre-authorized purchases. You could also automatically reinvest your dividends and distributions, similar to the Questrade drip.
In recent years, the TD e-series funds started to hold TD ETFs that track the index, so they act as a ‘wrapper’ of ETFs in a way. Holding ETFs disguised as a mutual fund.
When I compare the TD e-series with an ETF, the latter is a more preferable option if you have a larger account because even though the TD e-series fees are very very low, many ETF fees are even lower. Even though the TD e-series fee is very reasonable, I would prefer to keep my investing costs as low as possible, therefore I prefer to keep it in my Questrade RRSP or Questrade TFSA.
In addition, many of the ‘all in one” ETFs do rebalancing automatically which the TD e-series don’t do.
How much do the TD e-series cost? The TD e-series range from 0.28% to 0.44%.
Here are some of the fees of the TD e-series funds:
- TD e-Series Canadian Index Fund 0.28%
- TD e-Series US Index Fund 0.33%
- TD e-Series International Index Fund 0.45%
- TD e-Series Canadian Bond Index Fund 0.44%
Here’s how to open, invest, and rebalance a TD e-series portfolio if you are interested in opening up a TD e-series. It is much easier to open an account now than it was a few years ago.
Taxation of US Dividends In Non-REgistered Accounts
As mentioned, although the TD e-series funds have served me well over the years, and made it easy to do pre-authorized purchases to invest, I would like to free up some room in my RRSP for my US dividend paying companies.
How much are US dividends taxed outside of the RRSP?
There is a 15% withholding tax on any US dividend income for Canadians holding US dividend paying companies outside of a RRSP Here’s more information from MoneySense.
If you don’t have this form filled out (the W-8 BEN), the withholding tax is even worse, 30% on your US dividend income because you will get DOUBLE taxed.
Double taxed just sounds awful.
Anyway, not only do you get the 15% withholding tax on any US dividend income outside of an RRSP, you will have to pay taxes based on your marginal rate on the foreign income (after you convert your foreign dividends received to Canadian dollars). You can include your withholding tax that was already withheld though.
US dividend income is taxed at your marginal rate (just like interest income).
Here’s a chart from Taxtips.ca for the Combined Federal and BC Tax Brackets and Rates. If you have $75,000 in income, your ‘other income’ (which is foreign dividend income) is taxed at 31.00% for 2021.
So let’s say you received $1000 in dividends from a US dividend paying company. If you are in the $75,000 net income tax bracket, you will pay $310 in taxes on that passive income.
US dividends do not get a preferential tax treatment like Canadian dividends do. Unfortunately this adds to the Canadian home bias problem, where Canadians have too much “Canada” in their portfolio when the GDP in Canada is less than 2% of the world.
Anyways, enough yammering about why it’s important to keep your US dividends in your RRSP, here’s how to transfer your TD e-series to Questrade.
How to Transfer TD E-Series to Questrade
The transfer of TD e-series is actually pretty simple and straight forward. The whole process took probably about 15 minutes, but it’s the waiting (20 business days or more) that is agonizing.
Here’s a step-by-step on how to transfer your TD e-series to Questrade.
First, you log in to your Questrade account.
Then you click on Funding.
Then you click on “Transfer Account to Questrade”
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After that, you will be prompted to a screen where you can name the institution that you are transferring your assets from.
If you use TD Direct investing for your TD e-series, make sure you indicate that. I have a TD Canada Trust TD e-series since it is strictly a mutual fund.
You have to make sure you are transferring the right accounts. For example, if you are transferring an RRSP, make sure you click on RRSP. You don’t want to be transferring to a Margin account from an RRSP.
You also need to know the approximate value that you are going to invest or transfer.
After that, you can choose to transfer the assets in cash or in kind.
When you transfer in cash, it means that your TD e-series will be liquidated, and you will receive 100% cash in your RRSP.
If you transfer in kind, it means that your TD e-series will be kept as they are (or tried to) and moved as is into your Questrade account. This would work for securities or if you already had a TD Direct Investing account that could transfer directly.
As you can see above, you can also choose to do a partial transfer (e.g. not all of the assets in the account). You would have to individually label the securities that you want to not transfer or not transfer (it is included in your transfer request form).
Finally, you’ll have to note your account number and indicate the approximate value that is being transferred.
Then you wait a while. For RESPs and pension accounts it will take longer than 20 days because it requires for verification.
You can upload your documents (the most recent statement of your TD e-series) to Questrade to expedite the process.
How Long Does the Transfer Take?
The transfer of your financial assets from TD e-series to Questrade usually takes 10-20 business days to complete.
However, on the form that I signed with Questrade to transfer funds, it says it can take at least 20 business days to complete. As mentioned, if you have an RESP account or pension account it will take longer.
For me it took 20 business days to complete. Questrade and TD both kept me in the loop for the entire process.
Will Questrade cover the cost of the Transfer Fee?
How much does TD charge to transfer out the e-series? To transfer out of TD e-series, I was charged a $75.00 plus taxes fee when I transferred a registered plan such as the RRSP to Questrade.
Initially, I thought Questrade would only cover the transfer out fee that the other brokerage would charge if it was funding a new Questrade account. However, I checked with a Questrade customer service representative and they stated that Questrade will cover up to a $150 transfer out fee charged by the other investment firm… period.
Questrade does not charge any fees for you to transfer your account to them.
As of October 1, 2019, you can transfer any account to Questrade from another financial institution (and the balance doesn’t matter, there is no minimum) and you can get your transfer fees rebated by Questrade (maximum rebate $150/account). There is no limit to the number of accounts you move over to Questrade.
To get a rebate, you would need to submit a statement indicating the amount charged from the other brokerage within 60 days of the transfer request being submitted to Questrade and upload it to their secure portal and label is as “rebate” for document type.
Once I get the money in my Questrade RRSP, I plan to exchange the CAD amounts to USD with Norbert Gambit.
Hopefully this step-by-step process on how to transfer your TD e-series account to Questrade helps you. It’s not as difficult to make the switch.
Do you have a TD e-series account?
Have you transferred your TD e-series to Questrade? Specifically, your TFSA or RRSP to Questrade?
How was the process for you?
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GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.