The tax trap

Jason thinks he’s kinda rich. Not just for the townhouse in Oakville (mortgaged) or the Land Rover (leased) or the hot wife (not working), but mostly for his liquid assets. “Just like you keep on telling people,” he said to me after that last intimate event in Toronto, “balanced and diversified, making dividends and capital gains. All four hundred.”

Well these days having $400,000 saved is no mean feat for a 46-year-old. Rich, it’s not. A decent start, it is. But Jason’s got a problem. It’s all registered money.

Sadly this is a common affliction, and before we hit that time of the year when every bank and mutual fund is yelling at you to ‘buy’ an RRSP, let’s drill into this for a few minutes. As I told Jason, he should stop stuffing money into his plan, redirect his energies and never again think of a retirement savings plan as something for retirement.

A quick summary: RRSPs are not products or things, but just tax shelters. You can put in them whatever you want, like stocks, funds, ETFs, bonds or cash. Each year you’re allowed to contribute up to 18% of your earned income, which includes salary or rental income, but not investment earnings or that wet T-shirt prize money. The 2012 max is almost $23,000.

You can also make a contribution without money, by shifting into an RRSP stuff you already own, such as a mutual fund or a pathetic GIC. That’s called a ‘contribution in kind’ and for selling yourself assets you already own, you’ll get a tax deduction.

In fact, that’s why most people contribute at all, to (as everybody says) ‘save taxes.’ The annual contribution can be deducted from your taxable income, which means the more money you earn the greater the benefit of doing this. What’s lost on many is the fact taxes are not being saved at all, but merely put off until a later time – when the consequences can be disastrous.

The other benefit of an RRSP is that the things you put inside there can grow in value, and the growth will not be taxed. Cool. But now that we have the TFSA, where the same tax-free compounding can take place, the clunker retirement plan – invented in the 1950s – is probably obsolete. At least when it comes to saving money for the wrinkly, sexless years.

First (as mentioned) taxes ‘saved’ today are payable later. Many people assume they’ll be in a drastically lower tax bracket when they retire than when they work, and therefore pay less tax by deferring it. That seldom works. For example, if you earn $80,000 and live in BC your marginal tax rate is 32%. But if your income plunges by half in retirement, and you’re squeaking by on $40,000, your tax rate’s still 23%.

But a bigger concern is that for anyone less than a decade away from post-work stupor, personal tax rates could actually be higher. After all, the federal government’s deficit has ballooned to a record $582 billion in the Harper years, while the federal deficit went from zero to $55 billion during the financial crisis, and still sits at $28 billion. That amount is added to the debt annually. The simplest way to deal with this? Raise taxes. Especially on ‘wealthy’ retirees who have fat RRSPs, which are conveniently registered with the government.

But RRSPs have more warts. If yours is full of stocks, ETFs or mutual funds that earn you dividends and capital gains, it’s a failing strategy. Sure, you can shelter the growth, but you’re squandering tax efficiencies. That’s because money received in the form of capital gains or dividends is taxed at about half what you pay on your salary. But all money taken out of an RRSP is taxed as income, which means the advantage is lost. This is why it’s good to have highly-taxed assets (like bonds, for example) inside an RSP, while dividend-producers are outside.

Also don’t forget that all RSPs must eventually convert into RRIFs (at age 71). This forces you to start draining off those funds and add them to your annual income. So retirees with swollen retirement plans can see themselves forced into a higher tax bracket, when they could have avoided that if the funds were in non-registered investments.

Finally, like Jason, many people grow an utterly false sense of security from having their savings in a pre-tax vehicle like an RRSP. A $400,000 RRSP can actually end up being $100,000 less when the money finally makes it into your hands. And that’s at today’s tax levels. I shudder to think what the bill might be when a 30-year-old finally starts collecting CPP in 2047.

So, are these things financial dinos? As puffed up and useless as, say, Kevin O’Leary?

Hardly. There are some very sexy things that RRSPs can accomplish, and none of them have to do with Viagra or knee transplants. They can play a pivotal role in everything from income-splitting to making babies to finding your inner self.

More tomorrow.

199 comments ↓

#1 City that smells like it sounds on 11.08.12 at 9:14 pm

Furrrst!!!

#2 Harold Hemberger on 11.08.12 at 9:15 pm

i may be first

#3 Vancouverite on 11.08.12 at 9:17 pm

Garth,

Thanks for the post on the tax trap. I plan to put more into the TSFA in January.

#4 notwobad on 11.08.12 at 9:24 pm

Garth. I had to roll in $320K into a LIRA when I left the government – no option there. And I know you talk about certain types of investments and how funds with high management fees are the devil. Perhaps. But all I can say is that I have a pretty conservative portfolio – only 60% in equities – and its all in CI funds. But I running just a fraction under an 8% return on the entire portfolio for the past 12 months in what most consider a difficult market. I ain’t disputing your advice, but it just goes to show that within all generalizations are exceptions, and my returns are pretty decent (at least until today – gulp). cheers.

Dump the funds for ETFs and add to your returns. — Garth

#5 Suburban Princess on 11.08.12 at 9:25 pm

And that’s why this 33-year-old is liquidating her RRSPs bit by bit starting next year. (I have very little salaried income projected for next year, so it’s okay). (Well, I’ll ask an accountant just to make sure).

#6 Old Man on 11.08.12 at 9:32 pm

The key is with taxation, now and in the future, as the Taxman can take a hike in the woods because will kick his azz under the bus. I know every legal trick in the book, and the Tax Act is complex, so get to know it well, as there is nothing to fear, as if you make a mistake it will cost you bigtime.

#7 Wise Guy on 11.08.12 at 9:33 pm

I make $80,000/yr and my wife makes $25,000/yr…yes I know it’s pathetic, but it is what it is.

We have a baby on the way due in February. I’m thinking of doing the spousal RRSP, but not sure how much that I should put in there in order to defer taxes?

And at what point could I take that money out if I needed it in years to come?

Tomorrow. — Garth

#8 EIT on 11.08.12 at 9:33 pm

Correction: debt is 582 billion.

I got your back Garth.

As stated. — Garth

#9 JO on 11.08.12 at 9:41 pm

Solid Garth. Wife was on mat leave for last 15 mts and we cashed out half her small RSP in 2012 as her income will be one third her normal amount…she is lucky to be in a good DB plan but i told her no more rsps…What are your thoughts about low fee corp class funds for non reg investing ? As far as i can see, ultra low cost ETFs with a buy hold strategy should still be better for investors.

Any thoughts ?
JO

#10 Hoof - Hearted on 11.08.12 at 9:49 pm

Philadelphia School District ( SRC ) borrows $ 300 million to pay its bills

http://www.philly.com/philly/news/breaking/20121107_SRC_borrows__300_million_to_pay_its_bills.html

Note : Philadelphia is 5th largest City in U.S.

#11 Engineer on 11.08.12 at 9:50 pm

I don’t understand why one can’t do it all…

On January 2nd of each year, I maximize both my TFSA and my spouse’s TFSA and also contribute $3400 to both of my children’s RESPs. On March 03, I maximize my RSP contribution for both myself and my spouse. After building up contributions for next year’s RSP, RESP, and TFSA, the remaining savings go into the non-registered account.

I am aware of the cash efficiency of dividends vs. bond income and make sure that my non-registered account holds only dividend-paying equities (quite a bit of preferred shares actually).

I don’t understand why Garth would be so negative on such a model. I am taking advantage of the incentives the Canadian government is offering me and doing so in the most tax efficient manner.

Please help me understand why this is so wrong?

#12 W on 11.08.12 at 9:50 pm

They could also apply a small tax to Your TFSA if they need the cash. Nothing is completely safe in the long term.

#13 Mean Gene on 11.08.12 at 9:51 pm

I see the light, this is another reason why everyone likes humping real estate, the capital gains on the principal residence is tax free.

And losses are mon-deductible, along with financing. — Garth

#14 Shane on 11.08.12 at 9:56 pm

Garth, what do you have against Kevin?

#15 Adviser on 11.08.12 at 9:58 pm

Love this post, everyone pay attention this type of advice seldom comes free.

Wise guy with the spousal question answer is 3 years for not attributable contribution. Garthman will cover details tomorrow.

#16 Adviser on 11.08.12 at 10:03 pm

Engineer,

Bonds and income assets go into registered accounts

Assets with high potential of growth, small caps, energy, miners, etc into TFSAs to grow future contribution room

Dividend payers are not registered to maximize tax advantage, while it is still favorable

#17 Violet on 11.08.12 at 10:07 pm

TSFAs are great…unless you’re one of the million or so Canadians who has US citizenship. (In my case, no fault of my own. And, yes. I’m looking into expatriation.) The IRS doesn’t recognize TSFAs, so there’s no tax benefit and — insult to injury — a boatload of extra paperwork.

#18 };-) aka D.A. on 11.08.12 at 10:08 pm

#166Form Man on 11.08.12 at 9:05 pm

#154 DA

DA ! such anger and bitterness. It isn’t healthy for you….

That is 1996 DA, not 2006. We made out like bandits. The ones who did not do well on our Kelowna development were the MLS realtors. We always market in-house……..We would rather pass the commission savings along to the buyers, and they appreciate that……

I note you conveniently ignored the facts I presented which completely destroyed your various absurd proclamations. Looks like you have a hard winter ahead of you DA.

I will think of you while I am on the skihill……

So what’s the reason for your being so down on the Kelowna real estate market then if you made out like ‘bandits’? And didn’t you earlier say you had to cut your asking prices by 20% which came out of the land component? That’s the problem with Bullshit, it’s hard to remember what you said and what you didn’t.

See you on the Hill Form Man, I’ll be the guy you wish you could keep up with. What’s your pleasure Big White or the Stoke? Or have you not yet advanced past Crystal? };-)

#19 kam on 11.08.12 at 10:10 pm

I think Spousal RRSP is good if there is a big gap between Husband and Wife’s income as mentioned in comment #7 .If you invest in spousal RRSP you immediately get tax refund which you can invest [7% return] or you can use refund to pay back your loan.
In case of emergency, you can withdraw funds from Spousal RRSP [after 3 yrs] . Funds will be taxed at spouse’s tax rate.
If you loose a job or you are without job for more than 5/6 months, you can withdraw money from RRSP and you will be taxed at a lower rate.

#20 abraxas on 11.08.12 at 10:15 pm

Garth, I’m not on board here. Let us just assume that you will withdraw the money at the same rate as you put in. Let’s say it’s 33%. If you put 1000 bucks into a non reg account and it grows by 100% you end up with 2000. If you sell at that point you now have 2000 * 83% which is 1660. Alternatively lets consider the case where you put the 1000 in the RRSP and get a 330 tax refund. Again assuming 100% final ROI, your registered money grows to 2000 and your unregistered grows to 660. Your take home money is now 2000 * 67% plus 660 * 83% once the tax burden is paid. That is a total of 1888. You are only worse off with the RRSP if your withdrawal tax rate is higher than your contribution rate. And that is a certain risk I admit, but a risk that might be worth taking.

#21 Form Man on 11.08.12 at 10:21 pm

DA

you seem to forget quickly. we sold over 90% before the end of 2008. Had to drop our prices on the last few. No worries. Very busy with the construction end of things these days. Cleaning up messes for the bankers.

Big White is a big bore. Revelstoke is good. Sun Peaks is closer and steeper and better than Big White. Much nicer village also. Nancy Greene and AL Raine have made a class act there.

You seem to have some serious insecurities DA. You really should get out and see the world some more. Don’t be afraid of those ‘frustrated buyers circling the city gates’

#22 Evil Magpie on 11.08.12 at 10:22 pm

Suppose I find a US ETF or stock that sits at more or less a constant price and pays out dividends of 5% or more. What’s the best place to put it, RRSP, TFSA, or non-registered?

#23 Uwinsome on 11.08.12 at 10:25 pm

I don’t always agree with everything you say Garth. Housing – totally. Gold negativity – not as much. Economic optimism – depends on how well I slept last night.

But, it was like I hearing myself speak when you said: “As puffed up and useless as, say, Kevin O’Leary?

And thank you for the info and tips on RRSPs. It’s very helpful.

#24 wykidajlo on 11.08.12 at 10:28 pm

Yesterday smoking man called a rally for today.
It did not materialize.
We will see if his housing predictions will be as accurate.
I guess the machine is broken. =P
Maybe not.

#25 Fleabitten Monkey on 11.08.12 at 10:38 pm

LOL love the K O’Leary comment. I think he’s a douchebag. Got lucky.

#26 Regan on 11.08.12 at 10:38 pm

I have never put much into RRSPs because I’m not in a high income bracket. Therefore, I don’t really see my income needs being all that much lower when I retire than the bare bones I live on now (except that I won’t need to save for retirement anymore). The math just never made sense. Step 1, start earning more than you spend – you can earn more, spend less or a bit of both. It doesn’t matter how you get there, really. Step 2, pay off all debt. Step 3, create income flows that don’t depend on you working forever. Voila. Semi-retirement.

#27 abraxas on 11.08.12 at 10:42 pm

@evil magpie

The answer is RRSP as US based dividends are taxed within a TFSA

#28 Fleabitten Monkey on 11.08.12 at 10:44 pm

But hey, gotta love K O’Leary at the same time – I understand he has some nice guitars and ain’t a bad player.

#29 Bottoms_Up on 11.08.12 at 10:47 pm

#11 Engineer on 11.08.12 at 9:50 pm
——————————————
Seriously? How would you “do it all” if you were starting out in today’s climate? How do you “do it all” if you have a juicy mortgage, daycare bills and car lease? Most people can’t do it all. You are fortunate that you are in a position where you have serious cash flow. Congratulations.

