How many TFSA accounts can you have? Is it just one? Can you have more than one TFSA account?
If you’re interested in maximising your tax-free savings potential and would like to know if you can have more than one tfsa account.
Well, the answer is “YES”. You can open and contribute to multiple Tax-Free Savings Accounts simultaneously. However, you cannot exceed your annual contribution limit.
In this comprehensive article, I explored some benefits and downsides of having multiple TFSAs and discussed considerations to remember while managing multiple accounts.
Can You Have More Than One TFSA?
The simple answer to this question is YES. You can have as many TFSA accounts as you like.
Having multiple TFSAs can be advantageous for individuals looking to diversify their investments or those with multiple income sources.
The Canada Revenue Agency (CRA) doesn’t have a restriction for multiple TFSA accounts. They allow each Canadian to open multiple TFSA accounts.
According to the last CRA statistics in 2017, the average number of TFSAs per holder is 1.38, which means many Canadians have more than 2 TFSA accounts.
However, having more than one TFSA account does not give you more contribution room. You must stay within your annual contribution limit. According to the CRA official website, the total amount you contribute for all your TFSA accounts must not exceed the TFSA contribution room for that year.
Benefits of Having Multiple TFSA Accounts
TFSA is popular among Canadians because of its tax advantages. Opening multiple Tax-Free Savings Accounts (TFSA) can have a range of benefits for individuals looking to diversify their investments and maximize their tax-free savings potential.
Let’s look at the benefits of having multiple TFSAs and how they can help optimise your investment strategy and financial goals.
1. Different Saving Goals
Multiple TFSAs let you save for different purposes. For example, if you want to save for rainy day funds, a car, a down payment on a house, and your retirement. In that case, you can open one account for each saving purpose and earmark each account for a specific purpose.
With this strategy, you are less likely to dip into the savings meant for something else.
2. Investing in a Product That may be Unavailable
Multiple TFSAs let you invest your money in a specific product unavailable within your current TFSA account.
For example, suppose you already have a TFSA account with a bank offering only savings accounts. Along the line, you are interested in buying ETFs and see an investment opportunity you want to seize.
In that case, you will need to open another TFSA account with a different financial institution that will allow you to buy the investment product you are seeking.
Downsides of Having Multiple TFSA
While there are no restrictions to having more than one TFSA, there are a few downsides you may have to consider before you open multiple TFSA accounts.
1. TFSA Contribution Limit
The annual TFSA contribution limit or the total contribution room is not per account held but per individual. For example, the TFSA contribution limit for 2024 is $7,000.
Except you have unused contribution rooms from past years, your total contributions to all your accounts cannot exceed $7,000.
So, if you have two separate TFSA accounts, you can contribute $4,000 and $4,000 each to both accounts, but if you contribute $7,000 to both accounts, you will have to deal with the CRA for over-contribution and pay the penalty tax.
The CRA charges tax equal to 1% of the highest excess TFSA amount in your accounts each month, and the excess money remains in your TFSA accounts.
So, if you make an extra contribution of $5000 into any of the two TFSA accounts in that year, a penalty of $50 will be due each month until you withdraw the excess TFSA contribution or the excess contribution is eliminated the following year by the new contribution room.
2. Keeping Track of TFSA Contributions
Knowing that the TFSA contribution limit is not per account but per person, it becomes difficult to keep track of all your TFSA account contributions if you have more than one account. Your contributions may exceed the contribution limit for that year.
Many Canadians with more than one TFSA account have been charged the 1% penalty and have had to spend long hours on the phone with CRA agents or make complaints in their offices.
Without a sound system to help you track your contributions, things can get confusing and become a nightmare, especially when you are making several contributions to your accounts in different months.
However, good TFSA contribution trackers on platforms like Wealthsimple can help you keep track of all your accounts and contributions in that year.
3. Fees
With more than one TFSA account comes higher investment fees, especially if you have managed accounts and not self-directed investments.
However, your account management fees drop as your balances or deposits increase. This is a benefit you cannot enjoy with multiple TFSA accounts.
