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Thread: Have you always maximized your RRSP contributions?

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    Default Have you always maximized your RRSP contributions?

    Question: Since the year you started working, have you always maximized your RRSP contributions, irrespective of times you've taken on a mortgage, got married or had any other significant life or expenditure changes?

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    No. Not even once.

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    Couple times when I had the money.. but it's been fewer than 3 times all together.

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    Never. Life's too short and can end too soon, to waste it saving for retirement or a rainy day. Better spending on helping your family so they can prosper for themselves.

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    While many articles talk about how people aren't saving enough for retirement, there are quite a few people who do max out their rrsp's as much as possible and end up in the position where they have to withdraw far more than they need in retirement (due to forced withdrawal rules of RRIFs). This can lead to higher taxes and troubles in qualifying for income-tested benefits, such as OAS.

    Maximizing your RRSP contributions in your 20's is a great start, and then you can just let it idle from there.
    If you are just starting out an RRSP in your 40's, then for sure, maximizing it might be a good idea.

    There's no one answer though, as it completely depends on your retirement goals, desired income, etc etc and needs to be part of a full package including TFSA's and non-registered investments/savings (as well as CPP, pensions plans, and possibly OAS).

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    Don't think I've ever contributed the maximum which is 18% of income up to $23,820 in 2013. Contributing at that level would end you up paying more in taxes in retirement than you did working. Not that there is anything wrong with paying taxes.

    I do contribute to a well-diversified RRSP every year though and also to a Group RRSP through my employer. RRSP contributions are tax deductible and one of the few tax breaks available to folks who make an average income. Income also grows tax-free within an RRSP.

    Even though I have no plans to stop working (I'm 59), there's peace of mind in having a nest egg to fall back on should something like a serious medical condition result in a major loss of income.

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    Nope. I only contribute enough into RRSPs per year to get a decent tax refund. I've been contributing to my individual and company RRSP plans since my early 20s, so I've already got a decent nest egg built up. I never put my eggs in one basket, I also park my chedda into investments, GICs, TFSA, etc.
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    I agree SDM. One word of caution. If there is another serious financial crisis, your RRSP can easily be singled out by our government. It is very easy (although politically risky) to change the tax rate of any withdrawals of your RRSP savings.

    If you do not believe me, take a look at Cyprus

    Cyprus Agrees 20% Tax On Bank Deposits
    Politicians in Cyprus are said to have agreed a new levy on savers in an attempt to secure a critical European bailout. http://news.sky.com/story/1068912/cy...-bank-deposits
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    Storing your money under your mattress is looking more and more appealing. :P

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    I'm asking because there's a parallel here and how Alberta operated in the 1980s and 1990s. Today, in retrospect, people blast the Alberta government for failure to "have a plan", to invest for the future, to maintain infrastructure, etc. Instead it focused on near-term issues like paying down debt (with long-term benefits), cutting budgets, etc. However, the Government was elected by the people and is staffed by the people so retrospective criticism tends to ignore the attitudes, thinking, facts and misinformation of the day.

    As such, we all know that in retirement, no matter how poor the returns, we'll all probably be wishing we'd forever max'd our RRSP contributions but each and every year we have to make a decision to prioritize our spending vs investing for the long term. As a result a lot of people end up with a retirement deficit somewhat analogous to the province's infrastructure deficit.

  11. #11

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    RRSP's are only one investment vehicle. One of the issues is, if you have a stable income, them RRSP's can be good for you. If your income is increasing and your investment portfolio is growing, when you take your RRSP funds out it is taxed as income, you may be taxed at a higher rate than when you placed it into your RRSP.
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    I usually throw a couple of grand into RRSP a year... not sure why, investment diversification is good, but from an investment point of view they really have really underperformed over the years. I've been funnelling money into a TFSA over the past few years, it seems like a good place to park money and get a tax credit as well... but from an ROI point of view my stocks have outperfromed all my other investments, including real estate, by a WIDE margin over the past five years.
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    Yes, every year. But only after maxing out TFSAs etc. as you have to balance taxable and non-taxable assets.
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    Don't do RRSPs, use other vehicles for investment and or savings.
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    Quote Originally Posted by 240GLT View Post
    I usually throw a couple of grand into RRSP a year... not sure why, investment diversification is good, but from an investment point of view they really have really underperformed over the years. I've been funnelling money into a TFSA over the past few years, it seems like a good place to park money and get a tax credit as well... but from an ROI point of view my stocks have outperfromed all my other investments, including real estate, by a WIDE margin over the past five years.
    ^Any type of investment vehicle can be held inside an RRSP including stocks. TFSAs are another useful option, but unlike RRSPs where the contributed amount is tax deductible, only the income earned inside the TFSA is tax exempt.

    Even if you never intend to stop working, having a retirement nest egg is still prudent. Life happens. I've seen too many people experience an unforeseen medical condition or disability that results in a significant or total loss of employment income.

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    It's always good to have an emergency stash here and there, just in case. For instance, I'm doing payroll contributions to Canada Savings Bonds. It's not for investment purposes since the interest rates suck, it's just another place to squirrel away some coin.
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    I don't come close to maximizing my RRSPs. Why not? Because I'm I'm my highest-expense, lowest income stage of life. I have a mortgage for a few more years, my wife is working little because we have a pre-school kid, and we have expenses for a family of 5. So that extra cash is worth more to us now than it will be later.
    Once the mortgage is gone I intend to move most of that monthly payment to RRSP, so after I'm 40 I'll be close to maxing out my RRSP contributions, and at 50 we might be able to save close to 50% of our income. Or not.

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    Quote Originally Posted by IanO View Post
    Don't do RRSPs, use other vehicles for investment and or savings.
    Same. Never seen the point of RRSPs with such low interest rates.
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    ^^exactly. Putting more towards my mortgage will help me more than RRSP contributions at the moment.
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    Quote Originally Posted by Sonic Death Monkey View Post
    Nope. I only contribute enough into RRSPs per year to get a decent tax refund. I've been contributing to my individual and company RRSP plans since my early 20s, so I've already got a decent nest egg built up. I never put my eggs in one basket, I also park my chedda into investments, GICs, TFSA, etc.
    You realize that you can hold just about any sort of "investment" in an RRSP, including GIC's right? A lot of people don't seem to understand that an RRSP is not just a pre-set plan laid out by your bank or company.