#30 Garth, learn some math! on 11.08.12 at 10:47 pm

Your “squandering tax efficiencies” comment is arithmetically wrong. And I believe this is not the first time you make exactly this mistake. Here is a simple example for you:

suppose you are taxed at 50% and suppose you have $1000 income and you can earn 10% on that which would be taxed at half the rate if earned outside a shelter.

with RRSP you have $1000*1.1*(1-0.5)=$550
with TFSA you have $1000*(1-0.5)*1.1=$550
with your tax advantaged strategy of holding investments outside of shelter you have:
$1000*(1-0.5)*(1+0.1*(1-0.5/2))= $537.50

Garth, please don’t make this mistake again. Also please feel free to man up and acknowledge you make an occasional mistake in the impressively massive amount of content that you manage to produce every week.

You have pretty brackets. — Garth

#31 Old Man on 11.08.12 at 10:50 pm

#24 wykidajlo – you must pay attention with Smoking Man, as he knows the machine, and never stated which market in the world would have the rally, so he might have scored bigtime. You must pay attention to his buzz words, or will confuse you.

#32 Bob on 11.08.12 at 10:51 pm

Oh Gawd, I would love to see an on-air exchange between O’Leary and Garth.

Make it happen!!!

#33 espressobob on 11.08.12 at 10:55 pm

Kevin O’leary gives investors all the more reason to invest in ETF’s.

#34 Inglorious Investor on 11.08.12 at 10:55 pm

Rumblings about increasing taxes on dividends and capital gains. The windows of opportunity may be closing as governments become increasingly able to make more tax grabs on “the rich” politically palatable and also close every loop hole they can find. It’s virtually inevitable. Maybe we’ll be able to save some money on lawyers and accountants. We’ll see.

There will be no such tax changes in Canada. — Garth

#35 Fartweezel on 11.08.12 at 10:55 pm

Jeeez…. First Cyndi Lauper and now Kevin O’leary…..

#36 mark on 11.08.12 at 10:57 pm

Isn’t O’Leary going into mortgage broking now?

I’m guessing he’ll be very impartial on real estate now.

#37 Inglorious Investor on 11.08.12 at 11:00 pm

#26 Regan on 11.08.12 at 10:38 pm

It’s not how much you earn, it’s how much you save. The woman who earns $50,000/year but saves $5,000 is better off than the woman who earns $150,000 and spends it all. The second woman may have a higher standard of living, but not necessarily a better quality of life. Earn as much as you can. Live below your means. Save and invest as much as you can. Good for you.

#38 Inglorious Investor on 11.08.12 at 11:02 pm

#24 wykidajlo on 11.08.12 at 10:28 pm

Mark Faber was surprised the S&P didn’t tank by 50% after the election. Even when you factor in his usual hyperbole, that’s still huge! The pros have a real hate on for Obama right now.

#39 Susan London Area on 11.08.12 at 11:02 pm

Your doing a great job Garth and Thankyou, but could you clear up a little issue I just stumbled upon tonight.
I have just been given some information about estate planning. According to this wonderful life insurance agent unless an investors portfolio is hidden inside the Insurance Act, such as Standard Life or Seg funds, all money can? or will? be held up in Probate for up to 4 years. She went on to explain that currently Probate fees are administered by the Attorney General, but Starting January 1st 2013 Probate fees will be administered by The Reciever General, and would be open to reassessment for up to 4 years. This would cause delays, and make it more costly to the beneficiaries. I guess my main concern is that my beneficiaries are my dependants, and a delay in them recieving my liquid assets would cause hardship. I think this is called Ontario’s Bill 173 “Royal Assent”
I’m sorry for slightly changing the subject but my insurance agent is saying anything inside a life insurance policy will go directly to the benificiaries if named, otherwise anything liquid will be subject to this new Probate process. Makes me wonder if it’s not just an overreaction by an insurance saleperson to have me invest with her company. Or maybe this is a real situation.Thank You for your time Susan.

Bill 173 in Ontario is simply the implementation act of the 2011 provincial budget. It makes administrative changes to the roles and obligations of executors of an estate, but no changes are made to how beneficiaries are treated. Spousal transfers are exempt from tax, as are the proceeds of registered accounts with named beneficiaries – the same as now. The province will have the power to issue reassessments of estates within four years if an irregularity is found. In short, if you are correct in what your insurance agent said, she is lying. You can read a summary of the changes here. — Garth

#40 KG on 11.08.12 at 11:08 pm

Garth, can you please comment on if one has an incorporated business, would it make more sense to withdraw from RRSP (from earlier years) instead of drawing dividends from corporation.

Only if you can engineer low-income years. — Garth

#41 };-) aka D.A. on 11.08.12 at 11:13 pm

#21Form Man on 11.08.12 at 10:21 pm

Ahhh, so unlike the real estate market you know at lease something of which allows you to speak with some reasonable understanding of the difference between the hills – “mountains” to our eastern Brethren.

#42 Freedom First on 11.08.12 at 11:18 pm

Excellent article Garth! Our education system has failed Canadians. We must seek financial literacy ourselves or spend our lives bent over. Looking at the world today, it is easy to see the truth of this. Without financial literacy……you are merely prey for the numerous unscrupulous among us. Garth has pointed them out too……although I think Garth has been very kind to them:)

Other traps besides the “Income tax trap”…… :

property tax, condo fees, condo repair/reno costs$$$$$ not covered by the reserve fund, house maintenance costs$$$$$, loss of job/income, no cash flow, no reserve funds$$$$$/liquidity, no assets, vaporized/or no-equity, child care costs/daycare etc., no disability insurance, no Will made out, debt…..too many numerous horror scenarios to list here, and lastly, a lack of thinking/knowledge to plan accordingly. If you have been reading Garth’s “Free” blog, written with a generous spirit, he has covered all of these and much more over the years, such as all of the “financially illiterate idiot parents/etc. giving their advice…….not funny):

#43 Takami Fujiwara on 11.08.12 at 11:19 pm

Garth-san,

You have forgotten to mention one very important positivie characteristic of RRSPs: You don’t have to pay taxes on dividends you receive from any American stocks you hold in your RRSP. The TFSA does not have the same advantage. Therefore it seems to me RRSPs still have a very important function: Use them to hold the NYSE/Nasdaq portion of your portfolio.

The dividends are still taxed as income when withdrawn. — Garth

#44 Young Boomer on 11.08.12 at 11:20 pm

My husband’s former employer matched RRSP contributions from 2-4% of gross salary based on yrs service. He contributed only up to the match. Would you not recommend the same in this circumstance?

Is that enough reason to make after-tax income taxable again and register it with teh government? — Garth

#45 Paully on 11.08.12 at 11:36 pm

If you have a mortgage, paying it down gives you a guaranteed tax-free savings return at your current mortgage rate. Yes, if you have a 2.99% mortgage, it is a low imputed return, but if you have a 5% mortgage, paying it down gives a very competitive rate vs. bank preferred shares, with absolutely no downside risk.

How is there ‘no downside risk’ when the asset you’re buying will lose capital value? — Garth

#46 Smoking Man on 11.08.12 at 11:38 pm

#24 wykidajlo on 11.08.12 at 10:28 pm
Yesterday smoking man called a rally for today.
It did not materialize.
We will see if his housing predictions will be as accurate.
I guess the machine is broken. =P
Maybe not.
………………………………………………………….

It was more or of an analysis than a call my good basement dweller.

The Post
Sorry Garth, Market sold off because of Greece, rumors where the rage on Bloomberg chat , that defection were rampant for the Greek vote on the Austerity. Well it passed.

So if we have another sell off tomorrow, you can put a feather in your cap that you where right.

Now if we have a huge rally, then you know it
was all Greek silly

I’m Calling a Rally.
…………………………………………………..

And it’s still Greece driving the market, they aint greeting the loot that easy, But Ok, you win no rally, but hey -39 points on an index at12,191.05. a Holocaust.

The point is, because I’m bearish on 416 SFH, and you’re a renter, you only see what you want to see, you view me as the enemy.

A Recipe for life long poverty.

Open your eye and ears and see the obvious, making bets with wish full bias will lose you money every time.

Why do I keep trying to help you idiots.

#47 Smoking Man on 11.08.12 at 11:39 pm

Bullish not Bearish on last post

#48 timmy on 11.08.12 at 11:40 pm

“After all, the federal government’s deficit has ballooned to a record $582 billion in the Harper years, while the federal deficit went from zero to $55 billion during the financial crisis, and still sits at $28 billion.”

And Harper calls himself a Conservative! The only thing worse than the deficit he’s racked up is the disasterous trade deal with China that he’s trying to sneak through without discussion or debate which will give Chinese investors the right to sue our government if their ability to make a profit on their investments are compromised.

#49 timmy on 11.08.12 at 11:45 pm

You make such a big deal about the TFSA. It is only 5 grand a year. I saved 20 K last year. Where am I supposed to put the other 15K? Money keeps compounding tax free in an RRSP,unlike in a cash account where you pay tax on dividends each year, and you can control when and how much you can withdraw.

TFSAs can accept $20K now, and that grows to $25K in seven weeks. For a couple in 2013, it’s an accumulated $50,000. Over time, this is a very big deal for most people. — Garth

#50 Chasicakes on 11.08.12 at 11:51 pm

I totally get the aversion to RRSP’s however my employer matches my contribution so it doubles my money right out of the gate. It seems prudent to me to at least contribute to my RRSP to the point where my employer matches???

#51 Tony on 11.08.12 at 11:52 pm

Re: #11 Engineer on 11.08.12 at 9:50 pm

Not much has been discussed about stashing or diverting funds offshore. The folklore about the 10,000 dollar tracked is still just that for clueless people. Most of the people i know have almost all their wealth in tax havens.

#52 Canadian Watchdog on 11.09.12 at 12:00 am

“But a bigger concern is that for anyone less than a decade away from post-work stupor, personal tax rates could actually be higher.”

Not could, it will. The government can push income levels into higher tax brackets indexed to CPI by understating the inflation rate. The average tax bracket has increased by around 40-45% since 1998, while headline CPI increased about 30%. Looks good right? Not really. If inflation is measured by an alternative CPI (consolidated sectors of StatsCans food, energy, shelter and services), prices have increased by around 55% since 1998, and even that measurement is understated by hedonic and substitution formulas.

It’s important to understand the long-term implications of maxing your savings in government tax-sheltered vehicles. The rules will change as the government becomes more aggressive to pay down their debt. Realize that. Ever think of paying a little more taxes today and invest in things that will save you money in the mid-to-long term, faster then the rate of inflation?

Efficiency will be a key factor in a low-growth economy. Invest in it.

#53 Grim Reaper/Crypt Speculator on 11.09.12 at 12:04 am

I can’t believe some of my stuff was deleted….my handle ain’t Smoking Man(where is my scythe and lightning bolts?..at my neighbours?…. dammit !!!).

Anyway…..GOOGLE Weimar…..no matter which way you invest…you are &*%$# *( DELETED).

#54 Hoof-Hearted on 11.09.12 at 12:06 am

SmoKingKong mans secret….?

Info from Bildebergs Madamz

#55 Dr. WAYNE on 11.09.12 at 12:11 am

#1 City that smells like it sounds on 11.08.12 at 9:14 pm

Furrrst!!!

Yes, again … you’re the FURRRST a$$hole on this blog today.

#56 Hoof-Hearted on 11.09.12 at 12:12 am

Now Mexico Bans Cash

http://www.thedailybell.com/28174/Now-Mexico-Bans-Cash

Quote:

Large Cash Transactions Banned In Mexico … Outgoing Mexican President Felipe Calderon has signed into law a ban on large cash transactions. The ban will take effect in about 90 days and it is part of a broader effort to control monetary flows within the country. Under the law, a Specialized Unit in Financial Analysis operating within the Attorney General’s Office will be created to investigate financial operations “that are related to resources of unknown origin.” For real estate transactions, cash payments of more than a half million pesos ($38,750) will be forbidden and, for automobiles or items like jewelry, art, and lottery tickets, cash payments of more than 200,000 pesos ($15,500) will be forbidden. The law carries a minimum penalty of five years in prison. – Forbes

Dominant Social Theme: Terrorism must be combated by controlling people’s money.

Free-Market Analysis: What we consider to be the “phony” war on terror is the gift that keeps on giving to those who run our governments.

The phony war on drugs only adds to the rationales for telling people what they can and cannot do with their resources.

What is going on is a pattern, not a series of defensive moves taken out of desperation. The power elite intends to lock down the world, it seems, in order to track every monetary transaction of any significance.

==================================

Coming soon to a a Casa/Hasta la Vista near you

#57 MB on 11.09.12 at 12:14 am

About employer-matched RRSP contributions:
How are those after-tax if they transfer your (pre-tax) money and the employers contribution directly to your RRSP every month?
You only pay tax once: when you take it out of the RRSP.

#58 Dr. WAYNE on 11.09.12 at 12:15 am

#2 Harold Hemberger on 11.08.12 at 9:15 pm

i may be first

Unfortunately, Harold … you are not the first a$$hole, “CITY that, etc., etc.” beat you to it … but you do get the consolation prize of being the SECOND a$$hole.

#59 Oakvillian on 11.09.12 at 12:21 am

The very first thing he should do is sell the town house because oakville is toast.

#60 a prairie dawg on 11.09.12 at 12:42 am

A different kind of financial leverage:

The name and shame gambit.

Last call, before we rat on ya’ll. ;)

http://business.financialpost.com/2012/11/08/ombudsman-preparing-to-name-and-shame-investment-firms/

#61 Paul on 11.09.12 at 12:46 am

#45: “How is there ‘no downside risk’ when the asset you’re buying will lose capital value? — Garth”

Don’t get me wrong — housing is a bad investment. But if you own it, and plan to continue to own it, then paying down the debt is often the best, zero-risk “investment” available.

E.g. If you happen to have a 5% mortgage, a dollar spent paying down that mortgage is providing an after-tax return of 5%. That’s a pretty good ROI. Whether the house drops in value or not is immaterial — either way, you’re stuck with the debt and its servicing cost.

