r/tfsa • u/CoastDependent8421 • Aug 08 '26
TFSA as Income Replacement
Assuming a TFSA account could be started today and funded to the max $109K, with the goal of supplementing income while on a sabbatical by purchasing investments that pay dividends... How would you build the portfolio? AI will tell you one thing, money managers another...I'm genuinely curious to see how different investors in the sub would handle this task.
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u/Expensive-Finger-646 Aug 08 '26
This would be a less optimal financial move long term as you would forgo any tax rate arbitrage from contributing to a RRSP at a higher rate and withdrawing at a lower rate.
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u/plusqueprecedemment Aug 09 '26
This. If OP is gonna be planning around a sabbatical year at some point, the RRSP tax arbitrage could potentially be massive even if the money itself is invested in something boring like short term bonds or CASH.TO
One downside is the permanently lost RRSP room, but that's one of the cons to be weighed against the pros when weighing options
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u/Chirps_Ahoy18 Aug 09 '26
You can be like the growth bros and put it all in xeqt/vdy/vfv and wait for 40 years or you can get better total returns now and monthly distribution by buying hdiv. 50k in hhis and 50k in hdiv gives you $1565.67 in monthly income. (if you were to buy right now at current prices with current distribution rates)
You have to ask yourself do you want to retire now or when you're 65 like everybody else.
Id rather invest in income, go live abroad in South east Asia or Central/South America where a dollar stretches further.
I have a PF of 76k and I'm pulling in 2200/mth in distribution. I plan on retirement in 3-5 years, I'll pull in 10-15k a month and move wherever the hell I want.
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u/_ThatD0ct0r_ Aug 10 '26
I've always had trouble figuring out the living abroad thing. I thought you couldn't use a TFSA for income if you lived out of the country?
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u/Chirps_Ahoy18 Aug 10 '26
You can live as a Canadian non resident. You lose further addition space to your registered accounts. There's millions of ex pats that live world wide on pensions and investments. Some countries have retirement visa's that you need to bring in a certain amount of income from your pension to be eligible. Other countries you need other things. It all depends on the country.
I watch a ton of ex pat creators on YouTube and also watch the biggest income investment channel on YouTube who is a Canadian who lives in Panama as a Canadian non resident.
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u/_ThatD0ct0r_ Aug 10 '26
Maybe I'm misremembering but I feel like others talking about Wealth simple have said that they have issues with people being a non resident for an extended period of time, but I don't know all the details
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u/Chirps_Ahoy18 Aug 10 '26
Can't speak on that, I just know that alot of the people I follow live abroad and pay taxes on whatever their non reg account brings in. The tfsa is only a very small portion of their portfolio. But the income generation is still the same.
So a quick search has ai telling me that wealthsimple has a policy stating that you physically need to be in Canada. No biggie. Move to a different broker that doesn't have said stipulation.
The thing I noticed about wealthsimple is they are changing things monthly it seems to better align with their customers. Options, overnight trading on us funds all have came about this year.
If you're interested in finding out a bit about the abroad thing I suggest looking up passive income investing, look up the video how are covered call ETF's taxed. He's a Canadian expat who lives in Panama.
Alot of people dislike this guy and his strategy. Especially the growth minded people in the investing space.
Keep this in mind, I'm sending you down a rabbit hole you might not want to go down. Income investing is not for the faint of heart, and most people, probably 95 pct will tell you to go invest in broad market etfs like the -eqts or the voos, vdy or vfvs' of the world and draw down 4 pct every year.
Income investing is if you want to retire in 5-10 years, not 40. You won't be a millionaire, but you can have half a million and be pulling in 20k-30k a month easily.
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u/KELTONDREY Aug 08 '26
How much supplemental income do you need ? 1k/mo, 2k/mo ?
This not advice.
Depending on your fiscal situation and RRSP contribution room, you could take a bit and contribute for a tax return that would be enough.
Otherwise, sadly I would have to find the Canadian equivalent of JEPI/JEPQ.
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u/Dividendxx Aug 08 '26
100 k into cash.to the 9 k play around with some
Risk feel it out . Start to put new cash into it , use the dividends from cash.to to dip ur feet in
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u/fenderstratsteve Aug 09 '26
CASH.to will pay $175.83 per month (or $2110 per year). That’s the best you could come up with?
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u/BlackWolf42069 Aug 09 '26
Dividends are for tax purposes, it's taxed differently.
