The season

RRSP

Christmas used to come in February for financial guys. Across a dark, cold nation I would haul my sculpted butt, mincing off an Air Canada flight in some frozen hellhole like Saskatoon long enough to deliver financial enlightenment to the natives. Then back to the scotch, salty cashews and bitchy stews in business class.

But, such changes. Saskatchewan and my rear are still what they were, of course, but “RRSP Season” and its carnal rewards has gone the way of Benny XVI. Contributions in recent years have fallen by more than 50%, mutual fund salesguys can be seen collecting bottles on recycling days in North Toronto and the TV (who watches that any more?) is no longer slathered with happy retirees romping suggestively through Investor’s Group ads.

Over 70% of the people who qualify to do the RRSP thing this year, won’t. Together they have about $700 billion that could be sheltered from tax. As I’ve been spelling out this week, our lascivious lust for real estate has resulted in a massive drop in liquid assets. Now 78% of Boomers own houses at the same time as 50% realize they’ll run out of money long before they croak, and only four in ten have $100,000 put aside. Worse, 72% have no pensions. This really sucks. So, is an RRSP the answer?

For some, sure. And remember the deadline is today (March 1st) to contribute and be able to deduct it from 2012 taxable income. But the fact remains every time you put money into one of these things, you’re making after-tax income taxable again. That’s cool if you believe years in the future you’ll be taking it out again at a lower tax rate. But if you trust what the government’s going to do in thirty years, then I also have a grow-op in Surrey your wife will love.

Still RRSPs do have a role to play in tax-shifting, instead of tax deferral. You can use this vehicle to move tax to a future year in which you’re pretty sure you’ll be slumming, or your family circumstances have changed, when the funds can be removed at a lower rate. There’s also the ever-appealing RRSP mortgage, which can be used to supplant the one the bank gave you. However, in times of cheapo mortgage rates there are better ways to make money.

Well, here are ten things worth thinking about today.

I You don’t actually need money to make a deposit into a registered retirement plan. It’s quite possible just to take assets you have now (that are kicking out taxable gains) and use them to make a ‘contribution in kind.’ So for selling yourself stuff you already own, the government will send you money in the form of a refund. Be aware that doing this might trigger a capital gain if the asset has increased in value.

II One of the most useful things about getting married, other than the free advice on everything, is a spousal plan. If you make more money, contribute to the spouse’s plan rather than yours. You get the deduction, he/she gets the money and after three years can take it out at a reduced rate. That’s called income-splitting. Or, pump up a spousal plan three years before a maternity leave, and let the government finance it for you.

III If you’re terminally horny and can’t help buying a house, at least use the HBP. The rules let you launder a downpayment of up to $50,000 (for a couple) through RRSPs and after 90 days remove it and buy a house. This nets a tax rebate big enough to buy a Miele dishwasher, Wolff stove and Bosch washer/dryer set so your little friends will think you actually have money.

IV Now, be somewhat careful what you put into an RRSP. Remember if you buy stuff like ETFs that may provide capital gains, or preferreds churning out dividends, the tax advantage is lost if you hold them in a registered plan. Everything coming out of an RRSP is taxed as income, at a far higher rate. So stick interest-bearing stuff like bonds in here, and collect the dividend tax credit in your non-registered account.

V Always, always, always have a self-directed RRSP. Doesn’t mean you have to run it – an advisor can do that for you. It just means you’ve prevented TNL@TB from having her way with you.

VI Are you a low-income person and figure you’ll stay that way? Then no RRSP for you. In the true spirit of Greed is Good, these plans give the greatest benefit to the wealthiest people. In fact, it’s been proven that people who retire on public benefits (CPP, OAS, GIC and my favourite, LCBO) are better off never having contributed.

VII Remember that just because you stick money in an RRSP to get it growing tax-free does not mean you have to declare this on your taxes. Why wouldn’t you? Because you might just be getting out of med school and know your income will quadruple in two years – so why not wait and claim the deduction later when the refund will be epic?

VIII Even though RRSPs may be a bad idea for increasing numbers of people, ‘investing’ in your mortgage – like women’s magazines and the CBC tell you – is worse. Nobody should be aggressively paying off a 2.6% mortgage when inflation is 3% and balanced portfolios are handing over 8%. If you don’t want to have F register your nestegg, then just build that non-registered investment account, and lock in your mortgage rate.

IX The biggest benefit of RRSPs, remember, is tax-shifting. That means if you’re planning on a sabbatical, or heading back to school, or going postal and getting fired, that income contributed during a fat year for a fat refund can be withdrawn in a lean one, for minimal tax. Just keep withdrawals to less than $5,000 a pop and the bite will be lessened.

X Finally, if you do make an RRSP contribution, don’t spend the refund this year on something you’ll regret, like a Kia. Instead, invest it in your TFSA.

Or a new Harley.

182 comments ↓

#1 TurnerNation on 02.28.13 at 9:09 pm

Let it snow!

#2 Smoking Man on 02.28.13 at 9:12 pm

Wow, nice pic.

THE ZOHAN, definitely in the book I will never publish…

#3 TurnerNation on 02.28.13 at 9:13 pm

Now I’ve got a Sno-Cone.

#4 MUST READ on 02.28.13 at 9:14 pm

http://www.financialpost.com/m/wp/personal-finance/mortgages-real-estate/blog.html?b=business.financialpost.com/2013/02/27/cmhc-seeking-to-hide-foreclosure-information-from-home-buyers

#5 Spiltbongwater on 02.28.13 at 9:15 pm

I think there should be some sort of Olympics to become the next Pope. Could maybe have 100 metre hurdles wearing a big hat or something. I would like to be nominated to be Pope, but I think my previous musings about the possibility of Jesus being a homosexual might not be welcomed by the RCC. Think about it though, if 1 out of 13 males is a homosexual, and non of the disciples were,….

#6 buy hi on 02.28.13 at 9:21 pm

It seems weird that she would be eating an ice cream cone in the winter and not have a Tim Hortons hot chocolate. Or maybe its a microphone.

#7 Grim Reaper/Crypt Speculator on 02.28.13 at 9:21 pm

Why are the last 2 blog post photos of Saskatchewan in August ?

#8 Xian Chan on 02.28.13 at 9:21 pm

Been watching the sales volume drop here in Vancouver since the peak back in 2011. And there hasn’t been an ounce of gain since. The Market has collapsed. Fear and anxiety has no firmly set in. No one is buying homes anymore. No one can define real market value. Sure you might have a brand new house framed two years ago sitting empty, and provincial kick backs to buy, but it’s simply not enough. Vancouver is way too overpriced compare to anywhere in North America. I truly believe that house prices in Vancouver will continue to plummet over the next few years.

#9 Aleksey on 02.28.13 at 9:28 pm

Shocking numbers for RRSP contributions in this post.
I guess this is the source: http://www.cbc.ca/news/business/taxseason/story/2013/01/02/f-rrsp-2013-by-the-numbers.html

#10 Victoria Real Estate Update on 02.28.13 at 9:29 pm

Hello everyone and especially you Victoria readers. I’m a Victoria girl in her 20’s who is here to share with you what I have learned about the housing market in Victoria. We were very close to buying 2-3 years ago but decided against it once we realized that Victoria’s housing market was in a huge bubble that was about to burst – and it has. In comparison to those who bought near the peak in Victoria, we have saved a lot of money by renting. The size of our down payment keeps growing.

House prices continue to decline in Victoria with the big price declines just around the corner.

The following stats are for Greater Victoria, using 3-month median data to the end of January 2013:

SFH (houses):
Peak: 575 K
Current: 516 K
(-10%)

Townhouses:
Peak: 433 K
Current: 374 K
(-14%)

Condos:
Peak: 300 K
Current: 254 K
(-15%)

February data will be available within days and it looks as though the SFH correction will go from -10% to -12%. The VREB uses average and median stats. In the US, the median is used almost exclusively instead of the average.

At the peak in 2010, house prices in Victoria were 2.47 times the year 2000 prices. Victoria’s bubble prices are comparable to the most overvalued cities in the US at their peak. Phoenix (2.25 X), Las Vegas (2.35 X), San Diego (2.5 X) and Los Angeles (2.75 X) all experienced major price declines as a result of their price bubbles.

At the peak of the US housing bubble, this Los Angeles house was valued at $445 K, but dropped in value all the way down to $127 K. Victoria will experience its own major price correction.

The bubble is evident in almost every Canadian city. For example, Toronto (2.12 X) and Ottawa (2.17 X) have also reached bubble prices, although not as extreme as Victoria and Vancouver.

Canadian banks, realtors, real estate boards, media and mortgage brokers are doing their best to convince the public that there is no housing bubble in Canada. The same thing happened in the US at the peak of their bubble. Denial was rampant.

For example, at the peak of the US housing bubble in 2005, the Washington Times wrote an article entitled, “No housing bubble trouble”. In it, they attempted to persuade the US public that there was no housing bubble: “The start of each year is prime time for economic pessimists, who try to persuade us terrible things are about to happen. A perennial favorite is the “housing bubble” about to burst, with a supposedly devastating impact on household wealth. This has been repeatedly recycled since June 2002 by bearish economic forecasters like Ed Leamer of University of California-Los Angeles and Stephen Roach of Morgan Stanley”.

The US housing bubble burst almost immediately after that.

Some Canadian media sources are not trying to hide the fact that there is a housing bubble in Canada. Macleans wrote an article entitled, “Great Canadian real estate crash of 2013 – The Housing Bubble has burst and few will emerge unscathed” .

Girls, buying a house now will prove to be a huge mistake in the near future. Waiting 1.5 – 2 years for much lower prices will be well worth it. Guys, renting for now and saving money by doing so is a no-brainer.

Invite your friends to read this blog. I’m sure Garth would love to have them here. You could also spread the word through social media.

Until next time – cheers!

While we appreciate your contributions, try not to plagiarize yourself. — Garth

#11 Dwilly on 02.28.13 at 9:30 pm

Generally speaking, what is your suggestion for allocation of assets across multiple accounts? My wife and I are 30 and have a combined 160k portfolio of index ETFs. Given our age, I keep a 70/30 equity/bond split, so call it 110k equity and 50k bonds. We have 51k combined TFSA room, about 75k in RRSPs, and the remaining 34k unregistered.