    Quote Originally Posted by Edmonton PRT
    I agree SDM. One word of caution. If there is another serious financial crisis, your RRSP can easily be singled out by our government. It is very easy (although politically risky) to change the tax rate of any withdrawals of your RRSP savings.
    How so, exactly? RRSP withdrawals have an automatic withholding of 30 or 35% I believe, but when it all comes out in the wash at tax time, the actual tax rate is whatever your marginal income tax rate is. There isn't a special RRSP rate, it's the income tax rate.

    Quote Originally Posted by 240GLT
    I usually throw a couple of grand into RRSP a year... not sure why, investment diversification is good, but from an investment point of view they really have really underperformed over the years. I've been funnelling money into a TFSA over the past few years, it seems like a good place to park money and get a tax credit as well... but from an ROI point of view my stocks have outperfromed all my other investments, including real estate, by a WIDE margin over the past five years.
    What do you mean about diversification, exactly, or that RRSP's have "underperformed the market over the years"? RRSP's are not an asset or investment class. They can be invested in anything from individual stocks, bonds, or GIC's to mutual funds, ETF's, and so on.

    Also, you don't get a tax credit from a TFSA. Basically a TFSA is the exact opposite of an RRSP. Instead of getting a tax credit at the start and paying taxes when you withdraw as you do with an RRSP, with a TFSA you don't get a tax credit at the start, you invest after-tax income, and it grows tax free with no taxes upon withdrawal.

    Otherwise an RRSP and TFSA are actually very similar, allowing you to hold the same types of investments.

    I would hope that you haven't been investing in stocks with post-tax income outside of an RRSP or TFSA, because you're going to end up paying tax on your gains and dividends that you otherwise wouldn't if they were held within either.
    Last edited by Marcel Petrin; 29-11-2013 at 11:01 AM.

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    I'll be blunt: it appears that the majority of people in this thread do not actually know or understand how an RRSP works.

    Quote Originally Posted by Greenspace
    Same. Never seen the point of RRSPs with such low interest rates.
    So then purchase individual stocks, or mutual funds (actually don't because they're almost all terrible with ridiculously high management fees), or better yet, index ETF's. The TSX is up around 12-13% this year, while a global stock index like Vanguards' VT is up 33% in Canadian dollar terms.

    Quote Originally Posted by IanO
    ^^exactly. Putting more towards my mortgage will help me more than RRSP contributions at the moment.
    What is your mortgage rate? 3 or 4%? It's a guaranteed return, which is nice, but a mix of equity and bond ETF's will return 7-9% on average over the long term, PLUS you will immediately get 30% or more of your RRSP contribution back in tax refunds. In terms of your personal wealth/net worth, paying your mortgage down faster in lieu of making RRSP contributions is a huge mistake.

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    What do you mean, exactly? RRSP's are not an asset or investment class. They can be invested in anything from individual stocks, bonds, or GIC's to mutual funds, ETF's, and so on.
    Of course they are tied to all kinds of investments. But I have relatively little control over that, vs. the control I have over my stocks. An RRSP is what it is.. it's a vehicle.

    Also, you don't get a tax credit from a TFSA. Basically a TFSA is the exact opposite of an RRSP. Instead of getting a tax credit at the start and paying taxes when you withdraw as you do with an RRSP, with a TFSA you don't get a tax credit at the start, you invest after-tax income, and it grows tax free with no taxes upon withdrawal.
    Incorrectamundo. I got a tax receipt for my initial investment into my TFSA. A portion of which I then invested in stocks. I am not 100% sure how that worked... nor do I particularly care.

    I would hope that you haven't been investing in stocks with post-tax income outside of an RRSP or TFSA, because you're going to end up paying tax on your gains and dividends that you otherwise wouldn't if they were held within either
    As noted, I buy stocks through my TFSA

    EDITED: and I'll add that I've put most of my savings into paying down mortgage debt, which I see as primarily beneficial. The RRSP's mutuals and the RPP I contribute to I rarely even think about. I do buy stocks, and have done very, very well on those.

    I'll semi-retire when I'm 50ish. At that point, I know I will still work doing something... maybe do something fun like contract myself out as a commissioning agent or something like that where i can work when I want.. I have no interest in my dad's version of retirement, which is to sit in an adarondak chair on the dock at the cabin a read bird books all day. I'd go crazy if I didn't have something to do.
    Last edited by 240GLT; 29-11-2013 at 11:17 AM.
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    Quote Originally Posted by Marcel Petrin View Post
    What is your mortgage rate? 3 or 4%? It's a guaranteed return, which is nice, but a mix of equity and bond ETF's will return 7-9% on average over the long term, PLUS you will immediately get 30% or more of your RRSP contribution back in tax refunds. In terms of your personal wealth/net worth, paying your mortgage down faster in lieu of making RRSP contributions is a huge mistake.
    paying down your mortgage does not save you the current interest rate. it saves you the future interest rate. unless you are going to fully pay it off this term, you are likely going to have to refinance when the term is up (generally every 5 years). every dollar you pay off now is a dollar you don't have to refinance. if one believes that mortgage rates will be higher when the term is up, the financial benefit is higher than the current rate. paying down the mortgage doesn't save you the current rate, it saves you the blended average of the current rate and all the future rates you will pay on your mortgage until it is gone. considering we are at or near historical lows...
    this contrasts with the US, where their terms are for 30 years (compared to our 5), so there is a great possibility that you have the rate for the entire duration of the loan.

    you are also mixing up before tax and after tax returns. returns on rrsp must be taxed leaving the rrsp at the end. mortgages are paid with after tax dollars.

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    Quote Originally Posted by 240GLT View Post
    Incorrectamundo. I got a tax receipt for my initial investment into my TFSA. A portion of which I then invested in stocks
    That is not correct. TFSA contributions are not tax deductible like RRSPs. You may have gotten a receipt which showing you contributed to it. You put that on your tax forms so the government can keep track of money in/out of your TFSA (to ensure you don't go over the yearly contribution limit), but there is no tax credit/benefit or rebate associated with it.

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    ^ OK, good enough then... I got something from the bank and gave it to the government.