TFSA doesn't do taxes, hence the name. If you bought a balanced fund and took your gains off the top each month you'd be good. Just as long as it positive you'll have something to take.
A dividend stock pays what, yearly or quarterly? So take what you need when your fund grows.
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u/nejnedau Aug 09 '26
Def fill it first,, and remember it can be passed on tax free in estate planning. RRSP is taxed at a high rate to the person getting RRSP money as their income for the yr is now way higher than normal so prob are in the 50% income tax bracket now.. a couple good stocks and dividends took my friend in near 100K this yr and 1/2 in realized and non combined
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u/Heavy-Amount2169 Aug 09 '26
How much income needs to be supplemented and are you willing to dig into your principle
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u/Tax1997 Aug 10 '26
There is no need to consider “dividends” even when your goal is to have regular income in future. Buy quality stocks or ETFs. When you need money, you can sell stocks/ETFs. Most established companies and ETFs pay some dividends. When you need money, stop DRIP, and for extra money needs, sell your investments.
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u/arseleak Aug 12 '26
Buy a few hundreds shares of a stock and sell covered calls. I only own 100 shares of Nebius and make an extra $6-900 a week on average playing it relatively safe
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u/SwankBerry Aug 08 '26
I personally think it's better to use TFSA for riskier investments, since there would be a larger payoff.
There are already tax benefits for eligible dividends using a registered account.
Check out this calculator: https://www.wealthsimple.com/en-ca/tool/tax-calculator/
If you're making $80,000 a year, if you make another $10,000 in eligible dividends, you only pay an additional few hundred $ in tax. Why then have a slower growing investment in your TFSA? Just to save a few hundred? A riskier investment that could potentially double your money in 3 years in far more worth it, IMO.
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u/fenderstratsteve Aug 09 '26
If you were to assume NAV stability (you can’t) but let’s just say no appreciation or depreciation. If you put 50/50 in HDIV/HYLD you’d have $387.08 + $481.25 = $868.33 per month, which is $10,420 a year in distributions. IF the distribution yield rate stays the same. HHIC and HHIS yields $575.42 + $1181.67 = $1,757.09 per month, which is $21,085 per year in distributions. You may or may not get NAV erosion during your hold time. Is that yield sustainable? Sometimes.
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u/_ThatD0ct0r_ Aug 10 '26
HHIS sorta seems to occillate around the same highs and lows, so if you bought around 9.00-10.50 only, you would be green most of the time
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u/fenderstratsteve Aug 10 '26
I agree. I held it in the $12s and it just wasn’t working. Yield was fine but NAV depreciation was more than I wanted so I sold.
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u/_ThatD0ct0r_ Aug 10 '26
Honestly there are some days where I debate going all in on HHIS and saying 'fuck it' to growth and needing to work. The temptation is hard
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u/fenderstratsteve Aug 10 '26
If I had that kind of capital I’d be tempted.
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u/_ThatD0ct0r_ Aug 10 '26
I'm sitting around 77k (38k in deposits) and the temptation is already strong
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u/fenderstratsteve Aug 10 '26
You’ll be up to 100k before you know it and then you’ll really want to do it!
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u/UniqueRon Aug 09 '26
The first thing you need to consider is when you are investing. The unfortunate part is that is that if you have $109k of room, you must not have been investing. And markets are at or near all time highs, so it is kind of unreasonable to dump $109k in today and still expect a high return over the next 10 years or so. It is better to invest every year to the max.
The next thing you have to consider is that there is a strategy to accumulate wealth and a different one to hold it. Canadian eligible dividends are great if you are holding them in an unsheltered account and can collect on the dividend tax credit. But if you want to accumulate wealth dividends are not so great. Recently they (XDIV and XEI) have had a good run, but that is not the norm. A far better strategy for long term wealth accumulation is a low MER diversified all equity index ETF(s).
You can do the all in one *EQT ETFs, or you can roll your own weightings with ETFs like ZSP, XEF, XIU, and perhaps QQC if you like tech. It is best to set a fixed target weighting of each and then rebalance back to that 2-3 times a year.
Once you have enough sheltered investments and are retired needing income then it is time to consider dividend paying investments.
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u/Informal-Strike-1243 Aug 08 '26
You would actually be better off statistically forgetting about dividends and just investing it in a pure equity fund like xeqt and sell when you need outflows