#62 Sir Finance on 11.09.12 at 12:56 am

These comments are too generalized. As with any other type of investing, diversifying is key. Which investment vehicles you use is no different. Yes, RSP’s and TFSA both have their benefits. The important part with RSP’s is the refund. Reinvest it!

Let me show you why:

Lets assume you have $15,000 to invest this year, and you want the most net benefit (net income) 25 years from now.

Scenario 1: RSP contribution + reinvest RSP refund
$15,000 RSP Contribution
33% tax rate
7% return for 25 years = $85,881
After-tax Money ($85,881 * 1- .33)= $57,540
Reinvest your RSP refund on day 1:
$15,000 * .33= $4950 rebate put into TFSA over 25 years
= $28,627 tax free
Total : $28,627 + 57,540 = $86,167 after tax income

Scenario 2: $15,000 TFSA, no cash refend (TFSA does not provide this)
= $15,000 investment
25 years @ 7% interest
33% tax rate not applicable since its a TFSA
Total: $85,881 after tax income

$86,167 – 85,881 = $286 net benefit.

Hardly worth losing your shorts over. However, TFSA has much lower contribution room.

Diversify your investment vehicle. A combination of RSP’s and reinvesting the refunds into TFSA is a good start. Keep your equities in the TFSA as well.

You ignored the risks I outlined. Tax rules of 2012 are not likely to be those of 2037. — Garth

#63 Jordy on 11.09.12 at 1:04 am

Tfsa’s are great, but the rrsp is much larger per year and gives an employee the only good tax break available. Rrsp’s are also an awesome unemployment insurance plan during this season of retard employer down sizing and goverment austerity.
I thought you and Kevin were brothers Garth???
?….oops
You do have better hair :-)

#64 Blacksheep on 11.09.12 at 1:37 am

Smoking / Old mans writer # 31,

“you must pay attention with Smoking Man, as he knows the machine, and never stated which market in the world would have the rally, so he might have scored bigtime”
————————————————————
Oh c’mon!….at least put, some effort into it.

take care
Blacksheep

#65 Nostradamus Le Mad Vlad on 11.09.12 at 1:38 am

-
“At least when it comes to saving money for the wrinkly, sexless years.” — From what I see, best bet for me is to have a nominal amount in RSP’s / RIF’s, base CPP / OAS and plenty in TFSAs. Main thing is to minimize tax while enjoying an adequate to good life.

The excesses happened in our youth. Now we’re slowing down, content with what life hands us.
*
It’s the interest, stupid! How banxters rule the world and The Energy Vampires aka another version of The Four Horsemen; Downsizing One square metre home; Taxing Us to Death Good job I don’t drive; Japan sinking (not Fukushima — the stock market); Cdn. Pot Pourri Incl. a para. on the coming bond massacre; We Need Asia and that’s why the CPC isn’t too concerned with the EZone; This, combined with this makes for an interesting 2013; Becoming the norm? Cable TV New single subscription service? Plus Newsrooms on way out. Lotsa unemployed journalists; Some boomers.
*
Laughing You laugh at me because I’m different. I laugh at you because you’re all the same (sheeple); Drinking Milk? Adding Vodka and Kahlua makes a nice mixture; Puerto Rico the 51st state. BC, Alta., Skatch and Manitoba can be the 52nd; Dance With The Devil 12-ft. tall croc standing on its hind legs; A trip to the grocery in the not-too distant future; US ICBMs disabled by UFOs? South Korea takes on Macau; The UN Good ol’ UN. We would be a lot better of without it; Superfoods compared to Monsanto? No comparison; Black Lamborghini in China.

#66 Tinfoil Hat on 11.09.12 at 1:45 am

#48 timmy on 11.08.12 at 11:40 pm

“After all, the federal government’s deficit has ballooned to a record $582 billion in the Harper years, while the federal deficit went from zero to $55 billion during the financial crisis, and still sits at $28 billion.”

And Harper calls himself a Conservative! The only thing worse than the deficit he’s racked up is the disasterous trade deal with China that he’s trying to sneak through without discussion or debate which will give Chinese investors the right to sue our government if their ability to make a profit on their investments are compromised.

——————————————————–
Furthermore once this FIPA is in effect, no future Canadian Parliament or court will be able to change any of its terms without China’s consent. Why would our govt. sign such a lopsided agreement?

The potential liabilities to us and our children resulting from this agreement are staggering.

We should be in the streets banging pots and pans, bending our MP’s ears and filling their inboxes. (and trying Harper for treason).

Don’t buy the government’s spin. No deal is better than a bad deal: http://t.co/End2fUsU

#67 smartalox on 11.09.12 at 1:57 am

What about using an RRSP as a tax-deferred savings account? Make your contributions, with employer matching, if you have it, but take advantage of federal programs like the 1st time home buying plan (if you haven’t already) and the lifelong learning plan (to pay for that MBA). Keep the amount in the RRSP minimal, and keep your money in TFSAs, and in non-registered accounts. Or a house. Or shiny metal. Or marshmallows, if that’s your asset of choice.

How do you hold metals in an RRSP, anyway?

#68 Alberta Ed on 11.09.12 at 2:04 am

I hope Garth will comment on non-registered portfolios.

#69 DonDWest on 11.09.12 at 2:05 am

RRSP’s = unemployment insurance. Definately of little use for retirement.

#70 vic_guy on 11.09.12 at 2:09 am

Smoking Man @ #28 Smoking Man on 10.21.12 at 9:49 pm

Gartho,

I told you that sales are swelling from Victoria and moving east, first to Burnaby, and onward into Alberta and eventually to the 416 and beyond.

Prices set to SPIKE higher.”

http://www.timescolonist.com/touch/business/story.html?id=7485922

But Oct 2012 sales are lower than 2011,2010,2009,2007,2006, etc. 25% less than Oct 2011. 2012 yearly sales may wind up being as low as they were back in 2000, when Victoria was way smaller.

Maybe you’re looking at the graphs upside down ?

#71 Riding the Pine on 11.09.12 at 2:24 am

#43: what? Dividends are taxed within a TFSA?? Isn’t all growth within a TFSA not taxable?

#72 Riding the Pine on 11.09.12 at 2:25 am

#43: what? Dividends are taxed within a TFSA?? Isn’t all growth within a TFSA non taxable?

#73 SydCixel on 11.09.12 at 2:51 am

The image at the top of today’s column is also used in a video promoting the vegan diet. ( http://www.youtube.com/watch?v=8GrbYVsK7vs )
It is entitled “Why Vegan?” Locking up a monkey in a cage, apparently for “scientific” purposes, is not nice.

What fans George W. Bush has remaining could be upset by the use of his picture at 0:07 to depict a person of simple thinking. Therefore, the producers of the video removed that image in a later edition of this video, and substituted an x-ray of Homer Simpson’s cranium showing a 5 cm. long brain. The producers wanted to invite everyone to become vegan, regardless of their partisan commitment.

Keep eating those leafy greens …

#74 Buy? Curious? on 11.09.12 at 3:12 am

Garth, if Smoking Man was a mushroom, what kind of mushroom would he be?

A Shit-Talkie.

http://www.youtube.com/watch?v=qQtmGcdSDAI

#75 Steve Merrill on 11.09.12 at 3:49 am

Re; #56 Hoof (Mexico Bans Cash)

You are absolutely correct of the “pattern” you identify – total control via public money. Out here on the left coast we have recently launched a B2B trading platform that employs Silver bullion as an ‘anchor’ for a private ‘tender’ .. clients can engage and transact in digital grams of AG that are 100% secured. At any point, members may Settle for Metal. Visit us at sovereignize (dot) net.

Cheers!

#76 Buy? Curious? on 11.09.12 at 4:19 am

Holy Cow! Smoking Man posted 8 times yesterday. The first one was at 10:54PM Nov 7 and his last one was on 9:45pm Nov 8. Then two more on tonight’s post. Yet on his own blog, he only posted 3 times in October and it was only cut N paste entries. And get this, on his blog, he claims that a publisher in New York City wants him to write a book. Here’s his post from Oct 3rd.

“Done posting for a while, got to do some work.
Great News after 50 or so Publishers, FINALLY got one to open his wallet. Had to go to NYC

My book is going to rock, not happy about having to re write a few chapters. But life’s a bitch.

Dead line DEC 1 In store Spring 2013

Got the title short listed to 3 sorry can’t give it up , that ‘s all I need for one of you to copy write the title.

It’s a spoof Success book.

The publisher Loves it, we may even leave in the bad grammar and speeling in the education chapter.”

Bwahahaha! Sure, Smoking Man. Whatever! I’ll keep my eyes peeled in the bargain bin at some bookstore while I ride around on my unicorn.

http://www.youtube.com/watch?v=u3jHByHy-_U

#77 Vernie on 11.09.12 at 6:13 am

Hello Garth,

Can you address the option of rolling a limited amount of severance into an RRSP ? I am about to retire and have fully-funded TFSA.

If my TFSA is “full” what options are there ?

Thank you

#78 EIT on 11.09.12 at 7:14 am

what about ‘locked-in’ RRSP contributions by your employer?…. how long is ‘locked-in’ for?

Until the retirement age specified in your employer’s plan. — Garth

#79 Bruce Chase on 11.09.12 at 7:44 am

HEY there’s nothing wrong with Kevin O’Leary, he is perfectly amusing!!!!!

#80 Don't read his post on 11.09.12 at 8:02 am

Garth, did you and your buddy Kevin o’leary have a scrap? That guy is a giant luck sack. He got richer because he’s a p&$&@.
If everybody stopped mentioning him he would go back to being a regular rich p@)&&
You Rock compared to him :)

#81 Smoking Man on 11.09.12 at 8:04 am

#69 vic guy. that was fake sm i dont give a turd about rest of canada. 416 is all that counts

# 75. buy curious
if i dident post so much you would have nothing to write about. chirping is the only content and contrbution you are capable of.
no market spin. no insite just a scornd suck.

#82 detalumis on 11.09.12 at 8:51 am

You make a big, big mistake planning your future using today’s tax rules. The moment pension splitting came in than spousal RRSPs became toast. I have seen enough flip-flopping to not believe the lie that I can have one million in a TFSA and still get senior welfare, say GIS in the future. I can see lots of entitlements become asset and not income based when the political moment (and resentment level) is ripe.

I already live on my RRSPs taking out the dividends and I am just over 50. I accumulated them using matching bank stocks through my working career before I got the axe, all “no nos” but these “no nos” mean that I can live a decent stress-free life for 20 years before I turn 71. I personally don’t worry about life after 71 beyond praying for assisted suicide laws to change. I live in a grey-collar area and the best thing I learned is to do all your living before the held-together-with-duct-tape-and-a-prayer age. That’s what I am doing now.

That was uplifting. — Garth

#83 T.O. Bubble Boy on 11.09.12 at 8:53 am

@ #30 Garth, learn some math! on 11.08.12 at 10:47 pm
Your “squandering tax efficiencies” comment is arithmetically wrong.
————————–

You are missing the point: certain assets (income-producing, like bonds and GICs) are taxed at the full rate, and some (dividends, capital gains) are taxed at a lower rate. If you’re going to use a tax shelter, it should be for the more highly taxed investments.

Your example assumes that you only invest in 1 type of asset, which Garth is assuming someone would never do.

#84 gmc on 11.09.12 at 8:54 am

The problem with Canada’s banking system
watch Victoria Grant and
Bill Graham
Ww should let the BANK Of CANADA create money, that was lost in 1976.Watch Bill’s video, a debt we can mathematically never repay.
Speaking of dept, isn’t CMHC on the hawk for 1 trillion in mortgages, would that give us, 1.589 trillion in debt
http://www.youtube.com/watch?v=q7HMt5MgsDg&feature=related

#85 T.O. Bubble Boy on 11.09.12 at 8:59 am

@ #69 DonDWest on 11.09.12 at 2:05 am
RRSP’s = unemployment insurance. Definately of little use for retirement.
———–

Great point – if everyone just thought of RRSPs this way, they’d be better off. Just like TSFAs, it works out better for the banks and the government if people don’t get it.

#86 Steve on 11.09.12 at 9:11 am

#61 Paul on 11.09.12 at 12:46 am
____________________________________________
Paul, as you indicate, it all depends on the rates. If you can get a better return from anything else, then paying down the mortgage above and beyond your minimum commitment is a poor choice. Also, by using that extra ‘paydown’ money to invest in non-real estate, you are diversifying. That reduces overall risk. Once you fill your TFSA, if you choose a dividend paying investment, you will enjoy the tax advantage.

Also, having some money in your RRSP, as already pointed out, provides a source of income should you be without work. Your mortgage may or may not offer you the ability to skip payments, usually to the extent you have over-paid, but even if it does, you can’t use the mortgage overpayments to buy groceries and gasoline like you can with income.

These issues, and any other that apply to you need to be considered before there is a clear answer to what is best for you and your situation.

#87 TurnerNation on 11.09.12 at 9:14 am

Lol?

http://www.bloomberg.com/news/2012-11-09/south-africa-billionaire-unmasked-selling-u-s-groceries.html

Real estate, Kirsh said, is the only sector where “stupid people” can make money. In December 2011, he agreed to pay 282.5 million pounds ($455 million) for Tower 42 — the first skyscraper constructed in the City of London — and the five buildings that sit on its 2.2-acre plot. He paid cash, and later arranged a 20-year loan that covered about half of the acquisition cost. More U.K. property purchases are likely, according to Philip Lewis, Kirsh’s global head of real estate.

His other holdings include stakes in commercial properties in Western Australia, through a 50 percent stake in Jandakot, Australia-based Ascot Capital Ltd., and in San Diego, California, where he invested in a student and residential housing development near the campus of California State University San Marcos.