    And ended up with a decent tax return. So really to me, it matter little how the nuts & bolts work
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    Quote Originally Posted by 240GLT
    Of course they are tied to all kinds of investments. But I have relatively little control over that, vs. the control I have over my stocks. An RRSP is what it is.. it's a vehicle.
    I'm still not clear on what control you have in buying stocks outside of an RRSP/TFSA vs. inside of one. My RRSP and TFSA accounts with ScotiaMcleod are full trading accounts, no different than my non-registered account. I can buy and sell stocks through their brokerage no differently between the three accounts.

    Quote Originally Posted by 240GLT
    Incorrectamundo. I got a tax receipt for my initial investment into my TFSA. A portion of which I then invested in stocks
    Sorry, that's impossible. That is not how TFSA's function.

    http://www.tfsa.gc.ca/

    Contributions are not tax-deductible.
    Quote Originally Posted by 240GLT
    I do buy stocks, and have done very, very well on those.
    Which you can do within an RRSP, and avoid any capital gains tax implications when selling for a profit nor do dividends paid count as income. Until you withdraw from the RRSP, of course.

    Quote Originally Posted by nobleea
    mortgage stuff
    Points taken, I wasn't going in to much detail.

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    I think you're not getting my point.

    When I buy RRSP's, I buy all the investments that whoever manages the fund has tied up in them. I understand I can borrow against RRSP's for things.. not really interested in that though.

    When I buy stocks, I am buying actual stock, through the TFSA

    I am sure there's better ways to do it and I could likely save some tax here & there, but frankly it's not all that intersting to me. Not nearly so as investing in the stock market.

    And all in all I've done extremely through my entire potfolio (RRSPs & mutuals, real estate and stocks + an RPP) so at the end of it all I'm happy with the direction that I've taken... especially since I started managing my own investments rather than letting HSBC do it
    Last edited by 240GLT; 29-11-2013 at 11:31 AM.
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    I have an old buddy of mine doing all my financial planning who I trust, and he's done a bang-up job. And like 240, I don't really care as long as I'm not losing my shi(r)t.
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    ^ Yup! I waste plenty of money on inconsequential stuff... I'm not sweating my investments too much at this point.

    They're going fine, I'm happy.
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  30. #30

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    Quote Originally Posted by Marcel Petrin View Post
    Quote Originally Posted by Edmonton PRT
    I agree SDM. One word of caution. If there is another serious financial crisis, your RRSP can easily be singled out by our government. It is very easy (although politically risky) to change the tax rate of any withdrawals of your RRSP savings.
    How so, exactly? RRSP withdrawals have an automatic withholding of 30 or 35% I believe, but when it all comes out in the wash at tax time, the actual tax rate is whatever your marginal income tax rate is. There isn't a special RRSP rate, it's the income tax rate.
    Registered Retirement Savings Plans are registered with the Government of Canada. If there is a major financial crisis or run on the banks, RRSP's could be frozen and according to the CDIC,
    Not all accounts and financial products that can be registered in an RRSP are eligible for coverage by CDIC. For example, CDIC does not insure mutual funds or stocks. - See more at: http://www.cdic.ca/Calculate/RRSP/Pa....wc2pp0Al.dpuf
    As in the Cyprus example and from a poster whose parents lived through two complete currency failures in Germany, 1923 and 1947, your RRSP may not be as protected as you think. It is possible that at a time of crisis by an act of Parliament, that in order to prevent people taking out their RRSP savings, that RRSP funds could be frozen or subject to taxation at the time of withdrawal of 25%, 50% or more.




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    BTW, if your RRSP has stocks in the portfolio and the Stock Market crashes, say goodbye to your retirement.
    Last edited by Edmonton PRT; 29-11-2013 at 11:48 AM.
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    Quote Originally Posted by 240GLT View Post
    I think you're not getting my point.

    When I buy RRSP's, I buy all the investments that whoever manages the fund has tied up in them. I understand I can borrow against RRSP's for things.. not really interested in that though.

    When I buy stocks, I am buying actual stock, through the TFSA

    I am sure there's better ways to do it and I could likely save some tax here & there, but frankly it's not all that intersting to me. Not nearly so as investing in the stock market.

    And all in all I've done extremely through my entire potfolio (RRSPs & mutuals, real estate and stocks + an RPP) so at the end of it all I'm happy with the direction that I've taken... especially since I started managing my own investments rather than letting HSBC do it
    i think the point might be being missed in the other direction. when you buy rrsp's you may well be purchasing investments from the rrsp administrator (i.e. rbc funds from rbc, manulife funds from manulife etc.) with the monies you contribute but those funds aren't your rrsp. just as your rrsp can consist of funds bought with your contributions, they could just as well consist of stocks or bonds or qualified mortgages purchased with those monies. you can also sell those funds - or stocks or bonds or mortgages or anything else in your rrsp - and purchase something else with them - which is still in your rrsp - or even simply have the cash itself sit in your rrsp. none of this requires any additional "borrowing against" your rrsp.
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    ^ Obviously there is come confusion over nomenclature. Which really isn't worth spending any time discussing as it's pretty inconsequential
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    Quote Originally Posted by Edmonton PRT View Post
    Quote Originally Posted by Marcel Petrin View Post
    Quote Originally Posted by Edmonton PRT
    I agree SDM. One word of caution. If there is another serious financial crisis, your RRSP can easily be singled out by our government. It is very easy (although politically risky) to change the tax rate of any withdrawals of your RRSP savings.
    How so, exactly? RRSP withdrawals have an automatic withholding of 30 or 35% I believe, but when it all comes out in the wash at tax time, the actual tax rate is whatever your marginal income tax rate is. There isn't a special RRSP rate, it's the income tax rate.
    Registered Retirement Savings Plans are registered with the Government of Canada. If there is a major financial crisis or run on the banks, RRSP's could be frozen and according to the CDIC,
    Not all accounts and financial products that can be registered in an RRSP are eligible for coverage by CDIC. For example, CDIC does not insure mutual funds or stocks. - See more at: http://www.cdic.ca/Calculate/RRSP/Pa....wc2pp0Al.dpuf
    As in the Cyprus example and from a poster whose parents lived through two complete currency failures in Germany, 1923 and 1947, your RRSP may not be as protected as you think. It is possible that at a time of crisis by an act of Parliament, that in order to prevent people taking out their RRSP savings, that RRSP funds could be frozen or subject to taxation at the time of withdrawal of 25%, 50% or more.


