All posts by Jonathan Chevreau

RRSP holdings on the rise even as investor knowledge about them falls

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A seemingly contradictory finding about RRSP trends was uncovered by BMO Financial Group’s latest  (its 11th) annual RRSP survey, released Wednesday. While the average RRSP balance rose to $112,295 — up 3.3% over $111,929 in 2019 and 41% more than $79,492 in 2015 — at the same time Canadians’ knowledge of the benefits and features of RRSPs has fallen since 2015. And women are 18% less likely to know how much they’ll need to retire.

This comes after a pandemic year in which 12% did not contribute at all, resulting in a a 15.5% decrease in overall contribution amounts since 2019; even so contribution amounts for this year are 15.8% higher than the survey found in 2018.

The BMO RRSP Survey was conducted by Pollara Strategic Insights via an online survey of 1,500 adult Canadians  between Nov. 17th and 23rd, 2020.

Robert Armstrong

In a press release, BMO Global Asset Management Director Robert Armstrong said investors need to consider long-term factors like increasing cost of living and longer average life expectancies when planning for retirement: “With these challenges in mind, it’s encouraging to see a national increase in RRSP holding amounts.”

What’s discouraging is that while most regard RRSPs as effective retirement planning vehicles, knowledge about them has steadily declined over the last five years:

  • 71% know how to contribute to an RRSP, an 8% decrease from 2015
  • 61% know the RRSP contribution limit, but the percentage who know this has fallen 12% since 2015. (The RRSP contribution limit for 2020 is $27,230, or 18% of investors’ annual income: whichever is less. Any unused contribution room from previous years is also carried forward.)
  • Only half are aware of what investments are eligible to be held in RRSPs, a 10% decrease from 2015 and only 44%  are aware that RRSPs can hold ETFs, while 79% know that RRSPs can hold mutual fund. (Holdings can include: mutual funds, cash, GICs, stocks, bonds and ETFs.)

Because of the inherent complexities of RRSPs, Armstrong suggests professional advice is valuable to help investors meet their long-term financial goals.

Gender gap

 The study also found a gender gap in retirement planning and RRSP knowledge:

  • Among those surveyed, women are 9%  less likely to know how to contribute to an RRSP and 10%  less likely to know the difference between RRSPs and TFSAs compared to men
  • Only 62% of women know the RRSP contribution deadline (the deadline for this year is March 1, 2021) and 55% know how much they can contribute to the account, compared to 70% and 67% of men, respectively
  • Only 41% of women know which investments can be held within an RRSP
  • Women are 18% less confident than men in their retirement plans, and 18% less likely to know how much money they will need for retirement
  • Women were more likely than men not to be contributing to their RRSPs this year because of pandemic-related reasons (15% versus 9%)
  • Women are less likely to have withdrawn funds from their RRSPs before the age of 71, with 25% having done so compared to 31% of men

BMO has several programs aimed at helping women build their investing confidence:

  • BMOforWomen.com is regularly updated with content to help inspire financial confidence
  • The podcast Bold(h)er podcast features inspiring stories of women making bold moves in their careers and businesses
  • BMO investment professionals provided access to online training to promote and engage women investors and business owners in tailored, goals-based conversations

For personalized advice on meeting financial goals in general, see www.bmo.com/myplan. For RRSP information in particular, visit www.bmo.com/rrsp/.  

 

 

MoneySense: 2 articles on how Canadians can play the cryptocurrency mania

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MoneySense.ca has just published two online articles on investing in Bitcoin and other cryptocurrencies. One is by me. Click on highlighted headline for full column: How to invest in Cryptocurrency (without losing your shirt.)

The other is from regular Hub contributor Dale Roberts of Cutthecrapinvesting. His MoneySense piece can be found here: Should you invest in Cryptocurrency?

My piece is the first time I’ve publicly written about crypto, although the Hub has long covered it, both positively and not so positively. Try, for example, this primer published here way back in July 2017.

The MoneySense piece recaps my personal experiments with Bitcoin and Bitcoin funds, as well as Ethereum and Ethereum Funds, going back to the fall of 2020. I sat out the original 2017 boom.

It seems to me that investors should regard this as a new asset class that should probably not exceed a few per cent of a diversified portfolio. Certainly, institutional acceptance of crypto and attention from hedge fund billionaires like Paul Tudor Jones seems to have ignited the new euphoria, buoyed in part over the frustration of minuscule interest rates and inflationary forces unleashed by endless money printing by central banks in the US and the rest of the world.