#88 Steve on 11.09.12 at 9:20 am

Garth, as #82 indicated, amongst that ‘uplifting rant’, there is a period of time (usually) between retirement (employment income becomes insignificant) and collection of CPP/OAS, let’s say at 67 years of age. As part of an overall plan, it would seem prudent to have RRSP dollars to provide the missing income during these years. (of course, if you have big dollars, it will matter less)

Perhaps this is among the sexy things RRSPs can do fo you?

Looking forward to tomorrow!

Take CPP at age 60. — Garth

#89 };-) aka DA on 11.09.12 at 9:39 am

#49 timmy on 11.08.12 at 11:45 pm
You make such a big deal about the TFSA. It is only 5 grand a year. I saved 20 K last year. Where am I supposed to put the other 15K? Money keeps compounding tax free in an RRSP,unlike in a cash account where you pay tax on dividends each year, and you can control when and how much you can withdraw.

TFSAs can accept $20K now, and that grows to $25K in seven weeks. For a couple in 2013, it’s an accumulated $50,000. Over time, this is a very big deal for most people. — Garth

Sometimes it’s hard to know what world I belong to and which I do not. On one hand this blog indicates a vast number of twenty-something’s pulling down annual salaries in the high six figures. And then on the other, that a couple can together tuck away a paultry retroactive, after tax, amount of $50,000 in a TFSA is touted to be some kind of retirement salvation.

Until the government gives the people some serious incentive to save for the future themselves they will go on spending all that they have someday ignorantly depending on that government which taxed them in good times to bail them out in bad.

As I’ve said before, people en mass are not so proactive and they won’t fix a problem until they have to. By then it’s often too late. You speak of the so many who have nothing saved and the burden it’s going to put on our society. What the government should do is implement a madatory forced retirement plan for everyone like that of teachers. Yes they would complain, like teachers do, that what they have left from each paycheque is too lean but eventually one day they’d appreciate where it led them. Of course the government that set up this plan would not likely match those forced contributions. Actually that plan will eventually I’m sure come someday but only when too late.

You see this is the benefit of home ownership as it is, for many who don’t otherwise have one, a form of forced savings. Just imagine Garth all those soon retiring Boomers had theb all been renters. Like I said people tend not to address pending problems so proactively as the do retroactively and by then it’s more often too late. By combining it with the present need for shelter they “kill two birds with one stone” so to speak. No, it’s not a perfect plan but it’s better than none at all wouldn’t you agree?

#90 };-) aka DA on 11.09.12 at 9:44 am

iPads do have their limitations. Fat fingers, little keyboard and a spellcheck with a mind of it’s own.

They have iPads in Kelowna? — Garth

#91 Behavioral Finance on 11.09.12 at 9:59 am

Right but don’t forget that the initial amount invested before tax is higher than after tax which could potentially offset the advantage of a tfsa in case of positive returns.

#92 Movement to disown O'Leary on 11.09.12 at 10:09 am

O’Leary is embarassing us and must leave our ranks. He can go work with his idol Mittens. Let’s work together to disown him. If we can’t kick him out, we should or at least take away his mic.

#93 tkid on 11.09.12 at 10:11 am

Are monies inside an RRSP protected in any way?

IE, gov’t cannot demand you empty an RRSP before you qualify for unemployment insurance or welfare, courts cannot demand you pay out of your RRSP if they find against you (neighbour sues when you cut down a tree and the court finds against you for $10,000), wife/husband divorces you and wants half of your RRSP type of thing?

#94 Debtfree on 11.09.12 at 10:28 am

@ 65 nmlv great links as usual . I’m with Howard dean . The Obama administration should drive right over the fiscal cliff . He doesn’t have to worry about getting reelected . It will be painful for a couple of 1/4s . He can straighten out those idiot republicans . And we should be back to the Clinton glory days . I also think he should tell f and h to stfu because they are just as bad if not worse than the republicans . It’s high time somebody showed some balls . I think Obama has them .

#95 Eaglebay - Parksville on 11.09.12 at 10:29 am

#66 Tinfoil (one sided) Hat on 11.09.12 at 1:45 am
“——————————————————–
Furthermore once this FIPA is in effect, no future Canadian Parliament or court will be able to change any of its terms without China’s consent. Why would our govt. sign such a lopsided agreement?”
________________
This is BS. You obviously haven’t read the agreement.
It is much simpler and fairer than NAFTA.
Though NAFTA has worked fairly well so far with some exceptions.
You seem to be plugged up.

#96 Buy? Curious? on 11.09.12 at 10:38 am

Smoking Man, you’re absolutely right! If you didn’t post, I wouldn’t have anything to comment on. We have a symbiotic relationship, like those tiny birds who eat off the teeth of crocodiles. But why don’t I take it a step even further, you big reptilian you! I’m going to cut n’ paste everything you’ve written on here, from the beginning, take the best lines, your classics like the one today from today’s post numero 81 at 8:04 am (Should you be too hung over to write?)

” that was fake sm i dont give a turd about rest of canada. 416 is all that counts!” Classic Smoking Man!

Remember the time you bragged about needing Viagra to make Mrs Smoking Man happy? Where is she by the way? She does know she about to strike it rich with a soon-to-be famous author, doesn’t she? Then I’ll run your posts through the spell checker then make some Bass Heavy hip-hop songs. I’ll be the Real World Rapper. What? Don’t believe me? You don’t think I can use your eloquent prose to make money. YOU are, aren’t you? I’m sure after talking to 50 producers in NYC I can find one that will “Open their wallet”. I’ll post a few samplers on Monday and you can tell me what you think and I will mock it for being stupid, again.

Us teachers, who live in the basements of their parents houses, sure need to find a hobby.

Thanks Smoking Man.

http://www.youtube.com/watch?v=RLufXp7Ey_A&feature=related

#97 live within your means on 11.09.12 at 10:38 am

#65 Tinfoil Hat on 11.09.12 at 1:45 am

Thanks for the link. I did sign that Leadnow petition.

Not sure whether you read the following article by Diane Francis in the NP. It’s quite a condemnation of the the agreement.

http://opinion.financialpost.com/2012/11/02/canada-china-trade-deal-is-too-one-sided/

also
Taking apart Tories’ Party Line on China-Canada Treaty

A Conservative MP’s letter attempting to soothe citizens worried about FIPA is misleading says expert Gus Van Harten, who breaks it down item by item.

http://m.thetyee.ca/Opinion/2012/11/05/Van-Harten-FIPA/

#98 House Horny Housewife on 11.09.12 at 10:44 am

Garth,

I really don’t know what you have against tax deferral. If I can make the government wait for its money, why shouldn’t I ? Besides, all of that money that I would be giving to the government today, can earn ME money instead of sitting in the government coffers.

If this guy had a third less of an investment, would this be better ? NO WAY. Yes you may be in the same or even higher tax bracket but you never mention the fact that the tax you are not paying today can be kept and invested.

If you are sheltering the maximum allowed, that translates into about $7,000.00 per year that you are keeping in your pocket to use now and pay back later. If you are in a 50% tax bracket, this becomes around $11,000.00 per year that you can use to make more money.

Also, if you are in a 50% tax bracket, I should think that at retirement you will indeed be in a lower tax bracket and by splitting your income with your spouse, you can almost guarantee that you will be in a lower tax bracket so you are saving even more.

And, as you are about to say in your future entry, you may encounter a “glitch” in life where you may find yourself with little to no income so not only would this pillow help to soften the temporary blow, but you would not have to pay a lot of taxes should you need to withdraw this money (since you will have “tax room” so to speak).

So capital gains and dividends are taxed as personal income instead of investment income … so don’t invest in these types of things for your RRSP, that’s all. As you say, RRSP’s can be invested in anything you desire: bonds with interest income or whatever.

You can have your cake and eat it too. Invest in that RRSP, take the refund and buy a TFSA.

The one point that I think you are bang on about is the fact that people look at their RRSP savings and think that it is ALL theirs. This is definitely a mistake .. granted. It is future gross income is what it is.

But then again, people look at their savings and think, “Oh wow, am I ever rich and smart” but they don’t look at their debt on the other side. A balance sheet is exactly that … a BALANCE sheet. If on the one side you have assets and on the other you have an equal amount of liability, then your equity is diddly squat. If you have assets on the one side and low to little liabilities then the balance of the equation is equity. Many are not aware that Assets = Liability + Equity.

I still think this is something that should be taught in schools at a young age (middle/high school). Right up there with household budgeting, cooking & nutrition and how to organize your time. They are all part and parcel of being successful in life and extremely important.

HHHW

#99 tax_trap on 11.09.12 at 10:56 am

I know and agree RRSP is a trap.

When comes to tax return time though, one has option to pay additional tax he/she owes to the government or put away some money to avoid paying additional tax. It is a tough decision.

It’s not ‘additional’ tax. It will be paid anyway. They’ve messed with your head. — Garth

#100 john on 11.09.12 at 10:58 am

Garth, do you have experience with clients or anyone you know using LIRAs as a safety net through their financial hardship clauses?

I’ve built up a decent portfolio (~$100k), but because of past ignorance, about half of it is locked-in as I left my previous job that had a very generous RPP program.

Is it relatively straight-forward to tap into my LIRA in the event I were to lose my job (i’m only in my late 20s so nowhere near retirement)? I’ve got enough to last me 1-2 years in my TFSA and non-locked-in RRSP, but I have always wondered.

Read this. — Garth

#101 cityboy on 11.09.12 at 11:05 am

Some sound advice. Lower income earners would be better investing in a TFSA. However, what about higher income earners?

For those of us earning far beyond the upper tax limit (128 k or there abouts) and paying 43 percent tax will certainly be paying less tax come retirement and as such the defered tax can work to our benefit. Especially if one does not blow one’s refund on hookers and blow. I put mine straight into a tfsa.

#102 Just Park It on 11.09.12 at 11:06 am

Surprised that no one commented on the poor state of that picture – a intelligent animal caged – it sicken’s me to see pictures like that – who gives other’s the right to deny a life or alter them to a point of pure misery. You taken a free spirited animal and turned him into a byproduct that we see as normal. The picture does have a point though – why should we feel caged about financial shortfalls – life is about today – be free and we were intended to be.

I was visiting a very close friend’s family who recently located in a retirement residence. I watch people at their stage in life – just shuffling along – as if they are waiting for the expiry date to come.

I don’t get the who save while your young to so you can sit on your old frumpy butt when your old and have funds that basically sit there for greedy offspring to get when your day comes.

My wife and I did the who nine yards in our 20’s and early 30’s – trips, dinners, weekend getaways, nice clothes while we had the energy and stamina to do it. Now we are in our mid 40’s – mortgage that is almost done with – I don’t understand the Million Dollar debate, I live for today – but not being naive about tomorrow –

I won’t waste the first 60 years of my life worrying if I have enough money for the last 10-15years where I may just be a worn down machine that only wished he took advantage of life when his body allowed him too.

Banks, advisors, and the like preach savings because they get a direct bennefit financially – period ! When a stranger is concerned with my financial well being – I know there is something wrong.

Live life to the fullest today – tomorrow will work itself out!

Peace and Love to all.

#103 live within your means on 11.09.12 at 11:12 am

Take CPP at age 60. — Garth

Garth can you elaborate on your comment. I took mine at 60 because the break even was age 76 at that time. With the new rules not sure what it would be today.

TIA

The disincentive to collect early has been modestly increased, but the principle remains that when the goverment provides money, take it. I am expecting legislative changes to roll back the basic CPP age in the future. — Garth

#104 Paul on 11.09.12 at 11:13 am

#90 };-) aka DA on 11.09.12 at 9:44 am
iPads do have their limitations. Fat fingers, little keyboard and a spellcheck with a mind of it’s own.

They have iPads in Kelowna? — Garth

And snow this morning.

#105 Spiltbongwater on 11.09.12 at 11:18 am

Third, you are immediately better off (at least most of us) making an RRSP contribution, since every dollar nets you a tax break of up to 50%. So, a family making $100,000 putting $13,000 into a retirement plan will get a tax reduction of $6,500, whereas if husband and wife put $10,000 together into a TFSA, they’d save nothing in taxes. – Garth
http://archives.garth.ca/?s=tfsa

Can you explaing what you meant when you said husband and wife would save nothing putting 10K into TFSA? Maybe no immidiate savings, but over time lots of tax savings to be had.

#106 Mister Obvious on 11.09.12 at 11:36 am

“O’Leary is embarassing us and must leave our ranks.”

Why do you feel the need to disown a comedian? That’s his only role in the media. Cheap entertainment. He got his start in the TV business by promoting Don Cherry, another famous Canadian windbag.

#107 };-) aka D.A. on 11.09.12 at 11:43 am

#102Paul on 11.09.12 at 11:13 am
#90 };-) aka DA on 11.09.12 at 9:44 am
iPads do have their limitations. Fat fingers, little keyboard and a spellcheck with a mind of it’s own.

They have iPads in Kelowna? — Garth

And snow this morning.

Bound to have happened on both accounts.

We just got a shipment of the iPad gen-1 in yesterday. I was first in line to lay down some beads and spent that evening acquainting myself with it. };-)

There are some, I know, who have moved back to Kelowna from Hawaii because they missed the changing of the seasons and Kelowna is not nearly so extreme as other Canadian cities in that regard.

Two months of twelve with white fluffy stuff on the ground is easily tollerable. I know there are places in this country where it’s way too close the reverse of that.

No flakes in TO. — Garth

#108 Smoking Man on 11.09.12 at 11:53 am

#96 buy curious

Lol. Go for it. But you should hold of a bit. My best work is yet to come.