How do you recommend splitting? All 51k in bonds in the RRSP, and equity in the rest? Do you recommend keeping Canadian or foreign equity in theTFSA?

#12 AK on 02.28.13 at 9:36 pm

#2 Smoking Man on 02.28.13 at 9:12 pm

“Wow, nice pic.”
——————————————————————-

One of the best!!!

After seeing the pick, there will be Forgiveness to anybody who posts First!!! Today only…

#13 vancouverite on 02.28.13 at 9:38 pm

Garth,

Thanks for the great write up on RRSPs.

#14 tim on 02.28.13 at 9:45 pm

Just because interest bearing securities are better in an RRSP doesn’t mean one should back up the truck. Anyone with a 5 year horizon is probably better off having the bulk of their investments in conservative dividend paying stocks–even in an RRSP. Who wants to make 1 percent on their money with interest bearing securities?

Thanks for the reminder why most DIY investors fail. Corporate bonds, real-return bonds, high-yield bonds – there are lots of alternatives to government securities. As I stated, earning dividends or cap gains inside an RRSP is throwing away profit. This is why God made non-registered accounts. Thanks again. — Garth

#15 Smoking Man on 02.28.13 at 9:51 pm

Garth, your the greatest, your amazing, the Oracle, the god, seriously do these hero worshipers not piss you off.

Tell me the truth, weak people with no self worth, kissing ass.

The schooled………

Need find a 3rd world country to live in, Canadians the most whipped momma boys, feminized girls,. Only time they are men when skates are on, the rest of time. Touch toes, knees not bent, some more sir..

I hate people

I would too. — Garth

#16 Gunboat denier on 02.28.13 at 9:54 pm

5 Spilt – OK way off topic but this ratio has been widely
refuted

DELETED

#17 Joseph J. Roy on 02.28.13 at 9:57 pm

@ MUST READ

In all fairness, you should also link the CMHC rebuttal of that article:

http://www.cmhc.ca/en/corp/nero/2013-02-27.cfm?WT.mc_id=TWT2013_54

It is a criminal offense to lie to a public official (Obstruction of Justice, public mischief) or police officer (perjury) but Federal officers lie to the Canadian people and it is not a crime..

What’s up with that?

#18 kreditanstalt on 02.28.13 at 9:57 pm

Number VI is most useful to the majority of Canadians who don’t work for “companies”, have $100,000 available, have any significant “income”, company pensions, employer-paid benefits and expensive late-model Dodge Ram pickups.

A large number don’t even have real “employers”. They’re perma-students. Basement-dwellers. Itinerant travelers. Walmart greeters. Pogey-collectors. semi-retired. Speculators. Part-time under-the-table work-on-weekend types. Odd-job grasscutters, yard-maintainers and tree-trimmers.

Which renders I thru X (excepting VI) rather redundant…

#19 Montreal here i come on 02.28.13 at 10:02 pm

#10, do you know what the past-3-months stats are for montreal?

#20 Smoking Man on 02.28.13 at 10:09 pm

THE ZOHAN

Helping a friend, trying to get him re established, at a bar, he’s 3 BEERS deep, I working some 30ish hotties,I got this, my bull shit is working. he’s complaining about the coldness of Canadian meat.. I got this, smoky magic. A waitress bulbs him, he loses it on her, he scares the hotties, and has us escorted out of earls by a twerp bouncer that one good fact would have him plastered as a wall painting.

O well I tried….

Still like this mad, i

#21 NYCer on 02.28.13 at 10:11 pm

Update on my poor friend who bought a condo less than 2 years ago and I tried to warn her not to buy but rent instead. Anyways, I now find out she wants to sell and maybe move closer to downtown. I recall she paid about $300k or so for a great unit/layout and put in a lot of money into the reno.

So I decide for fun to look at her building and I see her listing. Listed for over $425k and according to the listing; over $100k spent on renos. She did do a complete gut job but c’mon $100k? Is this was real I feel sooooo sorry for her. Similar units in the same building are listed for $320k which is a higher floor than hers. Units with 2 bathrooms are listed at $360k.

Looks like she will be sitting there for a LONG time or eat all of her money away.

Did I mention her condo fees are $700/month? Ouch!

But it is her birthday this weekend and we are having a party at her “fabulous” condo.

I tried to warn her.

#22 Suede on 02.28.13 at 10:14 pm

Just spoke to a gentleman who makes a comfortable 150 large and has never put a dime into a TFSA. He’s scrambling to head to the bank and contribute to his RRSP.

He has a defined pension coming when he retires too…

Oh the humanity.

#23 Ralph Cramdown Ⓤ on 02.28.13 at 10:18 pm

Garth, I have to disagree with you. All this talk about “losing” a tax deduction for dividends held in an RRSP is bunk. Of course every investor should compare after tax returns and, if you’re holding bonds, then the RRSP or TFSA is where to hold them. But if you’re not currently holding bonds, it’s plain nuts to pay $132 for BCE’s 9.7 of 2032 to yield 5.1% when you can instead buy BCE common, also yielding 5.1% but growing its dividend every year.

In normal times the dividend tax credit helps narrow the spread between low yielding common shares and higher yielding bonds. When common dividends pay as much or more than the same quality long corporate debt, and far more than government debt, buying bonds is just running to stand still. High yield is priced for perfection, and real returns are returning zilch.

It might be helpful to point out that foreign securities held in an RRSP aren’t (depending on the country, always check first) subject to withholding tax.

#24 Gunboat denier on 02.28.13 at 10:19 pm

Garth – got it – not an “orientation” blog

#25 Gunboat denier on 02.28.13 at 10:26 pm

21 Suede – at $150K with a DB plan he may just be tossing into the RRSP what little(?) is allowed just so he
can retire earlier without drawing on his pension. As far
as his TFSA he may just be waiting until he feels
its “worthwhile” – maybe the $25K+ contribution room
will do that.

#26 Smoking Man's Old Man on 02.28.13 at 10:27 pm

You can even split you CPP income with your spouse as well, or former spouse that is…. Stay single my friends!!!

#27 double double straight up on 02.28.13 at 10:28 pm

To the wanna be riddle man. Ya always talk aboot the macheen. so why ya keep contributing to it. Duh !

#28 HD on 02.28.13 at 10:37 pm

#11 Dwilly on 02.28.13 at 9:30 pm

First of all, good job. You seem to be doing pretty well for your age group.

Here’s how I do it:

Most of my Bonds are in my RRSP
Most of my Growth ETFs are in my TFSA

I keep a small portion of the other asset class in each registered accounts in order to rebalance when need be.

If you have only Bonds in your RRSP, how can you rebalance when you need to?

Maybe other readers have different opinions on this but it’s been working well for me so far.

Have you checked out Canadian Couch Potato yet? Seems like you have but I thought I would throw out there as they have some insights regarding your other enquiries.

Best,

HD

#29 Bargains everywhere on 02.28.13 at 10:40 pm

#23 Ralph Cramdown Ⓤ on 02.28.13 at 10:18 pm

Yes, I totally agree with you. Bonds are priced for perfection right now as we are near the end of the cycle and they have nowhere to go but down. Much better to buy a good divvy yielder with increasing dividends, even in your RRSP. You’re more likely to get some capital appreciation along with a growing dividend. Even with the recent run up in BCE, it’s still a better choice than corporate bonds at this point in time.

#30 BMW Rider on 02.28.13 at 10:40 pm

Whew. At least you said Toon town was a hell hole and not Regina. Lol.

#31 Grim Reaper/Crypt Speculator Ⓤ on 02.28.13 at 10:42 pm

Dr Wayen…

U OK?

#32 Big Sexy on 02.28.13 at 10:43 pm

“V Always, always, always have a self-directed RRSP. Doesn’t mean you have to run it – an advisor can do that for you. It just means you’ve prevented TNL@TB from having her way with you.”

Garth, Ive got a RRSP started with TNL@TB. Can I start another registered account, self-directed this time, and transfer all my money into the new account without incurring penalties? Would that be a “contribution in kind”?

Thanks buddy

#33 bigrider on 02.28.13 at 10:49 pm

Still some ‘massive’ mutual fund books out there Garth.

80’s and 90’s built them and the ‘dinos’ that run them milking them for all there worth

#34 Allanbrad on 02.28.13 at 10:55 pm

Me and my wife will have only 25 and 30 years of CPP contributions each. We raising large family and our savings are miniscule. Can someone explain why we are better off by NOT contributing to RRSP?

#35 Chopper on 02.28.13 at 10:57 pm

CMHC unapologetic.

http://business.financialpost.com/2013/02/28/we-dont-want-low-ball-offers-cmhc-firm-on-hiding-foreclosure-information-from-buyers/?__lsa=de36-a550

#36 AK on 02.28.13 at 10:58 pm

#23 Ralph Cramdown Ⓤ on 02.28.13 at 10:18 pm

” But if you’re not currently holding bonds, it’s plain nuts to pay $132 for BCE’s 9.7 of 2032 to yield 5.1% when you can instead buy BCE common, also yielding 5.1% but growing its dividend every year.”
——————————————————————-
I agree with you.

I bought BCE @ $24.00 in my RRSP. At the time, that was the only account I had available cash in.

Today, BCE is trading at $46 (+) and has paid out tons of dividends.

#37 JMS on 02.28.13 at 10:59 pm

In a ‘lean year’, which I’m likely about to experience, can one transfer in kind _out_ of an RRSP? I do have some preferreds in my registered account, and would love to move them into a non-registered.

Thank you Garth. As the others say, this blog is invaluable.

PS The girl in the pic looks almost exactly like my ex! And now I feel sad.

#38 Clarification, please on 02.28.13 at 11:04 pm

Could you please clarify this statement: “earning dividends or cap gains inside an RRSP is throwing away profit”?

I understand the dividend tax credit part, but wouldn’t capital gains in a non-registered account be a bad idea in terms of the tax liability? Sheltering them in an RRSP protects the profit, no?

The maximum capital gains tax (if you earn, say $150,000 in Ontario) is 23%. If you earn the gain inside an RRSP and take it out at the same income level, the tax is 46%. You want no tax? Do it in a TFSA. — Garth

#39 my "trouble and strife" on 02.28.13 at 11:04 pm

“One of the most useful things about getting married, other than the free advice on everything….”

