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I have shares in my tax-free savings account and registered retirement income fund that I want to donate to charity. My broker said I would first have to transfer the shares in-kind to my non-registered account, which would be considered a sale, and I would therefore have to pay income tax. Is this true? Also, if I sell some other stocks in my non-registered account at a loss, can I use the loss to offset my taxes?

Your broker is correct that you must transfer the shares to a non-registered account before you can donate them. Alternatively, you could sell the shares and withdraw the cash to make a donation. However, there seems to have been some miscommunication with your broker regarding the tax implications.

When you make a withdrawal from your TFSA – whether in-kind or in cash – there are no tax consequences. However, if you make a withdrawal from your RRIF the value of the withdrawal is added to your income and taxed. This is probably the tax your broker was referring to.

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Keep in mind that, if the value of your RRIF withdrawal exceeds the government-mandated minimum percentage based on your age, your broker will withhold tax on the excess. The tax withheld will be credited toward your taxes payable when you file your return. The tax withheld varies based on the amount of the withdrawal.

From a tax perspective, then, given the choice between donating assets from a TFSA or RRIF, you would be better off withdrawing shares (or cash) tax-free from your TFSA, rather than making a taxable withdrawal from your RRIF.

To answer your second question, if you withdraw shares (or cash) from your RRIF, you can’t use a capital loss from the sale of stocks in a non-registered account to offset tax on the RRIF withdrawal. A capital loss can only be used to offset capital gains. The loss must first be applied to capital gains in the current year; any unused losses can be carried back up to three years or forward indefinitely to offset capital gains in those years.

That being said, you can likely use the value of the donation receipt to offset some or all of the tax on the RRIF withdrawal, said Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth Management.

Depending on the province or territory, your gift would produce a charitable tax credit worth at least 40 per cent of the donation amount. This assumes you have already made $200 in charitable donations, as the charitable tax credit is significantly higher above this threshold.

“In many cases, especially with seniors in low or middle tax brackets, once someone is donating more than $200 a year, the value of the donation credit actually exceeds the tax payable on the RRIF withdrawal, resulting in excess tax credits which can be used to reduce taxes payable on other income, such as Old Age Security and Canada Pension Plan benefits,” Mr. Golombek said.

Finally, you may wish to investigate a third option: If you hold stocks that have appreciated in value in a non-registered account, consider donating them to charity. When you donate listed securities or mutual funds that have appreciated in value, you don’t have to pay any capital gains tax. I wrote about this in a previous column (

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I have about $140,000 to invest in my registered retirement accounts. I’m 42, so I’ve got 23 years before I turn 65. I don’t like mutual funds because of the high fees, and I am leery of exchange-traded funds because with markets being so high, I’m worried my nest egg will take a hit that will take years to recover from. I was thinking of investing in bank stocks because they pay good dividends and are still trading below prepandemic levels. What do you think?

I have news for you: Your nest egg is going to take a hit at some point – many hits, actually. Market setbacks are a perfectly normal part of investing. Instead of trying to avoid them, successful investors learn to live with them. Volatility – sometimes severe volatility – is the price investors pay for the long-term rewards that stocks deliver.

With that in mind, your goal should be to construct a low-cost, well-diversified portfolio that is appropriate for your level of investing knowledge. I’m a big fan of stocks with rising dividends. However, unless you are an experienced investor, owning individual stocks may not be the best choice as they require research and monitoring, and may not provide proper diversification.

Exchange-traded funds are a great alternative. A Canadian index ETF will give you exposure to all the big Canadian banks – plus utilities, power producers, railways, tech stocks, pipelines, real estate and other sectors – at very low cost. The iShares Core S&P/TSX Capped Composite Index ETF (XIC), for instance, charges a management expense ratio of just 0.06 per cent and pays a dividend yield of about 3.3 per cent. To enhance diversification, consider adding a U.S. market ETF such as the BMO S&P 500 Index ETF (ZSP), which trades in Canadian dollars, has an MER of 0.09 per cent and yields about 1.5 per cent.

Want an even simpler solution? Check out the newer one-stop ETFs that give you a globally diversified basket of stocks and bonds with a single purchase. Vanguard Canada, for example, offers five “asset allocation ETFs” with varying levels of equity exposure. Given your long investing horizon, the Vanguard Growth ETF Portfolio (VGRO) – which has an 80/20 mix of equity and fixed income – might be appropriate.

Finally, if you are nervous about the short-term market outlook, you could always invest your money in stages over the next six months to a year. Studies have shown, however, that investing a single lump sum usually (but not always) produces higher returns.

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E-mail your questions to I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.

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