Based on the recommendation of Profit Unlimited’s Paul Mampilly, my first try was to put several thousand dollars into each of the Grayscale Bitcoin Trust [GBTC/OTC] and Grayscale Ethereum Trust  [ETHE/OTC], which I currently hold in a non-registered account.

I soon realized I wanted to hold these experimental positions in registered portfolios (RRSPs and TFSAs) so that the next time I got a double or triple — if indeed they materialized rather than comparable losses — I could book the gains with no immediate tax consequences. I soon discovered the closed-end funds of Toronto-based 3iQ Digital Asset Management:  first I tried The Bitcoin Fund [QBTC/TSX] andThe Ether Fund [QETH.U/TSX], can be held in registered accounts like RRSPs and TFSAs.

My third experiment was when Mampilly started to recommend his readers move from the Ethereum tracking ETHE to actual native ethereal or ETH (which some call Shitcoin, or poor man’s Bitcoin). He suggested buying actual “native” crypto from places like Coinbase and RobinHood, convenient for his mostly American subscribers but less so for Canadians. Continue Reading…

Q&A with MyOwnAdvisor’s Mark Seed on speculating near Retirement

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Mark Seed’s MyOwnAdvisor website has just published a Q&A with Yours Truly. The Hub often republishes Mark’s blogs here (with his permission of course) and this Q&A covers topics like dividend investing, asset allocation ETFs, hybrid strategies using both and even crypocurrencies.

You can find the original blog by clicking here, or you can read the republished version below:

MyOwnAdvisor’s Mark Seed

Mark Seed: “Fun money” is an apt term for monies you can afford to lose. I mean, nobody wants to lose money on purpose of course but there is always an undeniable trade-off when it comes to investing.

Risk and return and related.

Higher risks can signal a higher potential return. Higher risks taken can also signal flat-out failure.

I was curious to hear about how some retirees or semi-retirees invest and keep speculation in their portfolio.

So, I reached out to author, blogger and columnist Jon Chevreau for his thoughts including how much he speculates in his own portfolio, at age 67.

Jon has already contributed to My Own Advisor a few times.

Jon, welcome back to the site to discuss this interesting topic!

Jon Chevreau: Glad to be back Mark.

Mark: In our last post Jon, we talked about low-cost ETF investing, investing in stocks and more in your Victory Lap Retirement book.  

Let’s back up a bit…

What should Canadians consider before Do-It-Yourself (DIY) investing? I mean, it’s not for everyone including those in retirement right?

Hub CFO Jonathan Chevreau

Jon: No, DIY investing is probably not for everyone: some need good advice and like most things in life, you get what you pay for.

If you need a full-service advisor or a fee-based advisor that can add value not just on investments but on tax strategies, estate planning, retirement income, insurance and the like, then paying on the order of 1% a year of assets is not unreasonable. On the other hand, with interest rates so low, the more you can save on the fixed-income portion of a portfolio the better. That applies doubly to retirees, who should have a good percentage of their investments in fixed-income (say 40 to 60% depending on objectives and risk tolerance.) I often tell retired readers that if all they use is a discount brokerage in order to hold a Vanguard or iShares asset allocation ETF, that can be a good compromise: you get the equivalent of near professional stock-picking prowess via indexing, asset allocation and rebalancing all for a very good price; and you could then hire a fee-only financial planner for specific guidance outside that pure investing realm.

(Mark: you can find many of those asset allocation all-in-one ETFs here.)

Mark: Seems wise Jon.

So, given some aspiring retirees might not want to invest entirely alone, what good options might be available to help them out (beyond blogs like yours and mine of course)!? Ha!

Jon: I often direct new or aspiring retirees who are worried about the shift from wealth accumulation to generating regular retirement income to the books by good Canadian authors like Moshe Milevsky, Daryl Diamond and Fred Vettese. Sites like yours and mine probably have reviewed these. There are also several retirement planning software packages that are worth considering; ViviPlan, Cascades and Retirement Navigator, to name three I once reviewed in a Globe & Mail article.

(Mark: you can find many references to those authors and their books below.)

Daryl Diamond – Your Retirement Income Blueprint

Fred Vettese – Retirement Income for Life

Fred Vettese – The Essential Retirement Guide

Retired Money: What can retirees do about GIC reinvestment sticker shock?

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My latest MoneySense Retired Money column looks at the vexing problem retirees and near-retirees face when their GICs have matured in recent months. Click on the highlighted text for the full column: Recovering from GIC sticker shock.