Garth, are you talking about my wife again? LOL.

#40 Chickenlittle on 02.28.13 at 11:05 pm

I was wondering where Be-ach Girl went. Maybe after a two-four or two would she look like this…

#41 Alga4 on 02.28.13 at 11:08 pm

I really enjoy reading your posts everyday, Garth! Keep it up!

Smoking Man is always entertaining too. Can’t wait for the book to come out.

#42 AK on 02.28.13 at 11:09 pm

#37 JMS on 02.28.13 at 10:59 pm
“In a ‘lean year’, which I’m likely about to experience, can one transfer in kind _out_ of an RRSP? I do have some preferreds in my registered account, and would love to move them into a non-registered.
—————————————————————–
Yes, you can.

RRSP in kind withdrawals

When an in kind withdrawal is made from an RRSP, the RRSP lump sum withholding tax rates apply. For example, if you want to withdraw $15,000, the tax amount will be 20% x $15,000, or $3,000. The net amount of the withdrawal after tax is $12,000. This means you would be able to transfer out investments with a current market value of $12,000. If you request a transfer of investments of more than $12,000, the total including tax increases to more than $15,000. This would result in a withholding tax rate increase to 30%. The total amount of the withdrawal, which includes the amount of the withholding tax (a total of $15,000 in the above example), will be included in the taxpayer’s taxable income for the year.

In order to do the transfer out of investments, your RRSP must have sufficient cash to pay the withholding tax. You may have to sell some investments in order to have the cash on hand. The sale of investments usually takes 3 days to settle, after which you can do your “in kind” withdrawal.

#43 Smoking Man on 02.28.13 at 11:10 pm

Why did the pope quit, hum…..

My guess, probably a good guy, could not take the insider stuff going on.

Probably a moral guy, who figured our what others wer doing.

Time will tell.

Me you know me religion is bs…

#44 Realtors , Bankers , Mortgage brokers and now Canadian government in an all out PANIC! on 02.28.13 at 11:12 pm

Been hearing from my realtors friends and noticed sold signs that pop out of nowhere. What happened was realtors have bought up foreclosers for a steal as people are going BANKRUPT and losing it all. Buyers would be smart to allow the Canadian house of card to crash back down to reality or 50% drop. People are going bankrupt in such large numbers that CHMC is telling realtor to hide the housing crash. Spread the word and tell everyone that Canada’s housing market is crashing hard. So hard that the government is asking realtors to lie…WOW!

http://www.financialpost.com/m/wp/personal-finance/mortgages-real-estate/blog.html?b=business.financialpost.com/2013/02/27/cmhc-seeking-to-hide-foreclosure-information-from-home-buyers

#45 Subversive on 02.28.13 at 11:14 pm

Garth, any fear that banks will force appraisals upon renewal for properties that may be underwater? Or will they happily renew without asking questions as long as you are making your payments?

#46 Roial1 on 02.28.13 at 11:22 pm

“Then back to the scotch, salty cashews and bitchy stews in business class”.

You are one BRAVE s.o.b.

You had better shave and wear a disguise.

I really can’t believe that ANYONE who flies in Canada would take such an outragious chance with their life like that.

Oh well, You do test your invulnerability with your views on metalheads so I guess that this is just “par for the coarse”.

GOOD LUCK!

#47 futureexpatriate on 02.28.13 at 11:22 pm

How about that US stock market today, eh? Remember all those idiots arguing with you about betting against the US?

Garth wins. Again.

#48 TurnerNation on 02.28.13 at 11:25 pm

I finally scrolled down the blog and realized my workplace RRSP deducutions are apparently taken out of my Gross (pre-tax) salary? Hence it’s pre-tax money?
That’s sick if so.

I front 6% to which they match with 3%.

#49 Shawn Allen on 02.28.13 at 11:25 pm

RRSP and Tax

That is all good advice on the RRSP.

I quibble a bit on the tax situation.

Here is how I look at it.

TSFA is tax free we all know that.

I look at $6000 in an TSFA as being just like putting $10,000 in an RSP and getting a $4000 refund, net cost to me $6000.

If tax rate on withdrawal stays at 40% my net after tax on my net $6000 RRSP will be exactly the same as the net built up on the $6000 in TSFA.

Consequently the tax I pay on all the growth of my net $6000 is zero. Yes zero.

I look at the 40% tax paid at withdrawal as just the repayment of the 40% that the government effectively contributed to my RRSP in the first place via the refund.

Well, that is how I look at it.

Of course if it get me into clawback then my marginal tax rate is higher than 40% in which case TSFA was better.

#50 Red Deer Cave Man on 02.28.13 at 11:27 pm

one other use of an RRSP is in the case of a divorce. You can shelter the growth from your ex-spouse and not increase your Total Income (line 150) inside the RRSP. Support is based off Total Income. Hey, either pay her more or the govt? they both suck but…

#51 Christopher Lackey on 02.28.13 at 11:33 pm

Since I’m not pulling down multiple six figures like all the other hotshots on this forum…

Are REIT distributions eligible for the dividend tax credit? And what better place to stash much-vaunted US equities than an RRSP? What would happen if a dividend from, say, Coca cola or an S&P ETF was in a TFSA or non-reg?

You have to admit that bond/stock/preferred/etf mixes are better in both than the sub 2% deposits and savings accounts a lot of people are using these “tax shelters” for

REIT distributions are normally income. Don’t buy individual US stocks, or any other kind. No dividend tax credit on non-Canadian securities. — Garth

#52 stop lying on 02.28.13 at 11:33 pm

III – I used the HBP and regret it. I make twice now what I did then, and am having to pay it back instead of getting a much better deduction now. The mortgage interest I didn’t have to pay offsets that a little, but I think net I lost out.
VIII – agreed, but the feeling of being mortgage free is worth its weight in gold. assuming feelings are heavy.
IX – this could be where people with pensions could use their RRSP to maximum benefit. delay your pension for x number of years so your yearly payout is higher after. cash out your RRSP over those x years depending on the current tax rates. win-win.

speaking of pensions, I know the theme here is that all of them will be dead in the future. but is this accurate? many pensions are “too big to fail” no? for example, omers did 10% in 2012. I also made voluntary contributions so my return on that investment was 9.5% (.5% management fees, similar to an ETF). omers is so diverse, isn’t it the perfect investment? omers also raised their contribution rates, so they plan to be fully solvent in a few years. sounds good to me.

#53 Shawn Allen on 02.28.13 at 11:34 pm

ALL HAIL THE RRSP (and the TSFA and RESP too)

The biggest benefit of the RRSP is that it encouraged a good chunk of people to invest.

My financial plan over the years has simply been to to take full advantage of government tax-assisted saving, RSP, RESP and now TSFA.

Even prior to the TSFA and even though my RRSP limit was small it was never easy to find the money but I did because I was not about to let the tax breaks and RESP grant money go unclaimed.

Once inside the RRSP and RESP the money to me is treated as untouchable. So it grew. A lot.

The other part of my financial plan was to strive for good returns. Low double digit returns combined with tax-free compounding for a couple of decades does wonders for a portfolio.

TSFA is fantastic and will make many people very wealthy. $5000 per year in a TSFA if he can swing it will make Jack a rich boy after 30 years.

TSFA all maxed out will make Jack a rich boy.

#54 Elmer on 02.28.13 at 11:36 pm

DELETED

#55 Holy Crap Where's The Tylenol on 02.28.13 at 11:46 pm

#20 Smoking Man on 02.28.13 at 10:09 pm
THE ZOHAN
My advice Smoking Man (Don’t mess with the Zohan)

#56 ozy - RE: #15 Smoking Man on 02.28.13 at 9:51 pm on 02.28.13 at 11:52 pm

RE: #15 Smoking Man on 02.28.13 at 9:51 pm

Well, Smoking Man, what you say it’s true, but it’s not these canadian mamma’ guys fault. When the post-kollonial system is run the same fake way (a hidden, well connected secret oligarhy) like 300 years ago, those lower-mid class workers are really not empowered, and they feel it in their bones! Slaves.

Plus the personal example “at the so called top” is negative, read page 8 carefully, every word.
http://www.torontolife.com/daily/hype/print-edition/2010/12/08/the-secret-life-of-a-bay-street-hooker/

Let me know your thoughts…

#57 Clarification, please on 02.28.13 at 11:55 pm

Re: “The maximum capital gains tax (if you earn, say $150,000 in Ontario) is 23%. If you earn the gain inside an RRSP and take it out at the same income level, the tax is 46%. You want no tax? Do it in a TFSA. — Garth – See more at: http://www.greaterfool.ca/2013/02/28/the-season/#comments

Thanks for the clarification.

#58 Todd on 02.28.13 at 11:56 pm

I read your blog. You write well although I find your tone off-putting at times. There is a certain arrogance which I believe hides your deepest insecurities. But I am here to praise you at the end if the day. You provide me with tidbits of exceedingly valuable information. For example, I hadn’t known or had forgotten that dividends from a registered REIT are taxed as ordinary income, rather than a friendlier capital gains rate. Reading this just now made me stop in my tracks as I am (was) planning just that move. Thank you for your provocative writing. Wish you would have answered my personal phone call/email sent months ago seeking (free) financial advice lol

I was too insecure. — Garth

#59 Elmer on 02.28.13 at 11:59 pm

Inflation is less than 3%.

#60 ApplePi on 03.01.13 at 12:00 am

Just a note to those doing the Spousal deferral plan. It’s 3 calendar years. That means if you made your last contribution December 31, 2011 to your Spousal plan, You would have to NOT contribute to any spousal account in 2012 and 2013. Jan 1, 2014 you could draw it all out. 2 years + 1 day in this case.

It’s CALENDAR year, not tax year, so be aware of that. If you’re planning on kids and haven’t made contributions this year yet, then put money in a TFSA instead… or your own RRSP. Get pregnant in late 2013. Have a baby in mid-2014 and your wife takes 1 year off while you draw the money out in 2015.

#61 RRSP on 03.01.13 at 12:01 am

Red Roses Snow Poses

Great pic Garth!

