Tag Archives: RRSPs

Why Robb Engen’s 4-minute RRSP portfolio is tough to beat

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I spent a total of four minutes working on my RRSP portfolio last year.

It wasn’t benign neglect:  my two-ETF all-equity portfolio really is that simple! I made four trades, which took about a minute each after determining how much money to invest, in which of the two ETFs to allocate the investment, and how many shares that would buy (plus a few seconds to enter my trading password).

The buying process is easy since I don’t have any bonds in my portfolio. I simply add money to the fund that brings my portfolio closest to its original allocation – 25 per cent VCN and 75 per cent VXC.

I don’t expect my four-minute portfolio to change much this year. I still plan on making four trades this year in my RRSP, and now that I’m contributing regularly to my TFSA again I’ll make an additional four trades in that account. Add 12 monthly contributions to my RESP and that brings my total time spent on investing to just 20 minutes a year.

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Why rely on hindsight for retirement saving?

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By Atul Tiwari

Special to the Financial Independence Hub

New research from a colleague has me thinking about hindsight. The trouble, as the saying goes, is that hindsight is 20/20 — and you can’t benefit from it after the fact.

But why not try to benefit from someone else’s hindsight? My colleague Anna Madamba of the Vanguard Center for Investor Research found in a new study that recent retirees were largely satisfied with their financial situations in retirement, but, if they could, would still do some things differently in preparation.

With the benefit of retrospect, 43% of Canadian survey respondents “agreed” or “strongly agreed” that they would have saved more — a higher percentage than garnered by any other answer.

But perhaps it’s too simple to suggest that pre-retirees should just follow the example of others. Many people know at some level that they need to save more. Whether they do often comes down to two things: competing priorities and insight into how much money they’ll have (and need) in retirement.

Obstacles to saving more

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When you should NOT invest in an RRSP

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Eva Wong, Borrowell

By Eva Wong, co-founder, Borrowell

As the March 1 deadline looms for contributions  to a Registered Retirement Savings Plan (RRSP) this year, many Canadians will be thinking about how much they should contribute to their retirement savings.

Perhaps surprisingly, for many, that number should be zero.

That’s because 30 to 40% of Canadians carry a balance on their credit cards, where many of them are paying 19.9% interest and even more.

To pay 19.9% interest on money that is borrowed, and invest money in an RRSP where it would only earn a return of 6 or 7%, doesn’t make sense.

Let’s say someone had $5,000 to either pay down their credit card or invest in their RRSP, and they chose to put that money into an RRSP. They would pay $995 in credit card interest and earn only $300 in return on their investment, assuming a 6% return

There may be situations where if they had the discipline to use their tax refund to pay off some of the balance on their credit card, it could work out evenly — but that assumes a high enough income to get a significant tax refund and the discipline to use the tax refund to pay off debt.

Paying down debt is a guaranteed return

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A retired Advisor’s Open Letter to Bill Morneau on expanding TFSA

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Finance Minister Bill Morneau (bmorneau.liberal.ca)

(To:) Hon. Bill Morneau, Minister of Finance,
House of Commons, Ottawa.

Dear Hon. Minister,

Thank you for your response to my previous letter. I am a strong believer in an enlarged Tax-free Savings Account (TFSA) and have NINE reasons for that belief through my experience as an IA (Investment Advisor).

I think you will agree that the larger TFSA makes retirement savings fair for all levels of Canadians incomes, but helps those who need it most as there is little RRSP deduction benefit for low-income Canadians. I think your background experience will lend itself to agreeing with my nine reasons for restoring the $10,000 TFSA.

Restore the $10,000 TFSA

The $10,000 TFSA [the previous annual contribution level] is the most profound and beneficial social program created in Canada’s 21st century. It benefits the young, seniors and the less fortunate as well as the well off. Its principal benefit is a meaningful and manageable amount of money which can be used as a saving vehicle and a retirement savings account.

1.)  It is especially beneficial to the non-working spouse, by enabling a savings and retirement account not requiring a monthly pay cheque and its commensurate income tax and tax deductions. This was the principal reason for the Americas Roth IRA, (ROTH account withdrawals are tax free,  but after the age of 58.)

2.) The larger TFSA amount is a meaningful savings target by today’s standards in that $400,000 can be accumulated over 40 years of adult life. Continue Reading…

TFSA Primer 2017

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“Many investors are wondering whether to pursue a TFSA or RRSP strategy. Quite simply, the TFSA, which started in 2009, compliments both the RRSP and RRIF.”

It need not be an either/or approach.
Wise investors embrace the Tax-free Savings Account (TFSA) in pursuit of long term goals, like retirement.

 

I summarize my 2017 TFSA primer:

1.) How TFSAs work

Eligibility:

• Canadian residents, age 18 or older, who have a Social Insurance Number can open a TFSA.

• One TFSA account per individual should suffice most cases. Be aware of plan fees if you own more than one.

Contributions:

• There is no deadline for making TFSA contributions as the unused contribution room is carried forward.

• A withdrawal in any calendar year increases the TFSA room in the following year.

• TFSA contributions can be made in cash or “in kind” based on the calendar year.

• Deemed disposition rules for “in kind” contributions are the same as those for RRSPs.

Your maximum TFSA deposits are as follows:
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