I don’t know what it is but Teacher inspire me.
:)

#109 Steve on 11.09.12 at 11:53 am

Take CPP at age 60. — Garth
___________________________________________
Hang on there a minute Garth! The 36% (by 2016) reduction in benefits to take CPP at age 60 instead of waiting for the full benefit seems significant, yet you readily just give it up? If the reduction of nearly $400 per month represents a large part of your finances in retirement…
wait, if $400 a month is significant in retirement… …oh, crap!

#110 Paul on 11.09.12 at 12:05 pm

Oh come on DA, quit the 2 month BS. From Nov to Apr it’s a very depressing place to be. You rarely see the sun unless you get out of the valley.

#111 Devore on 11.09.12 at 12:15 pm

#12 W

They could also apply a small tax to Your TFSA if they need the cash. Nothing is completely safe in the long term.

How would they do that? That’s already after-tax money. As for the gains and growth? Who’s going to keep track of that for each account? You take money out, put some money in, how are they gonna tax that? TFSA accounts that are all at $0 balance? which is what would happen if this were to be done.

#112 squidly77 on 11.09.12 at 12:20 pm

Surprise, a realtor that tells the truth. Toronto DT condos are not really housing units, they’re simply trading widgets!
http://www.torontorealtyblog.com/archives/the-friday-video-rant-e-is-for-apple/8055#more-8055

The video hits hard.

#113 };-) aka D.A. on 11.09.12 at 12:23 pm

But seriously, without taking some risks many will not be able to accumulate what they need to retire in the lifestyle they would like to as they are too busy trying to make ends meet while they try maintain such a lifestyle today. Few are willing to sacrifice today that they might, maybe if they live that long in the first place, live that life that seems a lifetime away. Not all have pensions and superannuation. Too few, in fact, do.

Clearly far, far more are inept at saving for a rainy day than they who diligently do. For the masses home ownership makes sense as it does achieve that “killing of two birds with one stone” by putting a roof over one’s head while providing a forced savings plan of sorts. I know of a great many Boomers who would not be in nearly as good shape today had they adopted the rental plan over that of ownership. I’m not saying it is the only plan but for many it’s proving a most welcomed one in retrospect amid their more blatantly obvious omissions.

Argue with the logic all day long and for the most part I would agree with you. But the simple fact remains there are far, far more who at the end of the day will not do what you say and this (home ownership) is the most logical alternative for them.

As with any investment plan the earlier you get started the more beneficial it will be.

Of course if you really think that the price of purchasing your own shelter will be fifteen to thirty percent cheaper in a few short years or months to come then by all means hold on to your paper and wait for that day. But don’t tell me or anyone else though that a home is not worth what others are prepared to pay today just because your crystal ball otherwise. Ours say something different than yours and history has sided more with us than you. Respect our plan as you demand we respect yours. At the end of the day we’ll compare notes. Maybe it’s we who will be wrong and maybe you will be right but one thing’s for sure; nothing gets done by doing nothing.

#114 ronthecivil on 11.09.12 at 12:24 pm

Being in my 30s still I would just as soon have a year or twos worth of salary in an RRSP as unemployement/sabbatical insurance.

If my worst case scenario is being overly taxed in my senior years because I am making too much money I can live with that.

Though that said I am close to my RRSP goal and with the TFSA nearly full as well I will be starting to fill up the non sheltered account.

#115 Form Man on 11.09.12 at 12:24 pm

#110 Paul

DA is deluded. An irrational fear of frustrated buyers circling the Kelowna city limits keeps him from venturing anywhere.

Heard this from a realtor to a buyer last summer who was moving here from Kamloops:

” oh you will like Kelowna much better, we have 6 months of summer !” ( Kamloops is only 65 miles away and has a higher average temperature )

hey ! maybe that realtor was DA !

#116 };-) aka D.A. on 11.09.12 at 12:34 pm

#110Paul on 11.09.12 at 12:05 pm

Oh come on DA, quit the 2 month BS. From Nov to Apr it’s a very depressing place to be. You rarely see the sun unless you get out of the valley.

True, to a degree (pardon the pun) but sunshine is not so easily tollerated in the bitter subzero cold. And a great benefit of living here is we have serious ski hills those back east might call ‘mountains’ which by compare to what they have there it is completely understandable.

Anyway if you go up to one of our local hills to enjoy a day of skiing you benefit by a great day of exercise and do so above those clouds in the valleys below. The best days up there can be forecast by the cloudy ones down here.

Really Paul say whatever you want in attempt to justify living wherever it is you live we live here for good reason. It’s costly in many a way but it’s worth it. If it wasn’t we wouldn’t be here.

Ya earn yer money where ya has ta, ya spends it where ya wants ta.

#117 };-) aka D.A. on 11.09.12 at 12:40 pm

No flakes in TO. — Garth

This that we got last night is but a quick reminder that the day nears when your wife is going to want to have her winter tires put on and it’s time to put the boat to bed and get the skis tuned up. Trust me it’ll be gone by tonight. We more often than not do not have a white Christmas here in Kelowna. And while January and February tend to have snow on the ground it’s melted by some time in March.

Care to compare notes on that?

Virtually no snow in Toronto last winter, or in Nova Scotia. — Garth

#118 Weekend Links – Remembrance Day on 11.09.12 at 12:55 pm

[...] Garth had a great post about “The Tax Trap.” It is good to remember that RRSPs are for TAX DEFERRAL; they  are not tax free. It is good [...]

#119 anotherwhistleblower on 11.09.12 at 1:19 pm

With the government only allowing a TFSA ceiling of $5000 per person per year and a 50% taxation on earned income there is precious little opportunity to save. The RRSP is a ‘damned if you do..damned if you don’t stategy. If you are extremely rigorous you can try to save in non registered accounts but really….how many people have the level of income that can max out an RRSP to defer the 50++% taxation in Canada….Max out anTFSA…..AND save additional funds in a investment account? You’re really getting into a rarefied atmosphere. Lets not forget that we’re dealing with a population that has to carry a 163% personal debt to income load…for thirty yeras as mortgages have ballooned for two entire generations almost wiping out any future savings.

Sure….I know lots of people that do well off Grandma’s death……and delight whenever MOMMY or Daddy get a bad report from the doctor…..but this is still a minority of Canadians.

Yes the RRSP is a tax trap…no doubt…..but given the egregious taxation and hyperinflated cost of living in Canada generally and on the west coast in particular…what do your ‘investment guru’s’ at whatever firm you work for have to say about the people who aren’t wealthy with cash to burn at the end of every month? What are the strategie’s for people who are just squeaking by and need the RRSP as a planning tool to balance out tax debt at the end of the year? Where are you suggesting we get the extra money to invest from?

#120 Franke le Skank on 11.09.12 at 1:21 pm

Is there a limit to the amount of RRSPs I can transfer to my spouse at one time?

#121 Bottoms_Up on 11.09.12 at 1:21 pm

#117 };-) aka D.A. on 11.09.12 at 12:40 pm
———————————————–
The Toronto to Hamilton horseshoe has the amazing weather benefits of ‘lake effects’, where Lake Ontario, because it is so large, serves to buffer the temperature and reduce snowfall etc. You can golf in the area in November and March. It is actually quite nice weather compared with the rest of Canada.

#122 Paul on 11.09.12 at 1:23 pm

DA, I lived there from 97 to 09, worked outside everyday so I know very well how miserable it can be. Big White, the fog is great isn’t it? Kelowna is ok but far from the best place on earth like you try and make it sound. Maybe if it wasn’t full of snobs, maybe.

#123 peter on 11.09.12 at 1:28 pm

I like you way more as a housing critic and less as a “Financial Advisor”. Almost like you have crossed to the other side and are part of the retail peddling class now.

Making stock market calls (as if you know) and suggesting people buy Canadian bank preferred’s which will undoubtedly be affected by your negative housing call.

The conflict of interest is glaring but what the heck, you are entitled to make a buck just like the rest of them.

Interesting comments from a professional mortgage broker in Victoria. I guess you have a fair amount of time on your hands, eh? — Garth

#124 Bottoms_Up on 11.09.12 at 1:29 pm

#98 House Horny Housewife on 11.09.12 at 10:44 am
————————————————-
Schools are teaching finances now! And I believe Garth has previously mentioned taking RRSP tax dollars and sticking them into the TFSA. Different strokes for different folks for sure!

#125 piazzi on 11.09.12 at 1:39 pm

for him with unemployed wife, it may (emphasize may) make sense to investigate benefits of spousal contribution into RRSP with plans to stop later for a three-year period and then witdraw as wife’s income up to the non-taxable income limit each year

in short, he gets tax benefit of contribution, wifes withdraws complete in cash

one caveat, he will not be able to get all sposal amount on his return when wife starts cashing out of spousal RRSP after 3-year no-contribution-period

#126 Bottoms_Up on 11.09.12 at 1:46 pm

#95 Eaglebay – Parksville on 11.09.12 at 10:29 am
————————————————
I strongly urge you to read the link to Gus Van Harten’s response to the FIPA (provided in comment #97).

#127 Walt on 11.09.12 at 1:46 pm

The question of future tax rates aside, the best way to invest (according to my calculations) is to invest in your RRSP.
An Ontario taxpayer with an income of $50,000 pays about $8,694 in taxes, netting $41,306. If he/she puts $5,000 into a TFSA in 30 years it will be worth $38,061 at 7% per annum. In the meantime they end up with $36,306 to spend.
However if they put $5,000 into an RRSP, they only pay $7,144 in taxes, a saving of $1,550 which will grow to $11,799 in 30 years at 7% inside a TFSA. And they have the same $36,306 to spend.
At the end of 30 years they would have $49,860 ($38,061 in an RRSP and $11,799 in a TFSA)
Under current rules a senior citizen with $45,000 income ($50,000 income less the $5,000 annual saving now no longer needed) made up of CPP OAS and RRSP withdrawals would pay about 14.45% tax so the $38,061 would be drawn down by paying $5,500 taxes for a net of $44,360. This is $6,300 or 16.5% greater than putting the money in a TFSA alone.

#128 Canadian Watchdog on 11.09.12 at 1:53 pm

#112 squidly77

That’s a good vid. Seems like the only way to sell condos is to bash new/pre-sales and promote resales now. Just a taste of what’s to come in 2013.

#129 GTA Engineer on 11.09.12 at 1:55 pm

Garth,

What if someone plans on retiring in the USA? You can abandon your Canadian residency (can always get it back) upon retiring, and withdraw your entire RSP as a lump sum with a flat withholding tax of 15%-25% when you retire (actual number depends on the source I read..). That makes RSP’s more attractive – ie. get back your marginal tax, repay 15-25% upon retirement, pocket the difference! The US is considered a great tax haven for this reason for Canadian retirees. Any downsides to this? I believe if you fully abandon your residency (home, phones, cards, accounts, etc.) you can do this and 2-3 years later move back with all your cash, paying no additional taxes. Gaps in my logic?

#130 Devore on 11.09.12 at 1:56 pm

#94 Debtfree

The Obama administration should drive right over the fiscal cliff . He doesn’t have to worry about getting reelected

The thing about democracy is that it’s not a dictatorship. Obama can’t do anything by himself. Hundreds of Democrat politicians are up for re-election after Obama leaves office.

#131 Montrealer on 11.09.12 at 2:00 pm

I like Kevin O’Leary, he’s the most entertaining Dragon in the Den!
And you have already posted your RRSP pros and cons, you should link back to these two posts.

#132 };-) aka D.A. on 11.09.12 at 2:02 pm

Virtually no snow in Toronto last winter, or in Nova Scotia. — Garth

Well slap me upside the head and call me stupid. That’s OUTSTANDING!

Actually I was lying. We get a ton of snow here and for the most part winter is like today when I look out my office window and can’t even see the nearby mountains. We probably won’t see sunshine for another five months.

Now that they’ve legalized the personal use of weed in that state we share a boarder with our economy is sure to go straight to pot (pardon the pun again) as our local mainstay industry looses it’s most valuable client base.

You don’t want to live here it sucks BIG time.

And with the exorbitant cost of living here coupled with service industry minimum wages?!? Ouch. Really don’t believe what anyone, including me, has said before. It’s a Hellhole… stay away.

#133 SRV on 11.09.12 at 2:21 pm

Well that’s a low blow Garth…

How can I continue to beat you up on Gold (I actually prefer Silver) when you say things like… “As puffed up and useless as, say, Kevin O’Leary!”

I have never been so ashamed to be a Canadian as I was after seeing this clip… I swear Harper insisted the CBC hire this guy in lieu of funding cuts!

http://www.youtube.com/watch?v=0SIhY6El5jk

p.s. If you ever have this guy cornered in a room and would like a little help PLEASE give me a call!

#134 john on 11.09.12 at 2:27 pm

Thanks!

#135 Steve on 11.09.12 at 2:36 pm

A simplified example of what RRSP really means to our taxes (Ontario rates used, numbers rounded):

$100k income now, assume $50k target in retirement. Contributing $18k to RRSP now when marginal rate is 37.2% ‘avoids’ current tax of ~$6700.

Using that RRSP as income in the future, at the current marginal rate of 31.2% for the $50k range, results in maximum tax of ~$5600.

So putting your money in the RRSP reduces the dollars you send to the government as income tax by about $1100, but usually decades apart in time, and if tax rates increase, that is eroded – there is that risk element that Garth reminds us to consider.

Going further, let’s assume that our contributions doubled in capital value within the RRSP. That means we get more income, but remember that it is all taxable on withdrawal.

Tax cost of the RRSP = 2*$5600=$10,200, albeit in the future

If we made the same investment in our TFSA and it doubled in there, we pay the tax up front, but we do not pay tax on the gains/withdrawals.

Tax cost of the TFSA = 1*$6700 now

Something to add to things that make you go hmmmm.

#136 Snowboid on 11.09.12 at 2:43 pm

#110 Paul on 11.09.12 at 12:05 pm…

The last two weeks before we headed south were depressing, with the clouds so low and dark we thought we were living a Halloween nightmare!