#62 Holy Crap Where's The Tylenol on 03.01.13 at 12:03 am

I would say oil could be a superb investment but here we go again with the ongoing battle for the Keystone pipeline project. Oh Canada when will you ever learn. Stop pissing around selling cheap liquid tar to the United Staes. Grow a pair and build a dam refinery on site and sell a refined product, here’s a hint value added profit. Secondly grow a pair and build our own dam pipeline to the East Coast. Hell there just happens to be our largest refinery already there. Third tell everyone to piss off (foreign investors from the Far East) if you want our oil come and purchase the finished products, not crude.

http://ca.news.yahoo.com/blogs/canada-politics/happen-canada-us-relations-obama-rejects-keystone-xl-204606616.html?.tsrc=yahoo

#63 Gunboat denier on 03.01.13 at 12:17 am

48 TN – that is the correct way to do it to maximize the investment.

#64 T.O. Bubble Boy on 03.01.13 at 12:21 am

I find it interesting that many articles this RRSP season have acknowledged the fact that Canadians aren’t contributing to RRSPs like they used to (because they are broke from giant mortgages and consumer spending), and now focus on topics such as “why a RRSP may not be for you” instead of making the assumption that everyone should be contributing to a RRSP.

Personal finance authors in Canada are a dying breed… heck – look at Garth’s “competition” in that survey from a few days back.

#65 T.O. Bubble Boy on 03.01.13 at 12:36 am

The maximum capital gains tax (if you earn, say $150,000 in Ontario) is 23%. If you earn the gain inside an RRSP and take it out at the same income level, the tax is 46%. You want no tax? Do it in a TFSA. — Garth

What about the fact that you are essentially investing 40%+ more in the RRSP to begin with?

For example, if you have $6,000 to invest…

In a RRSP:

A $10,000 contribution gives you a $4,000 refund, so you’ve spent $6,000 to have $10,000 invested.

After a 50% gain, you have $15,000 in the RRSP (no tax on the gain).

Upon withdrawal, you end up with $15,000 * 60% = $9,000

In a non-registered account:

$6,000 invested is just $6,000 (not $10,000).

After a 50% gain ($3,000) with a 40% tax rate, you are left with $8,400 ($9000 – 0.4*$3,000).

What am I missing here?

#66 T.O. Bubble Boy on 03.01.13 at 12:38 am

(whoops – change that last formula)

After a 50% gain ($3,000) with a 20% capital gains tax rate, you are left with $8,400 ($9000 – 0.2*$3,000).

#67 LS in Arbutus on 03.01.13 at 12:52 am

Got my bonus today, down 11%. Salary review, no increase year on year. First time in my life that I’ve never had a net increase in total compensation, let alone a reduction… sign of the times, as they say.

#68 Grim Reaper/Crypt Speculator Ⓤ on 03.01.13 at 1:07 am

#43 Smoking Man on 02.28.13 at 11:10 pm

Me you know me religion is bs…

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

Just remember…

There are no Smoking Men in fauxholes.

bwahahahahahahaha

#69 LaughingCon on 03.01.13 at 1:10 am

Preliminary “Final” Feb.2013 numbers for Vancouver:

http://img855.imageshack.us/img855/3708/vanfeb2013.jpg

And these are the past sales numbers:

Feb/13 = 1,838 sales
Feb/12 = 2,406 sales
Feb/11 = 3,097 sales
Feb/10 = 2,473 sales
Feb/09 = 1,480 sales
Feb/08 = 2,676 sales
Feb/07 = 2,859 sales
Feb/06 = 2,941 sales
Feb/05 = 3,068 sales
Feb/04 = 3,067 sales
Feb/03 = 2,760 sales
Feb/02 = 3,008 sales

Lest wait for the official news release with the HPI numbers

#70 Devore on 03.01.13 at 1:12 am

#17 Joseph J. Roy

Don’t worry your pretty little head about that, it’s for the greater good.

#71 Tim on 03.01.13 at 1:16 am

Owning dividend paying stocks in an RRSP is not throwing away money. Holding bonds and interest bearing securities now is. What’s wrong with racking up a large RRSP? There are ways to gradually draw it down through investment loans, or, if you accumulate too much, you can retire that much earlier. Unless one has a huge portfolio or is already retired, or needs the money within 5 years, having the bulk of one’s portfolio in fixed income is a poor strategy.

Buying individual stocks is not a bad strategy either. Providing one sticks to the recommendations of highly respected newsletters, one will likely do better than invetsing in etfs.

#72 Devore on 03.01.13 at 1:35 am

#58 Todd

For example, I hadn’t known or had forgotten that dividends from a registered REIT are taxed as ordinary income, rather than a friendlier capital gains rate.

Dividends, or distributions, are never taxed as capital gains. If you really want to know, the financial statements describe the tax treatment of distributions.

#73 Dr. WAYNE on 03.01.13 at 1:39 am

#31 Grim Reaper/Crypt Speculator Ⓤ on 02.28.13 at 10:42 pm

Dr Wayen…

U OK?

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

Garth ran over me with his Harley … twice …

#74 Nostradamus Le Mad Vlad on 03.01.13 at 1:55 am

-
Noticeable that you used Roman numerals (I, II etc.) rather than numbered numerals. Are you running in the next Pope-a-thong, or is this blog be turned into a Latin class?

“Then back to the scotch, salty cashews and bitchy stews in business class.” — Not this scotch?

“. . . don’t spend the refund this year on something you’ll regret, like a Kia. Or a new Harley.” — Supposing Kia bought Harley. Could it be called Kia-ke-Harley Shuffle?

“I was too insecure. — Garth” — Take a couple of years off and connect with Dr. Oprah (Dr. Phil’s busy) — get therapy!
*
Shocking Gives an idea of how electric companies (FortisBC and BC Hydro) are doing the same as the UK — gouging consumers; Robots displacing Workers? Looks as if this is the future; 2:54 clip What if the US Fed is insolvent? 15:51 clip Banker admits to engineering financial crisis; Detroit is so broke, this was the only thing left; British Airways Always blame someone else; Unintended Consequences Bring in new tax, lose jobs; Banxters Lose billions by still get nice bonuses; Consumer Spending Drought The middle class are losing their marbles; Moscow Blnaire. capital of the world; Obomba’s Tax into recession? China Bond market makeover, because Mfg. slows down; US$30 trillion Emerging markets; Japanese Deflation; 25:50 clip The Rockefellers and the TLC; JC Penney posts sizable loss; Embezzling Former mayor of Greece’s second-largest city; UK Immigration down by a third, but Ireland This is surprising.
*
China and Pentagon These two stories are quite accurate; Wonky the dog now walks tall; The Law Is An Ass A person has a right to protect their property; Rumania There is the City of Joy, a city within a city in Calcutta, where the residents have nothing; 2:11 clip More than 65 mln. gun purchases (for Civil War #2?); Why Russia Needs Alaska First para. is interesting; Feeding Frenzy Sharks or RE agents? Public Lavatory No need to go far when you’ve got to go for a tinkle; UFO and Meteorite From The Siberian Times; Radiation Belt surroundng Earth; Beijing preps for war; CC Horsefeathers Four out of last five winters are colder than average; US govt. Us consp. whacknutjobz are considered too outlandish to even have a life; Another dumbass myth exposed; Popecopter Exit the Vatican.

#75 Gunboat denier on 03.01.13 at 2:34 am

63 TOBB – Well I’m not broke, I dont have a mortgage, and I’m not buyin’ much stuff these days (already have lots) but I am not contributing much to RRSPs either. I did a few years back when business was better (ie declared incomes for me and Mrs each over 90k) and you could get 5% GICs (redeemable even) which should be in tax-sheltered accounts.

I still make a decent living, but the income split is less so
RRSP doesnt have the same benefit from a marginal tax
rate perspective. Also, with rates being so low, new
investment is either TFSA or unsheltered to take advan of
cap gains or dividend credits.

It has been raining hard here on the coast hence my more frequent posting the last couple of days…..

#76 Polek on 03.01.13 at 2:40 am

I would melt the ice with woman like that with no regards to the cost any time!

#77 Billy on 03.01.13 at 2:49 am

RRSP is also sheltered from bankruptcy, something to think about.

#78 Landbaron on 03.01.13 at 2:55 am

Long time reader but first time posting.

I may buy a KIA or two in the next year or so, who knows, but they seem like a great value.

All cars depreciate, that’s the nature of a useable asset. New Korean cars seem pretty sweet to me. Waiting for snark below

#79 Montrealer on 03.01.13 at 3:01 am

Can you fill your RRSP in Québec and move to Alberta, then withdraw at the Alberta rate?

Of course. You are taxed in a calendar year based on your residency. — Garth

#80 Dan on 03.01.13 at 3:48 am

why keep any amount taken out of an rrsp to less than 5k? Is this just to avoid a huge I owe you at the end of the year?

Withholding tax is reduced. — Garth

#81 Montréalaise on 03.01.13 at 4:50 am

Thanks Garth for your blog, it’s extremely informative.
I’m wondering of you can do tax shifting between jurisdictions? Say I contributed this year at a marginal tax rate of 53% (vive le Québec), and I were to move to Alberta when I draw from my RRSP saving. Assuming 2013 marginal rates held constant (for 100K+, 25.75% in Qc vs. 10% in AB), will I be saving 15% or will CRA/Revenu Qc claim this money?
Anyways, I think that Montreal will suffer as much as Toronto, if not more. Sadly there is very little coverage about the housing correction in the French speaking media.

#82 meslippery on 03.01.13 at 5:24 am

Well Ok RRSP = Tax deferral say that five times.
Most will glazeover and want to change the subject.

You are a good Man to try and make people understand.

Great blog.

The following I have no link so sorry for that. Delete if
nessasary.

I did. It was a book. — Garth

#83 Hilarious on 03.01.13 at 6:14 am

#15 Smoking man:

sycophants can be truly disgusting to see (read). strong-willed, articulate, charismatic men often tend to attract at least a few of them. a shepard to the sheep; a leader to the cultists. don’t hate them. it’s not their fault.

#35 Chopper:

wow, that’s such BS. that needs to be changed.

#84 Hilarious on 03.01.13 at 6:16 am

shepherd

#85 Small Town Steve on 03.01.13 at 7:19 am

#78
Ever notice how the provinces with the highest tax rates Also receive the most in transfer payments and yet they still have the most poverty?
Oh well we get the government we deserve.