    BTW, if your RRSP has stocks in the portfolio and the Stock Market crashes, say goodbye to your retirement.
    this is pretty much a straw man discussion...

    yes the government "could" tax rrsp accounts. but not because they are "registered". yes they are registered but only in regard to the tax benefits accruing to their owner.

    every other account you have with your bank is also "registered" with the government and tied directly to you (that's how you get your t4 for two dollars and thirteen cents in interest every year that you have to declare as income on your tax return).

    you could buy real estate instead but that is also registered and it's probably just as likely and potentially more palatable politically to impose a capital tax on things like real estate than to take money from rrsp accounts.

    cypress was a bit different because of the extremely high proportions of bank accounts in cypress consisting of foreign monies (primarily taking advantage of tax law loopholes) with a very high proportion of them being russian.

    if it's a currency failure your concerned with (which is really rampant runaway inflation), it doesn't matter whether your cash is in a bank account or in your pocket. it's losing its value because of inflation, not because of government taxation (monetary policy and taxation may be somewhat related but they are far from the same thing) and it matters not whether the account is in or out of an rrsp.

    you could "own" things instead - cars or art or jewelry - but they can depreciate in value and their value isn't always terribly liquid when you need it.

    if you lose your investment in stocks because the stock market crashes, you wouldn't lose any more or any less if that investment was in or out of an rrsp account. if they were in an rrsp however, you would at least have had the original tax deductions/credits that you would not have had without the rrsp investment.
    Last edited by kcantor; 29-11-2013 at 11:57 AM.
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    ^^^Stock markets are volatile, but over the time frame of most people's working lives they go up way more than down. Just make sure you are buying quality.

    Canadian bank stocks are one of the safest equity investments out there, and even leaving aside appreciation of shares, the dividends alone pay multiples above what can be earned in a GIC.

    In addition to bank shares, I also hold Investment Shares from my credit union (Servus) in an RRSP. In the 15 or so years I've owned them, the annual yield on the Investment Shares has never been lower than 5.75 per cent (all tax free). Unfortunately, Servus isn't selling any more because they are already over-capitalized.

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    Quote Originally Posted by 240GLT View Post
    ^ Obviously there is come confusion over nomenclature. Which really isn't worth spending any time discussing as it's pretty inconsequential
    No, it's not about nomenclature at all. And it's VERY consequential. You seem to be indicating that you can only buy set plans within an RRSP:

    Quote Originally Posted by 240GLT
    When I buy RRSP's, I buy all the investments that whoever manages the fund has tied up in them.
    That's not an RRSP. That's a mutual fund held within an RRSP. You don't necessarily "buy" an RRSP. You seem to have a fundamental misunderstanding of what an RRSP is, and are confusing it with plans or funds held within an RRSP.

    All of my RRSP funds reside within a registered ScotiaMcLeod trading account where I can invest in any traded equities I choose, in real time during trading hours.

    Quote Originally Posted by 240GLT
    I understand I can borrow against RRSP's for things.. not really interested in that though.

    When I buy stocks, I am buying actual stock, through the TFSA
    I'm not talking about borrowing against an RRSP. I'm talking about buying "actual stock" within the RRSP, the same as you are apparently doing within your TFSA. It works exactly the same.

    Quote Originally Posted by 240GLT
    I am sure there's better ways to do it and I could likely save some tax here & there, but frankly it's not all that intersting to me. Not nearly so as investing in the stock market.
    You're throwing away anywhere from 20-40% of your returns by paying taxes on them if you're not investing within an RRSP or TFSA. It sounds like you may be doing it within a TFSA, in which case great. If not, then you really should open trading accounts for either or both of your TFSA and RRSP.

    Quote Originally Posted by Sonic Death Monkey
    I have an old buddy of mine doing all my financial planning who I trust, and he's done a bang-up job. And like 240, I don't really care as long as I'm not losing my shi(r)t.
    Minimizing your tax burden is one of the most important principles of wealth management. The same way that compounding interest can make a huge difference over time, so can saving a few percent of taxes over your earning years.

    Quote Originally Posted by Edmonton PRT
    Registered Retirement Savings Plans are registered with the Government of Canada. If there is a major financial crisis or run on the banks, RRSP's could be frozen and according to the CDIC,

    As in the Cyprus example and from a poster whose parents lived through two complete currency failures in Germany, 1923 and 1947, your RRSP may not be as protected as you think. It is possible that at a time of crisis by an act of Parliament, that in order to prevent people taking out their RRSP savings, that RRSP funds could be frozen or subject to taxation at the time of withdrawal of 25%, 50% or more.
    That's not saying that the Canadian Government could seize your assets. That's saying that if the institution that holds your assets goes under and isn't bailed out, CDIC won't cover your losses with some asset classes. That applies for absolutely every sort of financial instrument other than simple bank accounts below a threshold ($100,000 I believe). The concern there isn't the government seizing your assets, the concern is that the institution that you've entrusted with your assets ceases to exist.

    That problem is not unique to RRSP's or TFSA's. It applies across the board. Same goes with a currency crisis or devaluation. The only protection from such events is buying and holding physical gold, which is a poor investment over time.

    Quote Originally Posted by Edmonton PRT
    BTW, if your RRSP has stocks in the portfolio and the Stock Market crashes, say goodbye to your retirement.
    My RRSP investments recovered the majority of it's losses within two years of the 2008 crash. Since I started my self managed RRSP in 2003, almost entirely invested in the stock market, it's returned a reasonably decent 6% a year. There is absolutely no 20 year period in the 150 year history of the modern stock market where average annual returns are negative. Over long time periods the stock market is very, very safe. As you approach your retirement years and will be needing your funds, you should be shifting out of equities and in to bonds or GIC's. The general rule of thumb is holding your age in bonds as a percentage of your portfolio, so if you're 60, 60% of your investments should be in bonds. You can adjust that up or down depending on your appetite for risk.

    So I guess I'm with Ken here, you've identified several different risks, some of which aren't even related to each other or specifically to RRSP's, and I'm not entirely clear on what your point even is.

  36. #36

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    kcantor, IMHO the best investment usually is in real estate. Owning your own home that is paid off offers a shelter from both inflation and the weather. As long as you can pay the taxes on your home, you have your assets covered. A mix of stocks, real estate inculding land, RRSP's and other investments such as gold are all prudent.