We sighed in relief as we entered the Valley of the Sun again, and waking up to sun at least 25 days a month is priceless.

I guess that’s why over 500,000 Canadians spent all or part of the winter here in Arizona.

BTW, the AI (Alberta Index) is observed as much higher this season – maybe they have abandoned Kelowna for sunnier skies!

I do recall one Kelowna RE agent stating about 2.5 years ago that he was liquidating all assets in preparation for a move away from the city that ‘sucks’.

I wonder where the agent and his family ended up?!!

#137 Snowboid on 11.09.12 at 2:50 pm

“stating about 2.5 years ago that he was liquidating”

Correction, that was 4.5 years ago – that same agent referred to Kelowna residents as lemmings living in a cesspool!

Any ideas?

#138 fancy_pants on 11.09.12 at 2:57 pm

America is finished.

Obama knew that when you rob from Peter to pay Paul, you can ALWAYS count on the support of PAUL. The sub-culture of societal parasites and social leaches has now become the dominant culture.

Withholding blame; there is now officially a new dominant class in America, the parasite class.

#139 };-) aka D.A. on 11.09.12 at 3:10 pm

#123Bottoms_Up on 11.09.12 at 1:21 pm
#117 };-) aka D.A. on 11.09.12 at 12:40 pm
———————————————–
The Toronto to Hamilton horseshoe has the amazing weather benefits of ‘lake effects’, where Lake Ontario, because it is so large, serves to buffer the temperature and reduce snowfall etc. You can golf in the area in November and March. It is actually quite nice weather compared with the rest of Canada.

Good to hear. I will spread the word so people don’t make the mistake of moving here when they have such wonderful other options to consider.

#124Paul on 11.09.12 at 1:23 pm
DA, I lived there from 97 to 09, worked outside everyday so I know very well how miserable it can be. Big White, the fog is great isn’t it? Kelowna is ok but far from the best place on earth like you try and make it sound. Maybe if it wasn’t full of snobs, maybe.

You’re lying you know as well as I that Walmart no longer requires their greeters to stand outside.
Ya sorry about that ‘making it sound better than it is’ gig. It SUCKS BIG TIME here – be warned – stay away. Anybody who tells you otherwise seeks only to part a fool from their money.

#140 };-) aka D.A. on 11.09.12 at 3:16 pm

Oh and the real estate market, Form Man is correct it has and continues to tank. Come back in a year or two and prices will be down 30% across the board.

Hey I tried my best to convince you all otherwise but clearly to no avail. You are all too smart and can’t be fooled by thei REALWHORE. I might as well accept that there is no way I can save our market by pulling the wool over the heads of such well informed folks as you.

I’m going to take down my shingle and join all my other REALWHORES friends at the soup kitchen at the foot of Leon.

#141 Tinfoil Hat on 11.09.12 at 3:23 pm

#95 Eaglebay – Parksville on 11.09.12 at 10:29 am

#66 Tinfoil (one sided) Hat on 11.09.12 at 1:45 am
“——————————————————–
Furthermore once this FIPA is in effect, no future Canadian Parliament or court will be able to change any of its terms without China’s consent. Why would our govt. sign such a lopsided agreement?”
________________
This is BS. You obviously haven’t read the agreement.
It is much simpler and fairer than NAFTA.
Though NAFTA has worked fairly well so far with some exceptions.
You seem to be plugged up.
———————————————————-

Fairer than NAFTA!? Have you actually read the agreement? Did you follow the link I provided to the article by an international trade expert taking apart the government propoganda response point by point?

Quoting from the article:

“Unlike NAFTA, the FIPA is not a trade agreement and does not reduce tariffs for Canadian exports to the Chinese market. Its main role is to protect Chinese-owned assets from legislatures, governments, and courts in Canada, and vice versa. Because there is more Chinese investment in Canada than Canadian ownership in China, the treaty’s investor protection mechanism puts disproportionate risks and constraints on Canada.

To illustrate, if current trends were to continue (tracking from inward Foreign Direct Investment flows during 2008 to 2011), the ratio of Chinese investment in Canada to Canadian investment in China would increase from about 2 to 1 now to 10 to 1 in approximately 10 years. Also, Chinese investment in Canada would exceed U.S. investment in Canada after roughly 17 years. Incidentally, this is just over halfway through the minimum 31-year lifespan of the Canada-China treaty. These investment outcomes are highly speculative and may not come to pass. But it is the governments’ responsibility to indicate how much Chinese investment is anticipated under the treaty and in what areas so that the treaty’s risks and constraints can be assessed and debated in an informed way.Canada has already spent hundreds of millions on penalties from lawsuits launched under the North American Free Trade Agreement (NAFTA), and right now Belgium is facing a $3 billion suit from one of China’s companies because of a similar foreign investor agreement.”

and

“What are the benefits for Canada? The treaty does not lower tariffs for Canadian exports to China’s market. It does not open China’s economy to investment by Canadian companies, beyond what governments in China already allow. It does not level the playing field for Canadian companies. On the contrary, the treaty allows China to continue to discriminate in favour of its own companies in China, while locking in the relatively even playing field in Canada.”

and

“The federal government still has not released a NAFTA award in an important case that Canada lost in May 2012 (Mobil/ Murphy Oil v Canada). This undermines the government’s credibility when it says that it will make decisions and documents public under the Canada-China treaty. It also raises the question of why the government in this treaty, unlike other FIPAs, retained the right to withhold documents relating to Chinese lawsuits against Canada (see Article 28 of the treaty). By retaining this right, the government will be able to shield itself from embarrassment by not telling Canadians about cases in which a Chinese company has sued Canada. The government’s response, in the face of the clear language in the treaty, is to ask Canadians to trust that the government will release all documents in all cases over the next 31 years.”

and

“Perhaps the treaty will protect Canadian interests. But on each of the key issues of market access, investor protection, and leveling of the playing field, the treaty favours China. The federal government needs to acknowledge this and explain why it is in Canada’s interest. And before locking in the treaty for 31 years, the federal government and other governments in Canada should make public their risk assessments and cost-benefit analyses of the treaty in order to allow independent scrutiny and informed debate. If they have not done those assessments, then frankly it would be negligent for the federal government to ratify the treaty.

Notably, when the Australian Productivity Commission in 2010 assessed the role of the investor-state arbitration mechanism that is replicated in the Canada-China treaty, it recommended that Australia not include this mechanism in future treaties. The Australian government accepted this recommendation after being sued under an investment treaty by Philip Morris for Australia’s national anti-tobacco legislation.

In recent weeks, the federal government has indicated that state-owned entities should be treated differently at the stage of admission to Canada’s economy. However, similar issues arise in relation to the treaty and its extensive protections for state-owned entities after they are admitted to Canada. The treaty will allow Chinese companies to challenge democratically-authorized decisions in Canada via arbitration processes that are not open, fair, and independent in the manner of a domestic or international court. Canadians deserve an opportunity to learn more about these arbitrations and the lawyers who control them before their sovereignty is conceded to the arbitrators for 31 years, for the purpose of protecting Chinese state-owned firms from governments in Canada.”

It appears to me that the prime beneficiaries in this agreement are Chinese investors (who as stated above will likely far outnumber Canadian investors in $$ invested) and the lawyer-arbitrators who will collect vast legal fees in dispute resolution cases.

#142 Daisy Mae on 11.09.12 at 3:31 pm

#42 Freedom First: “Our education system has failed Canadians. We must seek financial literacy ourselves or spend our lives bent over…..”

****************

What you state is so true. Past generations didn’t generally know where to begin, or to even take financial planning seriously. At least, not enuf. Too late now for a ‘do over’.

Financial literacy should be part of the school curriculum.

#143 Dontcallmeshirley on 11.09.12 at 3:49 pm

#143 };-) aka D.A.,

You weren’t kidding when you said your cupboard was bare of motivated sellers and serious buyers were you?

Despair is creeping into your scribblings here.

Why don’t you just go and tend to your rental properties and let everyone else waste their lives away?

#144 Canadian Watchdog on 11.09.12 at 3:56 pm

#145 Daisy Mae

Past generations didn’t generally know where to begin, or to even take financial planning seriously.

They didn’t have to because they kept borrowing — pushing up asset prices — making them feel wealthy. Now that ponzi scheme is collapsing and many are clueless on how to make money without signing a piece of paper or clicking a mouse button.

Financial literacy should be part of the school curriculum.

You want Harper teaching your kids finance? Link

“The Agency develops innovative tools to help Canadians make some of the biggest financial decisions of their lives. From mortgage calculators to guides on choosing the best credit card to meet their individual needs”

Choosing the best credit card, not avoiding them.

Disclosure and access to information will teach people everything they need to know about their finances. We don’t need more government in our lives.

#145 Daisy Mae on 11.09.12 at 3:59 pm

#42 Freedom First: “….condo repair/reno costs$$$$$ not covered by the reserve fund…”

****************

Tell me about it! In the gated community in which I live, we budget $98,000 annually to mow grass….and another $8,500 to keep it green.

We live in the ‘sunny Okanagan’ — semi-arid. We’re being referred to as ‘water hogs’ because of our water waste. Xeroscaping is becoming the norm, but you just ‘can’t teach old dogs new tricks’ and homeowners refuse to give up their grass. Council won’t even entertain the idea. This money should be going into the contingency fund but, oh well…..

#146 Rainman on 11.09.12 at 4:15 pm

I have never been so ashamed to be a Canadian as I was after seeing this clip… I swear Harper insisted the
#135 SRV on 11.09.12 at 2:21 pm

CBC hire this guy in lieu of funding cuts!

http://www.youtube.com/watch?v=0SIhY6El5jk

p.s. If you ever have this guy cornered in a room and would like a little help PLEASE give me a call!

I will join you in this, not in violence, but a decent wedgy would do this guy some good… I never realized he was such a wanker??? embarrassing indeed….

#147 Daisy Mae on 11.09.12 at 4:25 pm

147Canadian Watchdog: “They didn’t have to because they kept borrowing — pushing up asset prices…”

****************

Past generations paid cash…or they did without.

#148 Daisy Mae on 11.09.12 at 4:29 pm

#147 Canadian Watchdog:

QUOTE: “First Modern Credit Card Introduced (1950): In 1949, Frank X. McNamara thought of a way for customers to have just one credit card that they could use at multiple stores. McNamara discussed the idea with two colleagues and the three pooled some money and started a new company in 1950 which they called the Diners Club.”

#149 Debtfree on 11.09.12 at 4:32 pm

@132 Devore all the prez has to do is just not cooperate with the republicans . Cut defence . Raise taxes . Anyone that tells you that there is not going to be pain is lying to you . Paying your debt is a can that can not be kicked down the road for ever . If the states don’t get their house in order we will be looking at a Greece south of the border . Only a fool cannot see that . If the states sneezes we get a cold . If the states get a cold we’ll die of pneumonia . As for democracy that ends at the ballot box . If the prez sticks his heels in the defence contractors will stick their boots right up the republicans you know where and throw the one percent on the barbie.

#150 Daisy Mae on 11.09.12 at 4:37 pm

#61 Paul: “If you happen to have a 5% mortgage, a dollar spent paying down that mortgage is providing an after-tax return of 5%.”

********

How can you have a ‘5% return’ on debt?

#151 wykidajlo on 11.09.12 at 4:41 pm

31 Old Man on 11.08.12 at 10:50 pm

Which market?

#46 Smoking Man on 11.08.12 at 11:38 pm
Sorry but no basement here. I live under the bridge.

You called a market and did not go your way so you called it analysis. I guess the market analysis had some flaws.

Maybe once you provide more facts on your analysis then I will take your comments seriously.

Your talk is about how great, smart and loaded you are and how everyone else is stupid. If you want to help some people then do it or just don’t waste the bytes for useless comments.

I will still give you a credit for some of your posts on your blog but too bad that many of them here are self-glorifying.

#152 ronthecivil on 11.09.12 at 4:42 pm

“The thing about democracy is that it’s not a dictatorship. Obama can’t do anything by himself. Hundreds of Democrat politicians are up for re-election after Obama leaves office.”

To go over the fiscal cliff all Obama need do is veto everything that prevents it between now and Jan 1.

It’s doubtfull a democrate controlled senate is going to over ride him. Heck, with the split in the states it would be hard to get two thirds to come together to agree the sky is blue let alone override a presidential veto.

The fiscal cliff is already law all he needs to do is keep it that way which he can very much do singlehandedly.

#153 Mixed Bag on 11.09.12 at 4:50 pm

Question:
If the tax rate will be much higher in future years, (e.g. when the boomers wish to draw on their RRSP), then the corollary should also exist – the tax refund on an RRSP contribution will be that much bigger. For those young enough to wait it out, it should be worth it, no?

Comment:
Drawing on the RRSP, when you have the baby in the summer, and had earned half a year’s salary, then collect EI for the other half, could still keep you in the same/similar tax bracket. Drawing on the RRSP while on mat leave is worthwhile if the baby was born at the beginning or end of year, if the mother was working in the first place.

#154 Questioning Calgary stats on 11.09.12 at 4:53 pm

2013 is shaping up to be early 2009 all over again with a housing market correction/crash in full effect.

However, this time there will be no housing market rescue like there was in 2009.

#155 Daisy Mae on 11.09.12 at 4:57 pm

#98 HHH: “But then again, people look at their savings and think, “Oh wow, am I ever rich and smart”

************

And then, of course, we have ScotiaBank re-inforcing that belief by telling their customers that they’re “richer than (you) think”….