#86 Tony on 03.01.13 at 8:15 am

Re: #47 futureexpatriate on 02.28.13 at 11:22 pm

The smart people including myself have mortgaged the farm so to speak to bet against America. Whatever it takes legally to make money i’ll do.

Bad bet. — Garth

#87 Tony on 03.01.13 at 8:25 am

Re: #64 T.O. Bubble Boy on 03.01.13 at 12:36 am

You’re missing the surtaxes and supersurtaxes that you pay on top of the federal and provincial tax when your capital gains are added to your income.

#88 Beach Girl on 03.01.13 at 8:38 am

Jesus, or is that Garth. I might need investment advice. I have close to 200 grand in RRSPs. Obviously other shit. Am going to be 56 this year, not planning or wanting a long life. But will look good. Should I drain the RRSPs as I really do not like my sons. No grandkids, thank God,

#89 AK on 03.01.13 at 9:00 am

#70 Tim on 03.01.13 at 1:16 am
“Owning dividend paying stocks in an RRSP is not throwing away money. Holding bonds and interest bearing securities now is. What’s wrong with racking up a large RRSP? There are ways to gradually draw it down through investment loans, or, if you accumulate too much, you can retire that much earlier. Unless one has a huge portfolio or is already retired, or needs the money within 5 years, having the bulk of one’s portfolio in fixed income is a poor strategy.

Buying individual stocks is not a bad strategy either. Providing one sticks to the recommendations of highly respected newsletters, one will likely do better than invetsing in etfs.”
—————————————————————–
Tim,

There is nothing wrong with your strategy. My RRSP consists of 95% individual stocks(Canadian, U.S, Global) and 5% Corporate Bond ETF’s.

The problem I now face is to come up with a tax efficient exit strategy. I am looking at moving them out in kind to my non registered accounts.

#90 eddy on 03.01.13 at 9:07 am

Bill Still interview about money and banking-

http://www.blacklistedradio.com/?p=1865

Bill Who? — Garth

#91 maxx on 03.01.13 at 9:11 am

#4 MUST READ on 02.28.13 at 9:14 pm

The stated mission of the Quebec Realtors Association is “the protection of the public”.

They categorically refuse to encourage entering false and thereby misleading data into listing sheets.

Kudos and bravo to the OACIQ!

#92 EIT on 03.01.13 at 9:23 am

Looks like she could use my fudge machine.

#93 mortgagebrokeron on 03.01.13 at 9:35 am

Hi Garth,

when are you going to extoll the benefits of seg funds in a non registered account? And their benefits?… ie. bypassing probate, paid out quickly to the beneficiary, vs tied up in an estate, account owner maintaining privacy (not being public knowledge like a will is)

The boomers need to start planning their estates!!!

You have a great storytelling ability and lots of people are benefiting from your blog.

Seg funds = MER heaven for the salesguys. — Garth

#94 Herb on 03.01.13 at 9:59 am

#88 Beach Girl,

Jesus can save your soul, but Garth could save your finances. And Garth is tax efficient – his fees are deductible.

#95 JeanM on 03.01.13 at 10:00 am

who retire on public benefits (CPP, OAS, GIC and my favourite, LCBO) are better off never having contributed.

LCBO ? is that a government plan I missed ? or benefit, do tell :)

Thx garth

PS Love the Pic of the lady and all the sleeping/flying wonderful doggies you have on this blog. Cute 7 Cute…

#96 Shawn Allen on 03.01.13 at 10:03 am

Meslippery at 82 says:

Well Ok RRSP = Tax deferral say that five times.
Most will glazeover and want to change the subject. –

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

No glazeover here, just disagreement.

$10,000 in RRSP which costs me $6000 net of refund will grow AFTER TAX paid to EXACTLY the same as $6000 in TFSA (assuming unchanged 40% marginal tax rate)

Since TFSA = tax avoidance and RRSP = TFSA (on net but not gross contribution) RRSP = tax avoidance

RRSP on the net contribution grows precisely equal TFSA (after tax is paid) when marginal tax rate is unchanged.

The government’s refund effectively is repaid and pays 100% of the tax in this example.

If marginal tax rate is higher RRSP not as good as TSFA and pays some tax on your NET investment (but nothing close to what is paid in a taxable account)

If marginal tax rate falls RRSP pays better than the tax free TFSA because the original tax refund inside the RRSP grows sufficient to pay all the tax with some left over. In effect a negative tax.

That is how I see the math.

One of our RRSPs $69,000 invested (about $48,000 net of tax refunds). It’s now at just over $500,000. Yeah, so it will do okay after tax thank you.

TFSA is Great! so it RRSP, both AVOID tax.

Rich people’s problems…

#97 T.O. Bubble Boy on 03.01.13 at 10:08 am

S&P up in January and February = S&P up for the year 100% of the time (historically)

http://www.businessinsider.com/sp-500-january-february-pattern-2013-2

… there have been 26 times since 1945 that the S&P 500 scored gains in both January and February. In all 26 instances, there was a positive calendar year total return, averaging a gain of 24 percent.

#98 Herethere on 03.01.13 at 10:13 am

Thank you Mr. Garth for help me to understand how to go about filling different government produced forms, to maximize my returns. I was, and can understand, the confusion that some of our senators feel. It is more, one removed, long enough, the apple of his mouth to point out the difficulties of such a task. Glad that he obviously found directions to the upper chamber’s restaurant clear and concise. And please, somebody should tell that other one, that has, on the taxpayers’ dime, her derrière on a plane seat all the time. “Cookie you are not in Saskatchewan anymore.” But please we should not be so harsh in judging her and her confederates confusion, they are producing huge quantities of fertilizers but it ain’t potash.

#99 Francis on 03.01.13 at 10:15 am

One of your best for its humour. Thanks for the morning tonic.

#100 afraidit allmightend on 03.01.13 at 10:16 am

Garth…I wonder if you really get it when it comes to net disposable cash available for savings among the vast majority of Canadians…it doesn’t exist man….they don’t have it.

After the car lease and mortgae..the overhead and taxation rip…..the vast majority live from paycheque to paycheque.

The reason that mutual fund sales are down on the long term curve is that people used to save but do not anymore…and the only people with the paycheque power to save don’t because they are civil servants and don’t have to with with the guarantee of a golden reirement on the backs of the taxpayer.

The coddled elite are so numerous now that the huge income gap has eclipsed avergae wages ….this is why taxes are through the roof and costs are skyrocketing…..all so that the gov’t can borrow and inflate to pay for the elite’s lovely lifestyle.

Here is an example of the elite lifer…not only raking in the big bucks but also using the social safety net to profit by living in housing supposedly earmarked for the less fortunate…..and we have all seen these cases…..even those that are still in the court system…..high paid civic workers scamming the system because they feel they are entitled to do so.

http://news.nationalpost.com/2013/02/28/subsidized-housing-northern-alberta/

Don’t be fooled…Canadians are being screwed on their ability to save retirement funds so that a few can live large.

#101 Buy? Curious? on 03.01.13 at 10:20 am

Garth, I can’t post a long comment. My wife, Mrs Buy? Curious banned me from this site when she found out it inspired me to open a NEW line of credit and not telling her. She thought I was going to spend it booze and broads. Women are so paranoid.

Anyhoo, your blog posts are getting funnier and more informative than ever.

Oh, sheet! Here she comes! Gotta go.

http://www.youtube.com/watch?v=AiTG6T9pTcM

#102 Calgary's OK on 03.01.13 at 10:34 am

“Sweeping U.S. government spending cuts totalling $85 billion begin taking effect Friday, slicing deeply into military and other programs in an unwanted move toward austerity that displays Washington’s paralyzing partisan divisions.”

http://t.news.ca.msn.com/top-stories/us-braces-for-billions-in-budget-cuts

Still thinking this is going to be a non-event and everything is going to be successfully resolved before this Fridays midnight? If not, we might need a new blog called “The Troubled Future of Financial Investments”

Non-event. Go back to worrying about yourself. — Garth

#103 ron on 03.01.13 at 10:46 am

I could have done without the visual of you and your sculpted butt “mincing”.

#104 Gunboat denier on 03.01.13 at 10:51 am

88 beach girl – the government will drain your RRSP before your sons get a hold of it…

#105 Toronto_CA on 03.01.13 at 10:56 am

“On a monthly basis, GDP fell by 0.2 per cent in December alone. And for 2012 as a whole, growth slowed to 1.8 per cent, the smallest growth since the recession in 2009. It was also the first time in six years that Canada’s full-year numbers were lower than in the United States, National Bank Financial economist Krishen Rangasamy pointed out.”

Why is the BoC always so bad at forecasting? Why don’t they look at the yield curve like so many others? So much for 2.0% growth. Predictions for 2013?

#106 jess on 03.01.13 at 10:56 am

…“These big financial institutions are getting cheaper borrowing to the tune of $83 billion in a single year simply because people believe the government would step up and bail them out. If they are getting it, why shouldn’t they pay for it?” asked Warren:

WARREN: So I understand that we’re all trying to get to the end of “too big to fail.” But my question, Mr. chairman, is until we do, should those biggest financial institutions be repaying the American taxpayer that $83 billion subsidy that they are getting?…It is working like an insurance policy. Ordinary folks pay for homeowners insurance. Ordinary folks pay for car insurance. And these big financial institutions are getting cheaper borrowing to the tune of $83 billion in a single year simply because people believe that the government would step in and bail them out. And I’m just saying, if they are getting it, why shouldn’t they pay for it?

BERNANKE: I think we should get rid of it.

Watch it:
http://www.youtube.com/watch?v=_Z5tuD-MCNA&feature=player_embedded
http://www.bloomberg.com/news/2013-02-20/why-should-taxpayers-give-big-banks-83-billion-a-year-.html==

other creative tax schemes
http://visar.csustan.edu/aaba/PINSTRIPEMAFIA.pdf

#107 Ralph Cramdown Ⓤ on 03.01.13 at 11:14 am

#100 afraidit allmightend — “I wonder if you really get it when it comes to net disposable cash available for savings among the vast majority of Canadians…it doesn’t exist man….they don’t have it.

