Can a Registered Retirement Savings Plan (RRSP) ever get too large? From time to time, you’ll hear certain financial advisors say so and propose “melting down” RRSPs in a tax-effective manner.
The piece mentions several dividend ETFs from manufacturers like BMO, Vanguard and iShares but also presents the views of a few ETF specialists who are not as enthusiastic about these products.
Well suited to TFSAs
Personally, I think Canadian dividend funds are particularly well suited to Tax-Free Savings Accounts: they’re diversified, provide dividend income, have reasonable fees and don’t result in any withholding of tax that may occur with foreign dividend ETFs. The latter are better held in RRSPs, in my view.
Of course, those who are cautious about the stock market will prefer to stuff registered plans with fixed-income vehicles like GICs and put their dividend ETFs into non-registered (taxable) accounts that let Canadians benefit from the dividend tax credit.
The case for being “an owner, not a loaner” was made by me in the fifth “Eternal Truth” of Personal Finance in the recent series that ran in the Post, both online and in the paper. You can find that piece as well as a short (1-minute) video under the headline Embrace Risk, Pay Less Tax. You can find the whole series here. Continue Reading…
When I heard the announcement that the Conservative government is considering allowing Canadians to make additional voluntary contributions to the Canada Pension Plan, my first reaction was that maybe that’s not a bad idea.
After all, the CPP Fund reported last week a return of 18.3% for its latest financial year, its best showing ever. I don’t know about you, but I’d be happy if CPP was managing and investing more of my retirement savings.
But the fact is that I already have retirement savings. I have a pension, my RRSPs and TFSAs are maxed out and our house is paid off. However, for Canadians who do not have a workforce pension and are living from paycheque to paycheque, another opportunity to save voluntarily is not going to make a difference.
In fact, if voluntary CPP contributions are locked in until retirement, even when middle or low earners finally bite the bullet and set up a payroll savings plan, chances are they will opt for an RRSP or TFSA so they can get at the money in an emergency. Because employers probably won’t have to match contributions, there is little incentive for employees to contribute more money to CPP.
I know it’s tough to save money. It’s even more difficult to up the ante and increase your savings year-after-year. But saving is necessary to meet both our short- and-long-term financial goals. Without any savings, and living paycheque-to-paycheque every month, you’ll either work until you die or else retire in extreme poverty.
So what will it take for you to save more this year? Some people start off small, saving two or three per cent of their salary, and that’s fine – every little bit counts. But many of us short-change our retirement by not finding ways to increase that amount every year. Here are four easy ways to save more in 2015:
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Can a Registered Retirement Savings Plan (RRSP) ever get too large? From time to time, you’ll hear certain financial advisors say so and propose “melting down” RRSPs in a tax-effective manner.
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