    The problem for most Canadians is after filling up our gas tanks, paying our phone bills, new coats for the kids and looking at our credit card bills, what is left to actually save?
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  37. #37
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    Quote Originally Posted by Marcel Petrin View Post
    I'll be blunt: it appears that the majority of people in this thread do not actually know or understand how an RRSP works.

    Quote Originally Posted by Greenspace
    Same. Never seen the point of RRSPs with such low interest rates.
    So then purchase individual stocks, or mutual funds (actually don't because they're almost all terrible with ridiculously high management fees), or better yet, index ETF's. The TSX is up around 12-13% this year, while a global stock index like Vanguards' VT is up 33% in Canadian dollar terms.

    Quote Originally Posted by IanO
    ^^exactly. Putting more towards my mortgage will help me more than RRSP contributions at the moment.
    What is your mortgage rate? 3 or 4%? It's a guaranteed return, which is nice, but a mix of equity and bond ETF's will return 7-9% on average over the long term, PLUS you will immediately get 30% or more of your RRSP contribution back in tax refunds. In terms of your personal wealth/net worth, paying your mortgage down faster in lieu of making RRSP contributions is a huge mistake.
    Ok, so I have mutual funds and i don't like management fees, but I don't have the time or inclination to be investing in individual stocks, so index funds look like a good option. What would be the best way to go about buying?

    Re: investing vs. mortgage payment, RRSP limits carry forward, so that 30% isn't necessarily forfeited, but could be claimed later.
    I've also seen enough people lose double-digits% in a single year in stocks or funds, so while I could get better than the 3.something% that my mortgage payments yield, but I could get nothing, or worse. So while it's less than other investments, it's also completely secure.

  38. #38
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    [QUOTE=Marcel Petrin;561888]
    Quote Originally Posted by 240GLT View Post
    ...
    My RRSP investments recovered the majority of it's losses within two years of the 2008 crash. Since I started my self managed RRSP in 2003, almost entirely invested in the stock market, it's returned a reasonably decent 6% a year. There is absolutely no 20 year period in the 150 year history of the modern stock market where average annual returns are negative. Over long time periods the stock market is very, very safe. As you approach your retirement years and will be needing your funds, you should be shifting out of equities and in to bonds or GIC's. The general rule of thumb is holding your age in bonds as a percentage of your portfolio, so if you're 60, 60% of your investments should be in bonds. You can adjust that up or down depending on your appetite for risk.

    So I guess I'm with Ken here, you've identified several different risks, some of which aren't even related to each other or specifically to RRSP's, and I'm not entirely clear on what your point even is.
    i'm not as "bullish" on bonds as many... the actual interest returns have not been great for quite some time and aren't likely to increase substantially for some time either. furthermore, when they do start to increase their value will actually drop (due to the inherent inverse relationship between the price of a bond and the interest rate it returns to its owner). in simplistic terms, if a bond purchased today that matures in one year with a face value of 100 can be purchased today for 97 dollars (an return of just over 3%) and interest rates increase tomorrow to 5%, that same bond would drop in value from 97 dollars to 95. at current interest levels and forecast levels, holding your age in bonds as a percentage of your portfolio could be pretty high risk, and not the low risk desired. not that i want to be giving investment advice. i'm no more qualified to do that than providing accounting or tax or engineering advice...
    "If you did not want much, there was plenty." Harper Lee

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    Quote Originally Posted by Edmonton PRT View Post
    kcantor, IMHO the best investment usually is in real estate. Owning your own home that is paid off offers a shelter from both inflation and the weather. As long as you can pay the taxes on your home, you have your assets covered. A mix of stocks, real estate inculding land, RRSP's and other investments such as gold are all prudent.

    The problem for most Canadians is after filling up our gas tanks, paying our phone bills, new coats for the kids and looking at our credit card bills, what is left to actually save?
    real estate often turns out to be the best investment made. that doesn't directly translate to being the best investment possible. it's often the best investment made because the mortgage is effectively a forced monthly savings plan as principal becomes repaid. the same discipline applied elsewhere would likely be at least equally well rewarded.
    "If you did not want much, there was plenty." Harper Lee

  40. #40
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    Quote Originally Posted by kcantor View Post
    real estate often turns out to be the best investment made. that doesn't directly translate to being the best investment possible. it's often the best investment made because the mortgage is effectively a forced monthly savings plan as principal becomes repaid. the same discipline applied elsewhere would likely be at least equally well rewarded.
    ^this.

    renting and investing the difference is a better investment in many markets (like Vancouver for example), but few people have the diligence to actually invest the difference between what their rent is and what their all in housing cost would have been if they bought.

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    Quote Originally Posted by highlander View Post
    Ok, so I have mutual funds and i don't like management fees, but I don't have the time or inclination to be investing in individual stocks, so index funds look like a good option. What would be the best way to go about buying?

    Re: investing vs. mortgage payment, RRSP limits carry forward, so that 30% isn't necessarily forfeited, but could be claimed later.
    I've also seen enough people lose double-digits% in a single year in stocks or funds, so while I could get better than the 3.something% that my mortgage payments yield, but I could get nothing, or worse. So while it's less than other investments, it's also completely secure.
    Very true on the second part. But as I said, over 20 year timelines equity indexes have never been negative, at least in the US market. Even on 10 year windows there's only two negative periods, at least as far as I recall from the last time I looked: the Great Depression in the 30's and the Great Recession in 2008.

    https://www.franklintempleton.com/fu...term-investing

    Use the slider partway down the page.

    As far as the first part goes, I don't think it's appropriate for me to give specific investment advice, because I'm just a plumber! And unfortunately a lot of the good index investing advice floating around out there is written for Americans, and things for us Canadians are complicated by exchange rates and the like. But you could start by reading a couple books about the principles and taking it from there:

    http://www.amazon.com/Bogleheads-Gui.../dp/0470067365

    http://www.amazon.com/Little-Book-Co...ense+investing

    John Bogle is frequently referred to as the "Father of Index Investing", as he started the first large index funds with Vanguard back in the day. The basic principle behind index investing is to, as much as is reasonably possible, reduce the fees you pay to financial "advisors" and companies to manage your investments, and invest in as tax efficient of a manner as possible. If you do that and start saving a decent amount at a young age, it's amazing what compounding gains can do for you over 20-30 years.