After the car lease and mortgae..the overhead and taxation rip…..the vast majority live from paycheque to paycheque.”

Yep. So? I’ll admit that advertisers have become ever better at persuading people to spend, and that lawyers have created new ways to vacuum money from unwary consumers. On the other hand, the government has implored people save more and spend less and has created generous tax incentives to do so. Many people manage to save no matter what their income, just as many others spend it all. This blog isn’t aimed at people who can’t figure out how to spend less than they earn.

#108 Dwilly on 03.01.13 at 11:16 am

#28 HD on 02.28.13 at 10:37 pm

Thanks for the tips. Yes, I love CCP – amazing site. Good suggestion… right now I am fully aware that my asset locations are not optimal for tax purposes. At my current portfolio size, it’s not hurting me big today – but as it grows, the effect will become more pronounced, so I’m trying to learn about it today. When you say “growth” ETFs in TFSA, do you mean generally any equity ETF? Or certain geographies in particular? I am leaning towards keeping the Canadian Index in Unregistered, since it seems to be most efficient there, and keeping US/International Indecies in the TFSA. The problem there is the witholding tax issue.

#109 Grim Reaper/Crypt Speculator Ⓤ on 03.01.13 at 11:21 am

#73 Dr. WAYNE on 03.01.13 at 1:39 am

#31 Grim Reaper/Crypt Speculator Ⓤ on 02.28.13 at 10:42 pm

Dr Wayen…

U OK?

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

Garth ran over me with his Harley … twice …

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

Yeah … but he didn’t even start it and also left the kick stand down .

#110 GTA Engineer on 03.01.13 at 11:28 am

Garth,

Do you have equivalent statistics of TFSA contributions? I for one (beginning this year [yes I'm late to the party]) am putting my retirement savings primarily into TFSA, with only overflow going into RRSP’s. In the past, I’d contributed to only RRSP’s, falling into the trap thinking that TFSA’s were only savings accounts.

I’m wondering if as the word spreads, that part of the reason for RRSP’s dropping in popularity as investment vehicles is the growth in the use of TFSA’s? Would be interesting to see numbers – though I suspect that although TFSA’s might be growing in popularity it’s not enough to offset the drop in RRSP contributions (though.. really.. I can contribute 1.4x into my RRSP than into my TFSA if I borrow the 0.4x portion and pay it back with my refund, which is what I typically did)..

#111 Doug in London on 03.01.13 at 11:30 am

It all makes sense to me. During years when i made a lot of income I contributed to an RRSP to get a tax break. During moderate income years, no RRSP contribution. As for lower income years (I’m semi retired) I’ve deregistered and removed some money from RRSP’s as the tax burden was low. Better to do it now, as the tax on doing so may go up in years to come. Let’s see now, where have we heard of that idea before?

#112 Oceanside on 03.01.13 at 11:36 am

#78 Landbaron on 03.01.13 at 2:55 am
Long time reader but first time posting.

I may buy a KIA or two in the next year or so, who knows, but they seem like a great value.

All cars depreciate, that’s the nature of a useable asset. New Korean cars seem pretty sweet to me. Waiting for snark below
____________________________________________

No snark here. Although I wouldn’t buy one myself, my wife had one for a company car for over a year in 2011 and 2012, a high line Forte. Apart from the transmission hunting more that it should, it was comfortable and drove well, almost like a Hyundai. Another couple of years they will be challenging Honda and Toyota. Not one domestic car made the Consumer’s Reports top 10 this year and after renting a few domestics over the last few months its easy to see why.

#113 The Prophet Elijah on 03.01.13 at 11:36 am

Garth will be proven wrong about gold, but right about RE. Will be 1979-80 all over again. Watch and learn.

Gold 2011 = $1,900, Garth says sell. Gold today = $1,590. Garth’s already right. — Garth
———————————————————-
We will remember these words, this is your last chance to pledge your alligance to the gold bugs….

Nobody should holed one asset – especially a non-income-producing one – with no regard to rebalancing or portfolio weightings. Gold bugs are cultist gamblers, not investors. I’ll pass. — Garth

#114 jess on 03.01.13 at 11:37 am

dictators debt – odious

…vulture funds never lent money to Argentina. The debt that NML gambled on was bought cheaply, representing the extreme risk they were taking. They took that risk in the hope Argentina would pay them off rather than fight, and they lost.”
http://www.jubileedebtcampaign.org.uk/Debt37203791vultures37923720told3720to3720keep3720claws3720off3720Argentina+8197.twl

Argentina’s £45 million restructured debt includes loans for two Type 42 Destroyers and two Lynx helicopter which were used in the invasion of the Falklands.

The debt overhang left by Argentina’s military junta was not cancelled, despite a court case in 2000 finding that loans to Argentina under the dictatorship were part of “a damaging economic policy that forced on its knees through various methods … and which tended to benefit and support private companies – national and foreign – to the detriment of society” [4]. These loans ultimately helped fuel Argentina’s economic crisis in the early 2000s.

The loans were run up by a government department called the Export Credits Guarantee Department – which has recently changed its name to UK Export Finance. The Liberal Democrats have a policy to audit all the debt owed to UK Export Finance and cancel those found to have come from “reckless loans to dictators known not to be committed to spending the funds on development” [5].

http://www.jubileedebtcampaign.org.uk/Argentina3720still37203791owes37923720UK3720dictator3720debt3720for3720Falklands3720arms+7564.twl

#115 Harvard Grad on 03.01.13 at 11:56 am

Garth qouted “Greed is Good” – that came from the movie Wall Street – loved that move – Gordon Gekko’s speech on Teldar Paper – I can recite almost the entire movie (how pathetic is that).

Greed is Good, Greed is right – for an 80’s movie – it still rocks!

Sadly I think there are legions of Canadians who are barely keeping above water. RRSP is something that just can’t be taken seriously. Many in here appear to be in the $100K income bracket so that is an off breed from the general public.

#116 HogtownIndebted on 03.01.13 at 12:02 pm

Highly scientific poll results!!

Er,… not so much, ….but somwehat interesting in light of cash-strapped and house-indebted masses.

On the Yahoo front page today:

“Have you contributed to RRSPs this year?”

Yes – 35%

No – 65%

Votes – 30,126

#117 Sebee on 03.01.13 at 12:17 pm

I thought only assets were supposed to deflate. Not incomes. By 3.6% too! Wow.

http://money.cnn.com/2013/03/01/news/economy/income-spending-saving/index.html?iid=Lead

#118 Daisy Mae on 03.01.13 at 12:24 pm

#58 Todd: “You write well although I find your tone off-putting at times. There is a certain arrogance….”

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

I’m constantly amazed at Garths’ level of tolerance…

#119 Smoking Man on 03.01.13 at 12:33 pm

Bax futures pricing in a rate cut on the boc floating rate.

#120 LP on 03.01.13 at 12:36 pm

#103ron on 03.01.13 at 10:46 am
I could have done without the visual of you and your sculpted butt “mincing”.
===========================
Don’t forget the cowboy boots. So, probably more of a “prance” than a “mince”. Does that help the visualization?

#121 Ogopogo on 03.01.13 at 12:53 pm

I’m still a bit confused about the penalties for cashing out early on RRSPs. Are the following two scenarios correct?

1. I lose my job and cash out $15,000 lump sum, thus paying $4,500 (30%) for the early withdrawal.

2. I lose my job and cash out $5,000 in 3 installments in the same calendar year, thus only paying $1,500 (10%) in total for the early withdrawal.

It almost sounds too good to be true. Am I missing something here?

That’s why I advised small withdrawals. — Garth

#122 Ogopogo on 03.01.13 at 1:02 pm

Correction: for scenario 2 I meant to say:

2. I lose my job and cash out $15,000 in 3 installments of $5,000 in the same calendar year, thus only paying $1,500 (10%) in total for the early withdrawal. – See more at: http://www.greaterfool.ca/2013/02/28/the-season/comment-page-3/#comment-226949

#123 Ogopogo on 03.01.13 at 1:07 pm

Thanks for your response, Garth. Could you please delete my “Correction” post? I see now that it’s just needlessly complicating the issue, which you’ve already addressed. Thanks again.

#124 Old Man on 03.01.13 at 1:11 pm

#2 Smoking Man – I see you have a good eye for an attractive young woman as the header picture has indeed had a few positive comments. Garth is holding back, as you should see her mother, and perhaps he is keeping us waiting for another time.

#125 NoName on 03.01.13 at 1:13 pm

I can see relation between house price and rrsp contribution.., but also there is many companies that are cutting benefits and canceling rrsp matching.
inc. that I work for is canceling DB and matching resp as of end of this year.

When also we factor in all people that lost jobs that provided matching rrsp, government policies of clawing back benefits to newly retired boomers, I see why rrsp contribution are in decline. I am not gonna mention potential of higher taxes in a future.

I am scared…

http://i50.tinypic.com/2rf8188.png

I

#126 KommyKim on 03.01.13 at 1:23 pm

[b]IV Now, be somewhat careful what you put into an RRSP.[/b]

Garth, one of the things you don’t mention is foreign withholding tax. While researching ETFs, I found some interesting info on that and why certain ETFs are a no-no in an RRSP or TSFA:
http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/

Also what do you think about “The Complete Couch Potato” portfolio example:
http://canadiancouchpotato.com/model-portfolios/

ie: Is it diversified enough?

#127 Silent Fan on 03.01.13 at 1:23 pm

Can’t…stay…silent…
#49 (and 53 and 96) Shawn Allen
#65 T.O. Bubble Boy
TFSA = Tax Free
$6000 + 50% growth = $9000
ZERO tax on withdrawal. Thats the TF part of TFSA.
RSP: $10,000+50% = $15000
Tax on withdrawal at 40% (you must be in Alberta): $6000
Net =$9000
WHY SET YOURSELF UP TO PAY TAX?

#128 The American on 03.01.13 at 1:26 pm

What Americans do when they’re broke, drunk, and bored.

http://www.youtube.com/watch?v=xG6p0z_W2Bo

#129 Mike on 03.01.13 at 1:26 pm

#65 T.O. Bubble Boy

The investment numbers you’re using are wrong. If you invest $10,000 in a non-registered account, that would translate to $14,000 in an RRSP at 40% tax. The non-registered account (assuming you never liquidate the capital gains and trigger taxes) would end up at $15,000, minus 20% times $5000 ($1000), which gives you $14,000 after taxes. The RRSP would have $21,000 after the 50% gain, minus 40% times $21,000 ($8,400), is $12,600.