If before you were getting 2 to 3% on 2, 3, 4 or 5-year GICs, you may be shocked to discover you’ll be lucky to get 1% and only then by declining to take the first suggested GIC your brokerage has on offer. Going out 5 years may only gain you 0.5% or so, depending on provider.

Nor will matters improve any time soon. The Federal Reserve, Bank of Canada and other central banks have suggested interest rates will stay “lower for longer.” The Fed in particular has indicated rates are unlikely to rise for at least three years.

The piece passes on the views of financial advisors Adrian Mastracci and Matthew Ardrey on what to do about it. It amounts to grinning and bearing it and settling for lower guaranteed returns, or biting the bullet and taking a bit more risk with equities or alternative investments.

But what if you insist on what our family has done historically: leaving half your fixed-income allocation in GICs? Personally, I aim for roughly a 50/50 asset allocation and for the fixed-income portion historically have split it between laddered GICs and bond ETFs, or asset allocation ETFs with a healthy dose of bonds.

Odds are if you use the major discount brokerages of the big banks, you may need to leave them to find more generous GICs available from independent places like Oaken Financial, which has a 1-year registered GIC paying 1.4% and a 5-year GIC currently paying 2% through Home Trust and Home Equity Bank.

Personally, I have reinvested some GIC cash in 2- or 3-year maturities, on the hope rates start to rise three years from now. While 1% or so is pathetic at least it’s a positive number (ignoring inflation): with so many mentions of negative interest rates in Europe and sometimes floated by central bankers in North America, any positive return at is not to be sneezed at.

Conservative Asset Allocation ETFs are one possible alternative

Among the gambits I’ve tried is to raise risk slightly by moving some of this cash to ETFs like Vanguard’s Conservative Income ETF Portfolio [VCIP/TSX], which is 80% fixed income but provides a modest 20% equity kicker. Those who don’t wish to mess with their pre-existing asset allocation might consider the Vanguard Global Bond ETF [VGAB], roughly split between US and global bonds, all hedged back into the Canadian dollar. Continue Reading…

Time to add $6,000 to your TFSA but consider holding off investing it until after Jan 6th

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Happy New Year! However, this first business week of the new year promises to snap investors rudely out of their holiday moods, given political events south of the border.

As of last Friday, January 1st, Canadians could add another $6,000 to their TFSAs, taking their total cumulative lifetime contributions to $75,500. As I outlined in my latest MoneySense Retired Money column, it’s generally a good idea to do this early in January just to maximize the time value of money.

However, I’d hold off committing to particular equity investments until the dust settles, given that this morning’s headlines no doubt focus on the incredible political drama taking place in Georgia on Tuesday, Jan. 5th and then in Washington on Wednesday, Jan 6th.

After this weekend’s dramatic capturing on tape of soon-to-be-ex President Trump’s attempt to persuade the State of Georgia to “find” (aka steal) almost 12,000 votes, both the Georgia runoffs and Wednesday’s supposedly ceremonial formal certification of the state electors votes confirming Joe Biden’s victory promise to be full of fireworks.

Fireworks almost inevitable in Washington this Wednesday

Things were simmering even before Sunday’s saturation TV coverage of what seemed yet another impeachable offence from Trump. Violence from far right-groups fomented by Trump’s fanning the flames in anticipation of Wednesday’s ceremony in Washington already seemed to be in the cards even before this weekend. That can be hardly good for stock markets although pre-market Monday futures were strongly up in the three major US indices.

Add in the ongoing stress of the still-raging pandemic and recent euphoria over vaccines, and the fact US and many global stocks have been hovering near record highs: not to mention cryptocurrencies and Bitcoin, which this weekend smashed through US$30,000 for the first time.

So it hardly seems like there’s a need to rush to invest new TFSA money when all these portents mean prices could be cheaper later this week. Whether this creates yet another proverbial buying opportunity remains to be seen.

Some ideas for how to invest new TFSA money

Those in doubt who would rather invest sooner than later on any anticipated market downturns Monday could always hedge their bets with value-oriented balanced mutual funds or the Asset Allocation ETFs often mentioned on this site, from BlackRock iShares, BMO ETFs, Horizons ETFs or Vanguard Canada. Hard to believe it was just three years ago that the Hub published this blog about these “game-changers”  and they seem to me to make a lot of sense for the large “core” of most portfolios.  Continue Reading…