For example, Wealthsimple’s 0.50% annual management fees drop to 0.40% when your deposit exceeds $100,000, and you will get additional perks. Even Questrade’s Questwealth Portfolio has a 0.25% annual management fee which drops to 0.20 with assets above the $100,000 mark.
You cannot use this cost-saving strategy when splitting your TFSA across multiple accounts. Consolidating your accounts at a single provider with lower fees will help you save money on management fees.
Tips For Managing Multiple TFSA
Regardless of the benefits of having more than one TFSA account, managing the accounts can be challenging for most people.
If you already have more than one TFSA account or intend on having more than one TFSA account, here are a few tips that you can employ to manage all your accounts to avoid TFSA penalties.
1. Use a TFSA contribution tracker: One good way to stay on top of your accounts and ensure you don’t exceed the TFSA contribution limit for the year is to take advantage of the many contribution tracker apps available.
A good contribution tracker will help you keep track of your contributions across your different accounts and financial institutions. These apps will let you see how much contribution room is available and track your deposits and withdrawals.
2. Start your account with a plan: Before you open a new TFSA account, ensure you already have a plan on how much you intend to contribute during the year and how you will use your account.
A plan helps ensure that your TFSA aligns with your financial goals. If there are any changes in your financial situation within the year, you can update your plans accordingly.
3. Close old accounts: Look at all your TFSA accounts and ask yourself why you have them. If accounts with brokerages no longer meet your objectives, you can move out your holdings and close the account.
After all, you can transfer funds between TFSA accounts without any tax implications. So, consolidating your accounts into one or a few will save on fees and make tracking easier.
4. Be intentional with your TFSA accounts: Because there are no restrictions to opening multiple TFSA accounts, opening a new account can be tempting. However, you must be intentional with your plans.
Why do you need to open a new TFSA account? Does having an account align with your goals? Is opening another account the best path toward your financial goals?
The answers to these questions will determine if you need another TFSA account. If not, you should stick with the TFSA you already have.
5. Have a system in place: Do not contribute randomly to your TFSA accounts. Holding all your individual stocks with one brokerage (Wealthsimple Trade) and all your ETFs in another (Questrade) is advisable. This will help you reduce the chances of over-contributing your TFSA accounts.
Multiple RRSP or RESP Accounts
Just as you can open more than one TFSA account, you can also open multiple RRSPs and RESPs. You can open separate RESPs for your kids and multiple RRSPs for your retirement savings.
For example, if you already have a group RRSP through your employer, you can open an additional RRSP to maximise your contribution room.
However, managing multiple RRSPs and RESPs can be challenging, just like managing multiple TFSA accounts.
Ensure you watch out for your available contribution rooms to avoid over-contributing, merge multiple RRSPs and RESPs and close old accounts, and use a contribution tracker to keep track of your contributions.
Related: TFSA vs RRSP: How to Choose?
Final Thoughts on Can You Have More Than One TFSA
Having more than one Tax-Free Savings Account (TFSA) in Canada is absolutely possible. The CRA does not limit the number of TFSAs that an individual can hold as long as the contribution limits are not exceeded.
having multiple TFSAs can offer several advantages, such as diversifying investments, taking advantage of different interest rates, and separating savings for different goals.
Overall, the decision to have more than one TFSA is a personal choice that should be made based on individual financial goals and circumstances. It is recommended to consult with a financial advisor to determine the best course of action for one’s specific needs.
Related: Roth IRA Canada vs TFSA vs Other Retirement Accounts Compared
FAQs on Can You Have More Than One TFSA
What is the Tax-Free Savings Account limit 2024?
The TFSA contribution or dollar limit is $7000 for 2024.
How much can I put in my TFSA if I have never contributed?
If you’ve been eligible since 2009 and have never made a contribution, your total unused contribution room for 2024 is $95,000.
How do I know my TFSA contribution room?
The quick and easiest way to check and confirm your TFSA contribution room is by logging in to your MyCRA account or contacting TIPS by phone.
Can I have multiple TFSAs with different banks?
Yes. You can have TFSA accounts at several banks, financial institutions, and brokerages. CRA deals with the TFSA limits and not the number of accounts.