I suppose the numbers work differently depending on whether you re-invest the rebate, or just spend it. The $4,000 re-invested represents a larger percentage of the investment for the non-registered account as opposed to the RRSP.

#130 Beach Girl on 03.01.13 at 1:27 pm

Herb on 03.01.13 at 9:59 am

#88 Beach Girl,

Jesus can save your soul, but Garth could save your finances. And Garth is tax efficient – his fees are deductible.

_____

I have always had my taxes done by a Chartered Accountant. Bastard died. Yah, Billy, you, we are both laughing, second dad. And I am not H & R Block. A bit more complicated. And yes, have been audited 3 times, always in the right, but it cost me money to prove my non guilt.

#131 Shawn Allen on 03.01.13 at 2:02 pm

Silent Fan at 127

You ask why set up to pay taxes but you demonstrated that the net investment after taxes form a $6000 net investment in RRSP ($10,000 gross but net cost to you $6000) is exactly the same as TFSA assuing tax rates unchanged. You showed net $9000 in both cases. So your math shows (when marginal tax rate is constant) RRSP = TFSA = no net taxes = tax free growth = tax avoidance not tax deferral

Number 65 T.O Bubble. You demonstated the margin account gives less net after tax than RRSP. (You used 40% tax but even at 20% or 1% tax the RRSP wins in your example.

Mike at 129…

The math was we have $6000. We can invest that in TFSA, or margin account or borrow $4000 and invest $10,000 in RRSP using the refund to repay the loan. Our net investment $6000. In the RRSP there is $10,000 growing but all withdrwals will be taxed at 40% in the example. Also $16,667 in RRSP costs you $10,000 after the refund of 40%.

How does the math work for you then?

#132 claudius emperor on 03.01.13 at 2:06 pm

Garth,

What is you take on the pooled pension plans?
It looks like complete crap to me, still using the RRSP room but with solid maintenance fees, I guess.
How is that different than a mutual fund on your RRSP?
Why on earth would someone participate in such plan?

#133 rapier wit on 03.01.13 at 2:11 pm

Well, so much for the Gold Bug hypothesis

http://business.financialpost.com/2013/03/01/if-you-had-listened-to-warren-buffett-on-gold-a-year-ago-you-would-have-made-a-lot-of-money/

#134 Old Man on 03.01.13 at 2:16 pm

#130 Beach Girl – the last time I freaked out about my tax assessment called and told the Tax Man no way, as prepare all myself, and they wanted big money. So I pulled a fast one, and demanded a full 3 year audit; the gal said nobody has ever done this, but she said pay or they will be on your ass, and do we have all, and said yes. It took months, but got my money back in spades, as owed them nothing. I threw in a special form going back with for income tax averaging which was ignored.

#135 The American on 03.01.13 at 2:28 pm

I can’t help it. I’m addicted… The movement is strong.
http://www.youtube.com/watch?v=vu9GvcJ6hvk

#136 West Vanner on 03.01.13 at 2:42 pm

Garth, great post, would you advise someone with a marginal tax rate at 45.7% to be putting savings into an RRSP and using the tax refunds to build up TFSA funds to the maximum allowable. Retiring in about 10 years.

Why? — Garth

#137 Silent Fan on 03.01.13 at 2:55 pm

#131 Shawn Allen
Tax rates can change.
All money taken from an RSP is taxable. That’s not tax avoidance: That’s tax deferral.

#138 Ogopogo on 03.01.13 at 2:55 pm

Buffett and Garth essentially agree on gold, as the excellent article below reveals. My favourite line (and one that could’ve been penned by the Bearded One himself):

“You can fondle the cube, but it will not respond”.

Now THAT’s gold, Jerry, gold!

#139 Ogopogo on 03.01.13 at 2:57 pm

Sigh, I’m in technical difficulties mode today. Here is the fixed link:

http://business.financialpost.com/2013/03/01/if-you-had-listened-to-warren-buffett-on-gold-a-year-ago-you-would-have-made-a-lot-of-money/

#140 afraidit allmightend on 03.01.13 at 2:58 pm

OK…so hate the truth…follow the other sheep….see where that gets you.

http://www.businessweek.com/news/2013-03-01/druckenmiller-sees-storm-worse-than-08-as-seniors-bankrupt-kids

OK so Stan Drunkenmiller is only the most successful financial manager of his generation….why not crap on his opinion when it doesn’t toe the party line on entitlements?

You guys that are talking up the staus quo have a big surprise waiting for you. Big fact….the youth population has surpassed that of the boomers….and it is the youth…not the boomers who will control the agenda going forward. Guys like Drickmiller are going on tour to wake youth voters up from the malaise they have been spoon fed by the leftist elites.

Are you a civil servant and you think your entitlements are forever? I disagree…I foresee huge righteous clawbacks as youth voters realize that they have been unjustly screwed by todays elite unions and special interest groups.

This idea that unions promote that we should all live within our means is just misdirection……they’re trying to demonize the taxpayers who simply cannot save money because there isn’t any net at the end of a paycheque due to taxation and fee’s that feed the civil service elite.

Tell people to save who have already turned in the keys of their lease and have to take the bus to work so that they can feed their kids. People whi say that the average Canadian isn’t spending their money judiciously are suffering from Marie Antoinette syndrome. Thew question should be “Why are we getting ripped off so egergiously to support the elites?”

Did anyone see the article yesterday about us having to subsidize French students to come to study in Quebec on the subsidized backs of the taxpayer? How can you Liberals justify your positions on waste?

Gee, I thought Conservatives ran the country. — Garth

#141 Herb on 03.01.13 at 3:08 pm

#130 Beach Girl,

if everything is on the up-and-up, an audit should be no problem, except that it will cost you time and effort. Putting us through hoops is part of the durance vile used by CRA to get taxpayers to shut up and pay up. They can be as ignorant, inefficient and incompetent as they choose until a court tells them otherwise.

Whether you hire professional help depends on the amounts involved. You might prefer paying (and deducting a thousand or two) to spending hours filling out and filing yourself. If you want to get an accountant you’d better start looking because they will be busy over the last two months of tax season. I have never used one except to get advice on particular issues.

Four years I found a cure for annual tax pain and apoplexy: UFile and TurboTax. TurboTax Premium costs around $60 and does a neat job with rental and investment income. TurboTax Standard and Ufile might be adequate for your needs and cost about half. With either one you answer their questions and fill in your amounts, and they do all calculations, filling and filing. Well worth the money, especially since I was told by a credible source that CRA reviews and audits fewer returns prepared by commercial software.

#142 gladiator on 03.01.13 at 3:10 pm

The young lady most probably took TTC to get to the beach.

Also, if TNL@TB is hot, I will take “N” as “naughty”.

#143 bigrider on 03.01.13 at 3:11 pm

Garth, I loved your statistic in #97 citing the fact that in the 26 times the S&P have been up in both January and February since 1945 the average gain was 24% and there was always a gain.

If pattern repeats, we make a new all time high for the S&P ( most likely) which seems so hard to believe given where we have come from.

I want to believe ,as an S&P at a new high is a game changer for sure.

Not my stat, but thanks. — Garth

#144 Ronaldo on 03.01.13 at 3:18 pm

A question for DEVORE or anyone else that may have some insight into this. I recently spent a week at a friends place in Vancouver in the Mt. Pleasant area. Thought I would wander around the area between 16th and King Edward and bounded by Main and Cambie (48 square block area). What was really eye catching was the almost total absence of For Sale signs. Notice a lot of renos in progress, lots of laneway houses built and being built but almost nothing for sale. My question is: Is this normal for this time of year and that in another month or so we may see an avalanche of listings or is there some other reason for this. It just seemed very odd.

#145 bigrider on 03.01.13 at 3:20 pm

#121 Ogopogo on withdrawing three 5k RRSP deregistrations instead of one 15K and paying three 10% withholdings instead of one 30% withholding thus saving $3000.00 presumably. Garth replies “thats why I advised small withdrawels”

You are not giving the whole picture Garth. When the tax filing occurs , total income from RRSP is 15k regardless . The tax owing will be adjusted upon filing regardless of whether he paid $1500 tax on his money or $4500.

You are not avoiding taxes, you are simply defering.

Actually you are avoiding taxes if the calendar year income is less than the withholding tax. In any case, it’s all about cash flow. — Garth

#146 Daisy Mae on 03.01.13 at 3:32 pm

CBC poster:

“Our voice was quite clear. We wanted the previous tax regime we were living under, and not to be sideswipped by pre-emptive legislative changes without our consent.

So it took that much effort to revert back to the old system? (1-1/2 years) They couldnt just accept at face value the previous legislation that they unilaterally swept aside?

Nope, we are getting a re-engineered tax system that will emulate as much as possible, the expiring HST.

This is your government, Even when you clearly tell them not to spoil the soup, they defy you and pee in it.”

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

BC’s HST will be gone April 1st. Just before the May provincial election…..

#147 DonDWest on 03.01.13 at 3:33 pm

Garth,

I have a question regarding the HBP with RRSP’s. Does the properly in question necessarily have to be a house or condo? Can you sock away 50K (per couple) for a duplex instead (provided of course it’s your first property ever purchased)?

Yes. — Garth

#148 think again on 03.01.13 at 3:38 pm

“If you had listened to Warren Buffett on gold a year ago you would have made a lot of money”

Metalheads, get the facts from the 2nd richest man in the world…

http://business.financialpost.com/2013/03/01/if-you-had-listened-to-warren-buffett-on-gold-a-year-ago-you-would-have-made-a-lot-of-money/

#149 Holy crpa wheres The Tylenol on 03.01.13 at 3:42 pm

X Finally, if you do make an RRSP contribution, don’t spend the refund this year on something you’ll regret, like a Kia. Instead, invest it in your TFSA.
Or a new Harley.