  42. #42
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    Quote Originally Posted by kcantor View Post
    i'm not as "bullish" on bonds as many... the actual interest returns have not been great for quite some time and aren't likely to increase substantially for some time either. furthermore, when they do start to increase their value will actually drop (due to the inherent inverse relationship between the price of a bond and the interest rate it returns to its owner). in simplistic terms, if a bond purchased today that matures in one year with a face value of 100 can be purchased today for 97 dollars (an return of just over 3%) and interest rates increase tomorrow to 5%, that same bond would drop in value from 97 dollars to 95. at current interest levels and forecast levels, holding your age in bonds as a percentage of your portfolio could be pretty high risk, and not the low risk desired. not that i want to be giving investment advice. i'm no more qualified to do that than providing accounting or tax or engineering advice...
    Yes, bonds aren't so hot right now, because we're at the end of a 20 year long bond bull market. They performed almost as well as equities over the past few decades, and that can't continue indefinitely.

    As far as the proportion of bonds in your portfolio, like I said, that's just a rule of thumb and there's different versions of it. And as far as bond prices declining, that can be addressed by investing in shorter term bond funds, like XSB (http://ca.ishares.com/product_info/f...erview/XSB.htm). It only holds short term bonds, which are much less vulnerable to rate risk, but of course pay lower distributions than something like XBB (http://ca.ishares.com/product_info/f...ch=true&qt=XBB) which has more rate risk in return for the higher distributions.
    Last edited by Marcel Petrin; 29-11-2013 at 02:02 PM.

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    Originally Posted by 240GLT
    I am sure there's better ways to do it and I could likely save some tax here & there, but frankly it's not all that intersting to me. Not nearly so as investing in the stock market.
    You're throwing away anywhere from 20-40% of your returns by paying taxes on them if you're not investing within an RRSP or TFSA. It sounds like you may be doing it within a TFSA, in which case great. If not, then you really should open trading accounts for either or both of your TFSA and RRSP.
    I have a trading account through HSBC tied to my TFSA.
    Parkdale

  44. #44

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    Not once.

    I have some RRSPs, a house, and some workplace-sponsored pensions saved up, but I expect to be working until I am in my 70s.

  45. #45

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    Not once either. I have lots of room in my allowable RRSP contributions.

    Please feel free to send me your excess cash...
    Advocating a better Edmonton through effective, efficient and economical transit.

  46. #46

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    Buy a colour laser printer and print your own.


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    Yes. Every year now for about 8 years (I'm 29)

    4 years ago, I took out $25K under the HBP to get 20% down on my condo, now I borrow from my HELOC to max out my RRSP, and then stick the tax refund back into my HELOC.

    Free money. Sort of...

  48. #48

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    Quote Originally Posted by MrOilers View Post
    Not once.

    I have some RRSPs, a house, and some workplace-sponsored pensions saved up, but I expect to be working until I am in my 70s.
    Which is close to my approach, I expect to be working up until close to the end, maybe not full time, but in some capacity. My house or condo will be paid off, so I will have a place to live. I have seen so many people save a lot, them end up realizing once your home is paid off, and as you age and toys become less important, you need very little.

    I was told once that people who grow up with very little tend to turn out extreme on this, either crazy saving for a rainy day, or crazy spending in a view that life is to short to miss out on good times. While not ideal, I am closer to the later, I don't think either is wrong though for while I could never be the former and personally think it's silly, people who are the former feel the same of me, it's what makes you happy that matters.

  49. #49

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    [QUOTE=Marcel Petrin;561888][QUOTE=240GLT;561877]^ Obviously there is come confusion over nomenclature. Which really isn't worth spending any time discussing as it's pretty inconsequential

    ...

    No, it's not about nomenclature at all. And it's VERY consequential. You seem to be indicating that you can only buy set plans within an RRSP:...

    All of my RRSP funds reside within a registered ScotiaMcLeod trading account where I can invest in any traded equities I choose, in real time during trading hours.

    [quote=...[/QUOTE]





    Some limits: OTC shares and MLPs (master limited partnerships) used to be problematic, not sure about now...




    .
    Last edited by KC; 01-12-2013 at 10:37 PM.

  50. #50

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    Quote Originally Posted by KC View Post
    I'm asking because there's a parallel here and how Alberta operated in the 1980s and 1990s. Today, in retrospect, people blast the Alberta government for failure to "have a plan", to invest for the future, to maintain infrastructure, etc. Instead it focused on near-term issues like paying down debt (with long-term benefits), cutting budgets, etc. However, the Government was elected by the people and is staffed by the people so retrospective criticism tends to ignore the attitudes, thinking, facts and misinformation of the day.

    As such, we all know that in retirement, no matter how poor the returns, we'll all probably be wishing we'd forever max'd our RRSP contributions but each and every year we have to make a decision to prioritize our spending vs investing for the long term. As a result a lot of people end up with a retirement deficit somewhat analogous to the province's infrastructure deficit.
    Klein Wins Re-election as Alberta Premier

    "...it was deficit-cutting that won the day - to the chagrin of the opposition. "I think a lot of people just came to the conclusion that the Klein government had done a pretty good job in terms of balancing the budget," said downcast Liberal MLA Frank Bruseker on election eve, as incoming poll results made it clear that he was about to lose his seat in Calgary North West. "A lot of people up in this area just said they didn't care that the cuts had hurt - they felt they were prepared to pay the price." "

    http://www.thecanadianencyclopedia.c...berta-premier/



    Klein admits government had no plan for boom
    CBC News Posted: Sep 01, 2006

    excerpt:

    "Gov't should have known: economist

    Todd Hirsch, chief economist for the Canada West Foundation, a Calgary-based think-tank, said the government should have known for years that the boom was on its way.

    "Of course we did not know in 2004 that oil prices were going to top $75 a barrel in 2006, but even then, prices were gradually rising," Hirsch said. "We should had some forethought on the part of the government saying if prices continue to rise, what are we going to do?"

    That foresight might have helped solve the labour shortage problem or the need for increased education funding, he said.

    Not all the blame can be put on Klein and the provincial government, Hirsch admitted, because aches and pains come with every boom."

    http://www.cbc.ca/news/canada/edmont...-boom-1.598340
    Last edited by KC; 11-12-2013 at 11:36 AM.

  51. #51

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    Only 1 in 3. And so, we vote accordingly.



