Off, the plan moves only the money you told it to: each contribution flow takes what cash can give it, and whatever is left sits in cash at the savings rate. On, the leftover is pushed down a list of accounts in the order you set, and each one takes as much as its room allows before the rest moves on. Nothing is decided invisibly — the amounts it chose are on every month row, separately from your own contributions.
The default order, and why
FHSA → RRSP → TFSA → non-registered. This is our convention, and the order Gilded's "cash priorities" use.[1] It is what the engine's own comparison of after-tax outcomes found: the FHSA wins in every case, because it is deductible going in and tax-free coming out; the RRSP beats the TFSA whenever your tax rate in retirement will be below today's, which is most earners; the two are identical when the rates are equal; and the TFSA wins when the retirement rate will be higher — a household expecting that should move the TFSA up. Non-registered comes last because it is the only one that is taxed as it grows.
RESPs (see RESP grants) are not in the default list. Filling one is a decision about a child, not a tax ordering; add it to the list yourself if you want it filled.
After you retire
The RRSP takes leftover cash only while you earn a salary. From the month you retire, the leftover skips your RRSP and goes to the TFSA, then to non-registered savings.[2] The CRA puts it plainly: "Usually, the idea is that you're contributing when you're earning higher income." New RRSP room comes only from last year's earned income, and a deduction taken at a retiree's lower rate is taxed again when it comes out of the RRIF, where it also counts toward the OAS recovery tax and the GIS. A TFSA dollar does neither. A contribution you set yourself still goes in. Someone with no salary in the plan is treated as retired from the start.
Filling new TFSA room from savings
Each January a new year of TFSA room arrives. By default the plan fills it from your savings: once that month's leftover cash is placed, any room still empty is filled from your non-registered savings: the plan sells whole units at market, and the proceeds go into your own TFSA.[3] The cost is the tax on the gain the sale realises that year; after that, the growth is never taxed, so it never raises the income that benefits are tested on. This is our convention: the CRA's rules allow it, and no government or PWL source tells households to do it. A holding worth less than it cost is left where it is, because buying the same investment in the TFSA within 30 days would deny the loss (a "superficial loss"). Only your own savings fill your own TFSA. You can turn it off. The move is part of Pro: a free plan does not make it, so savings reach the TFSA only through leftover cash.
Moving savings into the TFSA does not make a short month draw your RRSP sooner: while you earn a salary, the RRSP is drawn last, after the TFSA (see borrowing when short).[4]
What the engine does
- Runs after your explicit contributions, so those keep their order and their warnings; see contributions when cash is short.
- Asks each account for everything that is left, and lets the room clamp say no: the FHSA stops at $8,000 a year and $40,000 for life,[5] the RRSP at 18% of last year's income plus carried room,[6] the TFSA at its room.[7] No over-contribution is ever modelled.
- Allocates the April refund on the deductions it earned the year before, the same way.
- Keeps back the cash buffer you set, in months of living costs (none by default).
What it deliberately does not
- Pay down debt. Gilded's first priority is "pay down all debt"; the plan has no prepayable debt yet, so the list starts at the FHSA.
- Choose the order for you from your own numbers. The default is the general answer; the optimizer on the accounts card is where the plan's own rates get a say.
See also: expected returns and fees, capital gains, over-contributions.