#156 VMD on 11.09.12 at 4:59 pm

BC & Ontario Credit Unions facing pressure from provincial regulators to follow OSFI B-20 Rules:

“there is already evidence that some provincial regulators are taking their cue from federal policy changes including at least two provincial regulators – the Deposit Insurance Corporation of Ontario (DICO) and the Financial Institutions Commission in British Columbia (FICOM) – that have asked member institutions to closely follow the recently introduced OSFI guidelines around residential mortgage lending”
Source: Credit Union Central of Canada: System Brief Oct 2012
http://www.cucentral.ca//Publications1/SYSTEM%20Brief_Policy_Final2_29OCT12.pdf

#157 Paul on 11.09.12 at 5:01 pm

#142 };-) aka D.A. on 11.09.12 at 3:10 pm
#123Bottoms_Up on 11.09.12 at 1:21 pm
#117 };-) aka D.A. on 11.09.12 at 12:40 pm
———————————————–
The Toronto to Hamilton horseshoe has the amazing weather benefits of ‘lake effects’, where Lake Ontario, because it is so large, serves to buffer the temperature and reduce snowfall etc. You can golf in the area in November and March. It is actually quite nice weather compared with the rest of Canada.

Good to hear. I will spread the word so people don’t make the mistake of moving here when they have such wonderful other options to consider.

#124Paul on 11.09.12 at 1:23 pm
DA, I lived there from 97 to 09, worked outside everyday so I know very well how miserable it can be. Big White, the fog is great isn’t it? Kelowna is ok but far from the best place on earth like you try and make it sound. Maybe if it wasn’t full of snobs, maybe.

You’re lying you know as well as I that Walmart no longer requires their greeters to stand outside.
Ya sorry about that ‘making it sound better than it is’ gig. It SUCKS BIG TIME here – be warned – stay away. Anybody who tells you otherwise seeks only to part a fool from their money.

You sound like you’re getting angry for no reason. Kelowna is nothing special. I visit quite often as I have friends in the Okanagan. Right now I pay 110.9 a liter for gas, the sun is beaming in my windows and it’s +9 and no snow. It’s 2 hrs away from great skiing with 3 times the amount of snow as Big Whiteout. I have yet to meet anyone as miserable as my Kelowna neighbors were. I’d even move back to the Okanagan (not Kelowna) but my other half says I’m going alone. :( Certainly wouldn’t have to wait another 2 years to get that 30% discount as that’s already happened.

This thread is funny. Maybe you could help. Looks like there’s a limited amount of good ones. :)

http://forums.castanet.net/viewtopic.php?f=23&t=47322

#158 Al on 11.09.12 at 5:22 pm

Almost 90% of the small shops/restaurants I walk by are more than three quarters empty nowadays. What gives?

#159 Daisy Mae on 11.09.12 at 5:23 pm

#140 Snowboid: “….that same agent referred to Kelowna residents as lemmings living in a cesspool!”

*************

Gimme a break…. LOL

#160 Inglorious Investor on 11.09.12 at 5:26 pm

#147 Canadian Watchdog on 11.09.12 at 3:56 pm

“We don’t need more government in our lives.”

Amen!

#161 Hoof-Hearted on 11.09.12 at 5:31 pm

Can’t wait till Okanagon prices collapse to what they are real worth.

#162 Poorboy on 11.09.12 at 5:36 pm

#11 Engineer
If you had to choose between TFSA and RRSPs, TFSAs are the choice. Doing both is better.

As for RRSP vs unregistered, it totally depends on how long you are investing for and what you are investing in. Compounded, tax sheltered gains over a long period of time will offset some or all and then some of the tax liabilities when you withdraw as compared to unregistered tax efficient gains.

If you are a believer in the balanced portfolio you should setup a spreadsheet and do the math with several assumption scenarios on returns and length of investment.

#163 Bottoms_Up on 11.09.12 at 5:48 pm

#139 Snowboid on 11.09.12 at 2:43 pm
——————————————
As you know, you talk to a lot of people down there and they tell you they moved there after having experienced the climate for a few weeks. It really is amazing.

#164 Bottoms_Up on 11.09.12 at 5:52 pm

#131 GTA Engineer on 11.09.12 at 1:55 pm
———————————————
What do you do for health care down there in some of your most needy years?

#165 Vamanos Pest on 11.09.12 at 5:55 pm

Garth, the discussion here is a little simplistic. Your general tone would suggest RRSPs are a bad thing. But, like most things, the devil is in the details. True, many people may blindly contribute to an RRSP without thinking through the real advantages and disadvantages, and they need to be aware of the issues raised in the blog. However, there are situations where it is absolutely appropriate to contribute for the tax advantage. I’ll use your own argument to demonstrate:
You said 400 000 in RRSP may be only 300 000 after taken out and taxed. But if said saver is in the highest tax bracket (let’s say that’s 40%) then to not be in RRSPs (i.e. no tax deduction prior to investment) that 400 000 never really is 400 000, it’s 260 000 because you now pay the tax up front prior to investing. And, self-evident but I’ll say it anyway: 300 000>260 000.
Now I know you can’t just put 400 000 into an RRSP and that amount is built over years, but I don’t think that changes the argument: For someone in the high tax brackets (that would save the most with the tax deduction) with a lifestyle well below their actual income (such that the income they need to support their lifestyle in retirement is much less than their actual income in working years) RRSPs remain a relevant, even crucial component to wealth accumulation and retirement planning.

#166 Vamanos Pest on 11.09.12 at 5:58 pm

whoops, that 260 000 is actually 240 000 (60% of
400 000). Nice, try to make an intelligent argument and can’t even do the arithmetic right.

#167 Linda Pearson on 11.09.12 at 6:06 pm

#148Daisy Mae on 11.09.12 at 3:59 pm
#42 Freedom First: “….condo repair/reno costs$$$$$ not covered by the reserve fund…”

****************

Tell me about it! In the gated community in which I live, we budget $98,000 annually to mow grass….and another $8,500 to keep it green.

but you just ‘can’t teach old dogs new tricks’ and homeowners refuse to give up their grass. Council won’t even entertain the idea. This money should be going into the contingency fund but, oh well…..

*******************************************

Some young pups are real slow to learn new tricks too. In the condo complex where we live, in a community that doesn’t allow chemical weed control, our “lawns” look disgusting. But the condo board won’t entertain the idea of seri-scaping or switching to native or acclimated shrubs that don’t require a lot of water. Our city is entirely reliant on groundwater for its supply so saving a precious resource instead of wasting it on a losing battle seems to me like the way to go. But what the hey, majority rules. :(

#168 Bottoms_Up on 11.09.12 at 6:07 pm

#143 };-) aka D.A. on 11.09.12 at 3:16 pm
——————————————-
DA, your reverse psychology approach looks good on you. You should keep it up.

#169 Bottoms_Up on 11.09.12 at 6:13 pm

#155 ronthecivil on 11.09.12 at 4:42 pm
———————————————–
It’s not a fiscal “cliff”. It’s a fiscal “pothole”. They might blow a tire but the machine will move on.

#170 };-) aka D.A. on 11.09.12 at 6:20 pm

#146Dontcallmeshirley on 11.09.12 at 3:49 pm
#143 };-) aka D.A.,

You weren’t kidding when you said your cupboard was bare of motivated sellers and serious buyers were you?

Despair is creeping into your scribblings here.

Why don’t you just go and tend to your rental properties and let everyone else waste their lives away?

Ya, you’re right again.

Here’s some interesting statistics: Of all the single family homes listed for sale in Kelowna thus far this year just 34.72% have sold. The listing of 29.69% expired before a ready willing and able buyer willing to pay something acceptable to the seller was found. And 35.59% of the sellers just gave up and cancelled their listing.

And Form Man thinks we have more than a year’s worth of inventory?!? Clearly only 35% of the active inventory is real and simple math deduces that it is more like just 3.7 months of inventory that is really for sale. Buyers are not so stupid as to consider anything else. You can ask whatever you want it doesn’t mean it’s near worth it. And everything can be bought for a price it’s just a matter of whether you’re prepared to pay it. So does that mean we should actually consider every home in Kelowna a part of the available inventory? Wouldn’t you sell yours if someone offered you the ‘right’ price?

#171 Ken R on 11.09.12 at 6:22 pm

#161 Al on 11.09.12 at 5:22 pm

“Almost 90% of the small shops/restaurants I walk by are more than three quarters empty nowadays. What gives?”

This is the new reality. It won’t take a melt down in real estate prices to cripple the masses; they are already crippled. The payday cash store lots are full of new vehicles, people are grocery shopping at the dollar store, the mall food court is filled with people who don’t have the resources to go anywhere else. Canadians are house and vehicle poor, plain and simple. A real estate correction looks inevitable; but the damage is already done. The explosion of poverty is upon us.

#172 };-) aka D.A. on 11.09.12 at 6:29 pm

#146Dontcallmeshirley on 11.09.12 at 3:49 pm
#143 };-) aka D.A.,

You weren’t kidding when you said your cupboard was bare of motivated sellers and serious buyers were you?

Despair is creeping into your scribblings here.

Why don’t you just go and tend to your rental properties and let everyone else waste their lives away?

Ya, you’re right again.

Here’s some interesting statistics: Of all the single family homes listed for sale in Kelowna thus far this year just 34.72% have sold. The listing of 29.69% expired before a ready willing and able buyer willing to pay something acceptable to the seller was found. And 35.59% were cancelled by sellers who simply gave up any thought of achieving their high priced expectations.

And Form Man thinks we have more than a year’s worth of inventory?!? Clearly only 35% of the active inventory is real and simple math deduces that it is more like just 3.7 months of inventory that is really for sale. Buyers are not so stupid as to consider anything else. You can ask whatever you want it doesn’t mean it’s near worth it. And everything can be bought for a price it’s just a matter of whether you’re prepared to pay it. So does that mean we should actually consider every home in Kelowna a part of the available inventory?

#173 jess on 11.09.12 at 6:33 pm

tax tricky

http://thetyee.ca/CanadianPress/2012/11/08/Carney-Banks-20701270/
i agree with mr. carney that REGULATION IS GOOD but enforcement with a “wink and the nod.”
Jersey is cooperative on tax matters, endorsed by OECD. Huh..Really?

http://taxjustice.blogspot.co.uk/2012/01/jerseys-geoff-cook-issues-misleading.html
…as a whistleblower has given detailed list of 4000 names addresses and account balances regarding HSBC in jersey.
By Holly Watt, Robert Winnett and Claire Newell
9:52PM GMT 08 Nov 2012
“The tax authorities have obtained details of every British client of HSBC in Jersey after a whistleblower secretly provided a detailed list of 40000 names, addresses and account balances earlier this week.” Daily Telegraph

For example : “Three senior bankers at the centre of a major Italian fraud case are holding large sums offshore with HSBC.
Antonia Creanza, Fulvio Molvetti and Carlo Arosio are among nine people accused of misleading officials from the city of Milan over the complex sale of millions of pounds worth of derivatives. The three worked for investment banks in both Italy and London. The complicated deals ended up costing the city millions. “

#174 Coho on 11.09.12 at 6:37 pm

DA wrote,

…Until the government gives the people some serious incentive to save for the future themselves they will go on spending all that they have someday ignorantly depending on that government which taxed them in good times to bail them out in bad….

The absurdity of the shrinking middle class, which cannot keep up a middle class standard of living without going into increasing debt, being expected to somehow accumulate a large enough sum of money to finance a 30 year retirement is lost on people. People are just making wages for God’s sake! And what percentage right off the top of tax revenues is paid to the central bank as payment on interest on the debt? In the 1990’s I believe it was around 30%! Small wonder there aint enough money to go around.

In a decent world, people who have worked all their life should not have to worry about choosing between food and medicine in their retirement. There IS enough wealth in the world being generated by the masses to allow for this. Unfortunately, the ruling class by way of their parasitic central banks and other mechanisms syphon more and more money from the public and into their private coffers.

The game is that they take an increasingly bigger chunk of the wealth pie and blame the people for not becoming millionaires to fund their retirement, while knowing full well that the vast majority not only will not, but cannot.

#175 Coho on 11.09.12 at 7:01 pm

Hoof Hearted 56,

This deserves a re-post.

Dominant Social Theme: Terrorism must be combated by controlling people’s money.

Free-Market Analysis: What we consider to be the “phony” war on terror is the gift that keeps on giving to those who run our governments.

The phony war on drugs only adds to the rationales for telling people what they can and cannot do with their resources.

What is going on is a pattern, not a series of defensive moves taken out of desperation. The power elite intends to lock down the world, it seems, in order to track every monetary transaction of any significance.

And wait until they bring in the carbon tax. One day you’ll need permission to fire up your lawnmower.

Indeed, these are patterns with seemingly plausible reasons to institute. This is the surface pablum fed to the unaware masses. Beneath it, the end game is really for total subjugation of the masses. There is not the will among those behind world affairs to improve conditions for the many. Rather it is for world dominance played out by basically two factions, one just as evil as the other pitting people and countries against one another through various means.

As goes freedom, so goes the standard of living. Oppressed peoples are not wealthy people. What is the standard of living in oppressed societies as compared to ‘free’ societies? For those able, it doesn’t at all hurt to accumulate a tidy sum, but, it would serve people well to take notice of these ‘patterns’ outlined above because as stated, as goes freedom, so goes wealth.

#176 live within your means on 11.09.12 at 7:11 pm

#117 };-) aka D.A. on 11.09.12 at 12:40 pm
No flakes in TO. — Garth

This that we got last night is but a quick reminder that the day nears when your wife is going to want to have her winter tires put on and it’s time to put the boat to bed and get the skis tuned up. Trust me it’ll be gone by tonight. We more often than not do not have a white Christmas here in Kelowna. And while January and February tend to have snow on the ground it’s melted by some time in March.

Care to compare notes on that?

Virtually no snow in Toronto last winter, or in Nova Scotia. — Garth

…..

I’ve lived in Nova Scotia since ’76. It’s a 50/50 chance, according to Env. Cda, that we’ll have snow at Xmas. I do hope to see a little on the ground Xmas eve & day.

True, Garth, we had next to no snow last winter.