    Fewer Canadians have money to contribute to their RRSP this year: bank polls

    BY LUANN LASALLE, THE CANADIAN PRESS JANUARY 10, 2014

    "MONTREAL - Fewer Canadians are planning to put money into a Registered Retirement Saving Plan this year simply because they can't afford it, say surveys by two big banks.

    Both Scotiabank (TSX:BNS) and Bank of Montreal (TSX:BMO) say many Canadians have other expenses, such as car payments and paying down debt, that are preventing them from making a contribution."

    Scotiabank found that...".


    http://www.theprovince.com/business/...158/story.html

  52. #52

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    Quote Originally Posted by KC View Post
    Only 1 in 3. And so, we vote accordingly.



    Fewer Canadians have money to contribute to their RRSP this year: bank polls

    BY LUANN LASALLE, THE CANADIAN PRESS JANUARY 10, 2014

    "MONTREAL - Fewer Canadians are planning to put money into a Registered Retirement Saving Plan this year simply because they can't afford it, say surveys by two big banks.

    Both Scotiabank (TSX:BNS) and Bank of Montreal (TSX:BMO) say many Canadians have other expenses, such as car payments and paying down debt, that are preventing them from making a contribution."

    Scotiabank found that...".


    http://www.theprovince.com/business/...158/story.html
    I always maxed out my contributions while in private practice. I moved to gov't this year where I get a db pension which will really cut down on my contribution room for any RRSP.

  53. #53

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    This is odd. Why wouldn't 100% hope to win the lottery? (Even if you don't "play the lottery" people might be given lottery tickets as gifts. So, in my case I "hope" to win the lottery. So does this mean 66% hope NOT to win the lottery?)


    "34 per cent hoped to win a lottery."
    ...
    "Chris Buttigieg, a senior manager of wealth planning strategy at BMO, advises against relying solely on government pension plans in retirement, given that the average monthly CPP payment is less than $600 and the maximum tops out at not much more than $1,000.

    "Rather, they should consider the CPP and QPP to be a supplementary component of their overall retirement income solution and focus on creating their very own personal pension plan by contributing to an RRSP on a regular basis," he said.

    The best plan is to have a diversified retirement nest egg, which can include the CPP, an RRSP, a work pension plan, a tax-free savings account and other forms of savings or income."

    Source:
    http://www.calgaryherald.com/busines...123/story.html
    Majority are counting on CPP for retirement; others will rely on lottery: poll
    BY LINDA NGUYEN, THE CANADIAN PRESS JANUARY 30, 2014

  54. #54

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    Quote Originally Posted by KC View Post
    This is odd. Why wouldn't 100% hope to win the lottery? (Even if you don't "play the lottery" people might be given lottery tickets as gifts. So, in my case I "hope" to win the lottery. So does this mean 66% hope NOT to win the lottery?)


    "34 per cent hoped to win a lottery."
    ...
    "Chris Buttigieg, a senior manager of wealth planning strategy at BMO, advises against relying solely on government pension plans in retirement, given that the average monthly CPP payment is less than $600 and the maximum tops out at not much more than $1,000.

    "Rather, they should consider the CPP and QPP to be a supplementary component of their overall retirement income solution and focus on creating their very own personal pension plan by contributing to an RRSP on a regular basis," he said.

    The best plan is to have a diversified retirement nest egg, which can include the CPP, an RRSP, a work pension plan, a tax-free savings account and other forms of savings or income."

    Source:
    http://www.calgaryherald.com/busines...123/story.html
    Majority are counting on CPP for retirement; others will rely on lottery: poll
    BY LINDA NGUYEN, THE CANADIAN PRESS JANUARY 30, 2014
    Sadly, this seems to be all too common. The most frustrating aspect of this issue is that many of the people who are in this situation are middle class people who have had the means but haven't had their priorities in the right place over the years. People need to have discipline and try to start early. It's tough to wake up one day in your 50's and 60's and begin to try to figure out retirement.

  55. #55
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    I should have mentioned in my post above that I don't max out my contributions, primarily because I pay into a pension at work, and that takes a fair chunk, so I don't have as much to contribute to my own personal RRSP.

    If I wasn't doing that, I would try to at least get close to the maximum allowed per year.

  56. #56

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    Interesting article - the American situation. I'd like to see the median values from the 60s, etc.



    It Only Takes $10,400 to be Richer Than Most Millennials - Real Time Economics - WSJ
    excerpts:

    "Why so low?
    ...

    Second, the rise of student debt, which now burdens 41.4% of those under 35. ... in 1998 it was 23.3%. The balances of those who borrow have been growing as well, to $17,300 in this survey,... and $10,000 in 1998. For those beginning thousands of dollars in debt, it can take years for net worth to climb into positive territory."

    ...

    "It only takes $10,400 to be wealthier than half of millennials (the median) but it takes $75,500 to be richer than millennials on average."


    http://blogs.wsj.com/economics/2014/...reaming_stream


    ...and another article on the big picture (USA):

    Fed: Don’t Blame the 1%, Blame the Top 3% - Real Time Economics - WSJ
    http://blogs.wsj.com/economics/2014/...reaming_stream
    Last edited by KC; 04-09-2014 at 03:41 PM.

  57. #57

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    Yes, always. Cause I like it when the government gives me money back (ie. tax refund).

    EDIT:

    And I figured if you're going to invest your money into balance funds/market GICs/Mutual Funds, RRSP is a much better way than the non-registered way. Since you only get taxed when you withdraw the money. Outside RRSP you get taxed on income every year and if there's another recession, money loss = money loss, but when your portfolio value increases again you get re-taxed. And I always hoped that the tax refund I get back (right away) will help me earn enough money to offset whatever increased tax rate there is in the future.
    Last edited by Meo; 04-09-2014 at 04:14 PM.

  58. #58
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    Tfsa # 1

    rrsp # 2
    The world is full of kings and queens, who blind your eyes then steal your dreams.
    It's heaven and hell!

  59. #59
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    Quote Originally Posted by Bill View Post
    Tfsa # 1

    rrsp # 2
    i'm not an accountant and i don't know your personal circumstances and projected timing requirements for needing to withdraw cash from either but for most people i think that's a reverse priority. that would be even moreso for anyone that doesn't own their own home unless they never plan to as you can "borrow" or withdraw 20k from your rrsp - and another 20k from your spouse's rrsp - to make that purchase without penalty and without losing the tax refunds already received and you have up to 15 years to repay it back in although the sooner you can do that the better off you are).
    "If you did not want much, there was plenty." Harper Lee

  60. #60

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    Quote Originally Posted by Bill View Post
    Tfsa # 1

    rrsp # 2
    I think it all depends a bit on your circumstances and the investments you make. There is a theory that it makes sense to put more speculative growth type stocks in TFSA (as unlike an RRSP you won't pay tax on the capital gain), and income generating stocks / REITs and similar in RRSP (less concerned about capital gains and the tax on the income is deferred). The big benefit of an RRSP though, is the compounding return on investing that tax saving from the deduction. Now, how big that benefit is, to some extent depends on your income level. As I'm at the top marginal rate, and would withdrawal in retirement at a much lower rate, RRSP would make sense for me (at least, to bring income down a rate bracket). Of course, it doesn't make sense if personal debt to clear (my situation).

    A very nice feature of RRSPs is the ability to put 25k into a mortgage / home buyer plan, that's a great way for people to save for a deposit on a home.
    Last edited by moahunter; 04-09-2014 at 09:36 PM.

  61. #61

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    Read the comment about CPP ! Near the bottom of the article.

    5 employees to over 1,000 today...

    Executive comp. around $3 million...


    Edmonton needs to be lobbying for bringing such entities here before these academic/bureaucratic bubbles hit!




    Andrew Coyne: Ontario pension plan not about ‘helping’ retirees, but financing infrastructure | National Post

    http://news.nationalpost.com/full-co...infrastructure

  62. #62

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    I'm not sure what to say about this... DB pension plans are being turned in DC plans... Generalizing lessens offered by that trend and the lessons of the 2008/09 market collapse(s), I thought people would be saving more and diversifying more anyway they could.


    RRSPs less popular since creation of TFSA, StatsCan data finds
    1.3 million Canadians took money out of their RRSP in 2013
    CBC News Posted: Feb 13, 2017


    Fewer people in their prime-aged working years contribute to registered retirement savings plans (RRSPs) now than they used to, according to new data analysis by Statistics Canada.

    In a report released Monday, the data agency reports that about five million Canadians between ages 25 and 54 contributed to an RRSP in 2000. But that ratio fell by a sixth to 4.2 million people in 2013, despite more individuals in the demographic group overall.

    Canadians in that age group put $30.6 billion into their RRSPs in 2000. By 2013, that figure had fallen to $22.5 billion.

    More people in that cohort are withdrawing early, too, with 900,000 people taking money out of their RRSPs in 2000. By 2013, that had jumped to 1.3 million....


    http://www.cbc.ca/news/business/rrsp-tfsa-tax-1.3979822

  63. #63

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    Quote Originally Posted by KC View Post
    I'm not sure what to say about this... DB pension plans are being turned in DC plans... Generalizing lessens offered by that trend and the lessons of the 2008/09 market collapse(s), I thought people would be saving more and diversifying more anyway they could.


    RRSPs less popular since creation of TFSA, StatsCan data finds
    1.3 million Canadians took money out of their RRSP in 2013
    CBC News Posted: Feb 13, 2017


    Fewer people in their prime-aged working years contribute to registered retirement savings plans (RRSPs) now than they used to, according to new data analysis by Statistics Canada.

    In a report released Monday, the data agency reports that about five million Canadians between ages 25 and 54 contributed to an RRSP in 2000. But that ratio fell by a sixth to 4.2 million people in 2013, despite more individuals in the demographic group overall.

    Canadians in that age group put $30.6 billion into their RRSPs in 2000. By 2013, that figure had fallen to $22.5 billion.

    More people in that cohort are withdrawing early, too, with 900,000 people taking money out of their RRSPs in 2000. By 2013, that had jumped to 1.3 million....


    http://www.cbc.ca/news/business/rrsp-tfsa-tax-1.3979822
    Oh its very obvious - you know all the talk about people struggling to get by, less money leads to less savings. I don't think the 50 - 60 crowd is feeling the pinch as much, but the 25 - 35 crowd is.

    Also, I think people have lost some faith in the financial system and they equate RRSP's with risky mutual fund investments that go down in value. The banks (short sighted I think) heavily push people into putting their RRSP money into investments like that and when the market declines they feel burned, so after that they avoid RRSP's.

    Of course they could put their RRSP money into low risk savings account or GIC, but even if they realize it people do not want to go to the bank and fight with the mutual fund salesperson who is trying to pressure them, so they just avoid it.

  64. #64
    C2E Stole my Heart!!!!
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    For anyone who's genuinely interested in index investing (which is what I was talking about in my previous posts in this thread), there's actually been quite a bit of good information tailored to Canadians coming out over the last couple years. Almost all of it the product of two guys:

    http://canadiancouchpotato.com/

    http://www.canadianportfoliomanagerblog.com/

    The "Couch Potato" plan works for TFSA, RRSP, and even non-registered investing. Although things get much more complicated once you start investing outside of the registered accounts, due to taxation considerations and there being optimal locations to hold certain assets. It's gotten a lot more simple for Canadians over the past few years, as there's a lot of good, low fee, index ETF's available now that trade on the TSX. When I first started index investing, there were few if any decent Canadian options, leaving me having to invest in NYSE traded, US-domiciled/currency ETFs. Now my portfolio is a bit of a mess, as I'd have to realize some pretty hefty capital gains to clean up some of the extraneous ETF's that I'd rather not hold any longer. Thankfully I've got a pretty decent, if messy, spreadsheet that makes sense of it all and helps me keep things in balance when I make new contributions.

    I've been managed my own investments since about 2004, but didn't move to a true index portfolio until August 2009. My IRR going back to 2004 is sitting at 9.1%, or going back to August 2009 it's sitting at 9.8%. Most of that time I held nearly 100% stocks, but over the past couple years I've been slowly bumping up my bond allocation, up to around 25% right now (doubt I'll go much past that, at least not for a decade or two, as I'm still quite young).

    Do-it-yourself index investing isn't for everyone. But if you find the topic somewhat interesting and most importantly think you're capable of avoiding the behavioral quirks that lead to bad investment decisions, then I'd highly recommend you give it a try as opposed to paying 1.5-2.5% of your portfolio every single year to a financial advisor or mutual fund company that probably won't beat the markets in the first place.

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