Biggest snow fall was what we called White Juan. We had flown up to Mtl. for the weekend. When we arrived at the airport in Hfx. , DH said stay inside as it might take him a long time to shovel the car out. Luckily, one of those little snow plows was just in front of our car and plowed us out. When we arrived home, neighbour put a big sign on our lawn to park our car at his place. He had shoveled a pathway to get into our home. He didn’t have a key to my car, otherwise he would have plowed our driveway.

We remember Hurricaine Juan. None of us were prepared for it. Most of us are now.

#177 Canadian Watchdog on 11.09.12 at 7:16 pm

Canada Pension Plan Investment Board Reports Fiscal Second Q2 return of 1.9% Link

Think you’re going to get paid in 20-30 years? Pffft.

#178 };-) aka D.A. on 11.09.12 at 7:21 pm

#171Bottoms_Up on 11.09.12 at 6:07 pm
#143 };-) aka D.A. on 11.09.12 at 3:16 pm
——————————————-
DA, your reverse psychology approach looks good on you. You should keep it up.

Reverse psychology? What ever do you mean?

Too long I’ve been towing the CREA party line. Time to fess up and admit, what the Blog Dawgs have been saying is the way it is.

Go Garth Go, woohoo.

#179 Mr.CBB’s Weekly Blog Post Picks Nov 9,2012 « Canadian Budget Binder on 11.09.12 at 7:24 pm

[...] The Tax Trap- Garth Turner [...]

#180 Neta on 11.09.12 at 7:26 pm

Highlight of the day: “Canada facing 10% drop in home prices, but no U.S.-style collapse”

Well, I don’t know how it will unfold. So many variables are in play here. But these Analist know $*^* all either.
I just know that if prices supposed to drop by 10% by 2015, why would they drop at all? At such level of prices, what is 10%? If one cannot afford $800K bungalo with 7% down, does it mean if price drops to $720K, now it would become affordable?

Now, all these m/f who want to sell their investment condos, you are not allowed to reduce you price more than 10% !!! And if no greater fools are around to bail your ass out, well, just don’t sell! Hold tight for several years, untill these loosers have no choice but to submitt.

#181 Coho on 11.09.12 at 7:38 pm

This notion of expecting to collect even more paltry amounts of OAS/CPP if at all in the future is ridiculous. Who is peddling this? Obviously this dialogue is sponsored and supported by TPTB and their agents. It is meant to condition people to expect more kicks in the stomach.

Of course they’ll throw around numbers on demographics and unsustainability. But, realistically, what does government do with millions upon millions of starving, homelss, sick people that were too broke or foolish not to finance a 30 year retirement? They’d lose control. There would be anarchy. This of course needs to be and will be avoided.

The ruling class determines how much it can take from the people before there will be anarchy and it seems to be cutting a finer and finer line. As much as it craves more and more wealth, it cannot afford to lose control. This is not for the benefit of the people. This is because it suits its own interests. There may come a time of all out war and total chaos, but it will be on its terms and timetable

As world geopolitics further deteriorates, I wonder how many people will be able to determine what is truly fair and just in a spiritual sense. How will their true inner feelings about what is right and wrong, fair and just, jive with man’s laws of what is fair and just. In otherwords, how would our reasons for having behaved in certain ways and committed certain acts that are repulsive in a spritual sense, yet lawful in earthly society be viewed in the eyes of God?

#182 };-) aka D.A. on 11.09.12 at 8:03 pm

#177Coho on 11.09.12 at 6:37 pm
The absurdity of the shrinking middle class, which cannot keep up a middle class standard of living without going into increasing debt, being expected to somehow accumulate a large enough sum of money to finance a 30 year retirement is lost on people.

Sorry Coho, but if you had a look at it from my vantage point the middle class is bringing it upon themselves. Yes they are being bombarded with propaganda which says they must have this and they must have that, from granite, hardwood and stainless to Hummers and Harleys, in order for their lives to be complete. But they are all autonomous human beings of free will and must ultimately take responsibility for their actions.

Anyone can learn to live on less and be quite comfortable and happy while doing it. Saving just 10% of your gross monthly pay is easier done than most think. Maybe takes some getting used to but once you’re there there is little if any perceptible change in the quality of your life. Fact is likely the quality of your life will be enhanced as you are less preoccupied with keeping up with the Jones’ and have time to focus on friends and loved ones.

What blows me away is the change that has taken place in what might be considered standard housing from decade to decade as it has become increasingly more decadent. And people complain about the cost of housing?

It’s not so much the cost of housing that has gone up as the price of their increasing expectations.

#183 Nostradamus Le Mad Vlad on 11.09.12 at 8:26 pm

#56 Hoof-Hearted — “Dominant Social Theme: Terrorism must be combated by controlling people’s money.”

Hence, the pre-planned GFC of 08/09 which led to a speeding up of the withdrawal of money. Barter system is looking mighty good these days, and paying cash for work is also in vogue. Good post, plus . . .

#174 Ken R — “The explosion of poverty is upon us.” — See response to #56 HH above, but you are correct. Just takes time to smother the continent with this, and . . .

#178 Coho — “. . . but, it would serve people well to take notice of these ‘patterns’ outlined above because as stated, as goes freedom, so goes wealth.” — All neatly wrapped up in a few great posts / sentences!

#66 Tinfoil Hat — “Why would our govt. sign such a lopsided agreement?” — In some respects, it may well have something to do with the response to #56 Hoof-Hearted, ‘tho connecting the dots would be difficult, but not impossible.

#141 fancy_pants — “America is finished. Withholding blame; there is now officially a new dominant class in America, the parasite class.”

Replacing the middle and lower class. See responses to #56 HH and #66 TH above.

#90 };-) aka DA — “They have iPads in Kelowna? — Garth” — No, just Brillo Pads!

#94 Debtfree — “The Obama administration should drive right over the fiscal cliff . He doesn’t have to worry about getting reelected . I also think he should tell f and h to stfu because they are just as bad if not worse than the republicans .”

Good call. Agreed on H and C, but who will replace the CPC? A coalition with a Layton-led NDP and the Libs. would have been far superior, but life can be a bowl of shit, which is all we’ve got now. As to the US, if Obama is assassinated that will put a kink in things, as Soros (his backer) would want someone else of like mind. All this, of course, is way beyond our puny little fingers!

#119 Timing is Everything — “The ‘Royal’ Canadian Armed Forces are thankful.” — Mel Lastman is very grateful for services rendered!

#184 anotherwhistleblower on 11.09.12 at 8:26 pm

Well, Americans voted and the winner is inflation. Half our voting populace inexplicably decided to award a second term to Obama. Four more years of mind-boggling record deficits and record national debt growth! Obama’s Administration spent roughly 50% more than the government took in, which can essentially only be financed in two ways. Borrowing from foreigners and running the printing presses.

The latter of course is pure inflation. And the Fed bent over backwards with its quantitative-easing campaigns to buy massive amounts of the Treasury debt Obama ran up on our children’s credit cards. It created trillions of new fiat dollars out of thin air to purchase Treasuries to finance Obama’s trillion-dollar-plus annual deficits. And with Obama sticking around, this dangerous trend is only going to accelerate.

The ironic thing is inflation wreaks the most damage on the people with the least. Its corrosive effects on purchasing power are felt most at the margin, among the poor and minorities whose overwhelming support of Obama carried him to victory. They apparently didn’t care about the crushing unemployment rates among blacks, Hispanics, and the young from Obama’s policies, but they will care about inflation.

Inflation is a simple supply-and-demand phenomenon, economics 101. When the supply of money grows faster than the economy, the underlying pool of goods and services on which to spend it, it takes more money to buy anything. Relatively more dollars are competing for relatively fewer things, bidding up their prices. With more dollars in circulation, each one is worth less. So prices inexorably start rising.

Say goodbye to your savings….just as seniors aon fixed incomes, annuaities and pensions dealt out in the past years have found. With income taxes accelerationg to fund the champagne dreams of those on defined benefit pensions…….2020 will see current saving slashed by 50%.

#185 Ballingsford on 11.09.12 at 8:28 pm

OK, I’ve had enough. The excess cash left over after the TFSA and RESP are filled, are going back under the mattress!

Don’t try to rob me, I’m just joking!!!

I’m kinda serious though!

#186 Smoking Man on 11.09.12 at 8:41 pm

#154 wykidajlo on 11.09.12 at 4:41 pm

I will still give you a credit for some of your posts on your blog but too bad that many of them here are self-glorifying
…………………………………………………………………..
Much bigger audience here, best way to get there attention.

The most important lesson I teach is self-glorification, perhaps I over do trying to make a point.

90 % of people who read by boastful exploits are bothered by it.

It’s a taught and learned emotion in ones slave training years. (School)

Zillionars, and Entrepreneurs who own slaves take no offence to my posts.

You are either Judge or Judgeee
The owner or the slave
The guy who loves himself or the guy who submits.

What do you want to be?

#187 Smoking Man on 11.09.12 at 9:05 pm

#187 anotherwhistleblower on 11.09.12 at 8:26 pm

Nice post but last time I checked we live in Canada, and our printing press has got spider webs on it.

Mind you if all other central banks are cutting rates and printing loot and we don’t. Kiss exports good bye

#188 Daisy Mae on 11.09.12 at 9:13 pm

#170 Linda Pearson: “But what the hey, majority rules. :(”

*********************

You have that right. Here, we need 3/4 vote in favor. So, it’s not going to happen. When I talk to neighbours, and I AM getting more vocal — they get all excited: “I’m not giving up MY grass!” So, what can you do? LOL They just don’t ‘get it’…..

However, the cost of water is going UP…and will continue to go UP until people get the message. LOL We’ve recently had water meters installed in every home and there’ll be a base rate. Go over that, and you’ll pay. This should wake ‘em up.

#189 Daisy Mae on 11.09.12 at 9:21 pm

Actually, zeroscaping is attractive. Along with native plants you can incorporate water attractions (using recycled water), various ornaments and whatever. Much more interesting tha grass.

#190 Roial1 on 11.09.12 at 9:29 pm

#41};-) aka D.A. on 11.08.12 at 11:13 pm
#21Form Man on 11.08.12 at 10:21 pm

between the hills – “mountains” to our eastern Brethren.
Ha! You are both, right, and wrong.

If you want to say that you can ski, RED.(and or Fernie Snow valley)

That from a former ski pro who has skied them all.

#191 Roial1 on 11.09.12 at 9:51 pm

#95Eaglebay – Parksville on 11.09.12 at 10:29 am
Though NAFTA has worked fairly well so far with some exceptions.
Ya, like the poison gas addative That we and the Americans outlawed —-but we got our asses sued off, for loss of profits thanks to a similar clause.

#192 Form Man on 11.09.12 at 10:31 pm

Roial1

agree. I was commenting on hills close to Kelowna. Red is fantastic. Have not skied Fernie, but had some amazing fresh powder days at Whitewater ………

I lived in Whistler for a few years, but there is a problem with warm temperatures there…..

#193 Snowboid on 11.09.12 at 10:41 pm

#187 anotherwhistleblower on 11.09.12 at 8:26 pm…

Please use links, or at least credit the authors you have copied and pasted from! Or apologies if you are the author?

http://news.goldseek.com/Zealllc/1352480936.php

#194 Gunboat denier on 11.10.12 at 12:44 am

180 Watchdog – what is the problem. Increase of $5B in
3 months. Going well.

http://www.cppib.ca/

#195 willworkforpickles on 11.10.12 at 2:03 am

Many of the newbie first time home buyers of the last few years will soon see in the next couple of years their newbie counterparts just getting into the market not being quite as enslaved as they’ve become to their level of overpaid lifelong debt.
Many will want to become like those less enslaved less debt burdened newb home owners and may just walk away from their houses – citing a debt overload enabling them to declare bankruptcy …(just to start over) .
Will they just walk away from the drudgery they allowed themselves into when they discover en-masse, they owe far more than their houses may ever be worth again, while their less enslaved newbie counterparts able to buy much cheaper houses compel them to wanting to start over themselves?
Will there be a snowball effect of foreclosed on houses and a subsequent massive price crash in real estate ?
I think with today’s crowd of newbie home buyers there will be.
When they discover the home ownership dream to ever greater wealth and riches has been just this great big lie …many will find the way to free themselves from their hard debt bondage through bankruptcy.
Oh boy…. and if so … houses are going to be getting cheap then.

#196 cynically on 11.10.12 at 3:59 am

#187 anotherwhistleblower – no, another ignorant rightwing blowhard who knows nothing about the American political system or the American character and he will be proved wrong if it even matters.

#197 Seeking knowledge... on 11.10.12 at 10:10 pm

I understand that RRSP is just deferred tax and that dividends and cap gains are taxed at a lower rate. So, if someone has max’ed out on the TFSA already, and plan to have a retirement income much less than the salary at which the RRSP contributions were made and there is no significant changes to the tax laws, would that person still not be ahead when he/she retires?

#198 rob on 11.11.12 at 12:32 am

Money invested in an RRSP will never be used as ‘real’ investment capital – as in, unlike $100,000 in the bank that might be used to leverage a loan of $500,000 to start a small business, RRSP funds are always “off limits”, and thus, are useless as far as “investment capital” goes.

Way to go, Big Government. You smartz!

#199 ApplePi on 11.12.12 at 6:47 am

Garth, here’s what I don’t understand about RRSPs and tax-splitting. I’ve heard others say tax-splitting is great, but it seems to work if both are working.

I have $25k in a Spousal RRSP, and $500 more every month. I’m a mid-30s guy earning $60k and my spouse is a homemaker. That’s reduced to $54k due to my RRSPs

If she earns $0/year, we get back about $1500 of my taxes. If she’s drawing out $10k from her RRSPs, then we lose that $1500 in tax credits. (15% of her basic personal amount).

Have I got this right?