All of these Roman numerals are making me go crazy.
We lets see today is, III / I / MMXIII
Or in Gregorian Latin, Dies Veneris I Martius MMXIII

Oh hell I’m going out to purchase a Harley with my tax refund!
Get you motor running! My God those were the good old days!

http://www.youtube.com/watch?v=LC30u35LII8

#150 Shawn Allen on 03.01.13 at 4:03 pm

Silent fan at 136 responded to me:

131 Shawn Allen
Tax rates can change.
All money taken from an RSP is taxable. That’s not tax avoidance: That’s tax deferral. –

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

Agreed, absolutely tax rates change. But we were holding them constant in our example.

Your math at 127 demonstrated that $6000 on TFSA turned into $9000 tax free with 50% gain

And $6000 net in RRSP ($10,000 gross less $4000 refund) grew to $15000 or the same $9000 after tax.

If RRSP = TSFA and TSFA = tax avoidance, then RRSP = tax avoidance.

It’s simple math but anyhow if people would just max out all tax-assisted savings and invest mostly in equities or a balanced approach they should end up rich. It’s worked for me.

People can whine about the high tax all they want, but mathematically it’s mostly just repaying the government’s 40% share of the RRSP that the government contibuted or subsidized in the first place.

Your RRSP is always about 40% the government’s from day one. You’re poorer than you think. (But still rich eventually if you max out TSFA and RRSP).

#151 Reg on 03.01.13 at 4:05 pm

I don’t know what you have against Korean cars Garth! Don’t you own a Hummer? American made crap! Thrust me, I have owned both American and Korean. I paid for my Pontiac 2X over with repairs, but my Korean car has yet to cost me an extra penny. Korean cars might not be top end, but I will take one over any American car any day of the week. Getting rid of that POS Pontiac was the best decision I ever made. Maybe you should trade the hummer for a Kia, if it’s still worth anything! LOL

#152 Ronaldo on 03.01.13 at 4:07 pm

Was sitting here thinking about all this money that the boomers have sitting in RRSP’s that will still be sitting there until they reach age 71 when they are forced to draw it out and pay tax on it.

For some that will result in a clawback of the OAS. One of the reasons a lot of this money is still just sitting there.

For others who don’t have the benefit of a pension plan, drawing out the RSP will become necessary for them and this too will result in a clawback if they are entitled to the GIS. It could actually result in a 70% tax for these individuals since for every dollar they take out of their RSP, they lose 50 cents of the GIS plus they may have to pay tax on that withdrawal as well.

In addition, they could also be disqualified from other means tested benefits. The GIS is not considered income for tax purposes but RSP’s are. For people who are in low income and foresee that their income will be low in the future as a result of no pension plan and limited CPP and savings, the TFSA is by far the best way to go.

As has been stated, RSP’s are a tax deferral and best suited to high wage earners. Basically, people who don’t need the money. I supsect that with a 50% reduction in people buying RSP’s, this would be beneficial to the Gov’t in the short term since they don’t have all these tax refunds associated with the purchase of RSP’s heading out the door. Just my two cents worth.

For those at the low income level, google ”OAS, GIS tables” on the federal gov’t web site. The 5 charts show the benefits available depending on levels of income and a persons status, eg. single, married, common-law, widowed, etc.

My recommendation if you or anyone you know is in this category, go and speak to a represenative at HRDC and they can explain all of this to you or someone you know. This is not anything you are going to get from TNL@TB who will sell RSP’s to anyone and their dog if they could get away with it. For most people, the RSP is a tax trap. I myself found this out but not too late to do something about it.

Many low income people are unaware of benefits available to them and as a result the government benefits by this lack of knowledge. I was amazed at how many seniors were unaware of this in the past. Some of those Walmart greeters may be just such people.

#153 vic_guy on 03.01.13 at 4:19 pm

Vancouver Island Feb 2013 updates :

Outside of Victoria :
~~~~~~~~~~~~~~
From VIREB : http://www.vireb.com/assets/uploads/02feb_13_sales_summary_5118.pdf

Nanaimo : 33% sales drop, avg prices up 1%
Port Alberni : 25% sales drop, avg prices down 26%
Parksville/Qualium : 23% sales increase, avg prices down 17%
…[read more in the PDF]

Victoria (preliminary):
~~~~~~~~~~~~~~~
From HouseHunt Victoria :
http://househuntvictoria.blogspot.ca/2013/03/february-decline-o-meter.html

February 2013
Net Unconditional Sales: 394
New Listings: 1,039
Active Listings: 4,072

Sales down 20.7%, new listings down 21.2%

SFH Median = $517,500
SFH Average = $601,377
Condo Median = $270,000
Condo Average = $299,412

And as for how the median has changed over time, an excellent graph from HouseHunt again :

http://3.bp.blogspot.com/-b83efQaKTbo/UTDijf1tCxI/AAAAAAAAAyg/Y15ZBJEGbfw/s1600/decfrompeakfeb2013.PNG

#154 West Vanner on 03.01.13 at 4:21 pm

Garth, great post, would you advise…….. Retiring in about 10 years.

Why? — Garth
—————————————————–
Draconian divorce laws

#155 Old Man on 03.01.13 at 4:44 pm

#26 Smoking Man’s Old Man – not too sure if I read this right, but a new law came into effect 1981/82 while I was in Ottawa. My girlfriend tipped me off in Stats Canada, as any divorced woman could file a lien against her old man for 50% of his CPP, and he would not be notified, so said now what? She said am going to take him to the cleaners, and give him the shock of his sordid life for ever cheating on me.

#156 HD on 03.01.13 at 4:59 pm

#108Dwilly on 03.01.13 at 11:16 am

You pretty much nailed it.

This is exactly what I meant by growth ETF, any ETF that tracks a stock index (S & P 500, etc).

Canadian holdings in non-registered accounts and the US/International in the TFSA is how I do it as well. There is a tax withholding issue but there is no way around it.

CCP posted an article addressing this exact problem. Take a look if you haven’t yet:

http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/

This blog entry gives some strategies on how to make your portfolio more tax efficient with different accounts.

Hope that it will help you. Good luck!

Best,

HD

#157 Devore on 03.01.13 at 5:06 pm

#96 Shawn Allen

Yes, it all works out the same in the end, in multiplication the order of the parameters is not important. There are other considerations to take into account, then, which will make one vehicle better than the other, or will set optimal contribution levels for each individual.

Rich people’s problems…

Although the grass appears greener on the other side, everyone has their problems. If higher income eliminates one set of problems, a whole new one opens up you’ve never imagined before. You’re certainly better off, on average, but to say rich people live in some sort of idyllic paradise, or that their problems are “rich people problems”, is dishonest, and patronizing.

#158 Ralph Cramdown Ⓤ on 03.01.13 at 5:31 pm

#140 afraidit allmightend

If you’re having trouble saving money…. Cancelling your internet access will save you $20-50/month, and that really adds up.

“Tell people to save who have already turned in the keys of their lease and have to take the bus to work so that they can feed their kids.”

Gee, you make public transit sound so lowbrow. The ‘Marie Antoinette’ in my household takes it to the office every day. We save money because the car (which we bought, cash, used, private sale) is only insured for occasional use, plus parking and all that. And the tax break on the transit. Which reminds me that I really should call and cancel the collision coverage now that she’s getting on in years. Maybe if you hadn’t leased your car you’d still have one. But keep it up! People like me need supply. Baby it, please. Garage it, and keep all the receipts.

Seriously, if you can’t even spend less than you earn, there’s other blogs that help with that.

#159 Dr. Hoof Hearted on 03.01.13 at 5:34 pm

#140 afraidit allmightend on 03.01.13 at 2:58 pm

Did anyone see the article yesterday about us having to subsidize French students to come to study in Quebec on the subsidized backs of the taxpayer? How can you Liberals justify your positions on waste?

===================================
It’s true.

Our eldest is at McGill…..took French from K-12 . Born in Canada …but not in Quebec…pays the Non Quebec Resident tuition fee .

However FOREIGN students, from French speaking Countries overseas ….pay less.

Entitlement is one thing, but stupid biased Gov’t programs should be the first to go.

#160 Canadian Watchdog on 03.01.13 at 5:39 pm

#138 Ogopogo #148 think again

“If you had listened to Warren Buffett on gold a year ago you would have made a lot of money”

Buffet also missed Google and Apple twenty years ago when it was dirt cheap.

#161 Suede on 03.01.13 at 5:56 pm

OMG

Direct email quote back after discussing home purchase.

“When we bought our house i bought it specifically to be good for Asian buyers”

This individual is part of my gauge of “Public Sentiment”. She wants to sell her place for fear that she won’t get back what she paid for it two years ago.

Joe and Jane Plumber now know the market has topped….uh-oh.

#162 Canadian Watchdog on 03.01.13 at 5:56 pm

Berkshire Profit Advances 49% on Buffett’s Derivatives

Well that explains why he isn’t a goldbug.

#163 Spiltbongwater on 03.01.13 at 6:17 pm

#151 Reg on 03.01.13 at 4:05 pm

You are right Reg. I don’t know why Garth has such a hate on for Kias. He probably rear ended one in his Hummer and got hit with a substantial increase in insurance premiums. I considered buying a Kia, but went for a Honda instead.

If I hit a Kia, would I notice? — Garth

#164 Beach Girl on 03.01.13 at 6:26 pm

Very valuable advice for the sager ones on this site. I ran my own incorporated business for 25 years. Then threw in the towel to more competitive Indian people. Worked for me, then owned apts and such. Which I have mostly divested myself of. Not your standard broke Boomer.

But, of course, I hire someone to sort this shit out. But, when you get audited by the govt. it costs you money to do that. Found out last time it was my 1st ex had pushed a button.

But the opinions expressed today are valuable. Why are we allowed to get raped like this, over and over. I pay taxes, educate stupid people. Not fair. Never collected a dime on any benefit.

#165 Smoking Man on 03.01.13 at 6:27 pm

#41 That was good, books on the way, send me an email I’ll shoot you a draft.. :)

#166 Smoking Man on 03.01.13 at 6:31 pm

#41 it’s a book about trading, with my usual crazy delivery of the obvious. This step by step low risk entry into day trading, haven’t decide if I’m going to correct the grammar or spelling…. Why endorce the obedience machine

#167 Shawn Allen on 03.01.13 at 7:02 pm

Canadian Wa=tchdog at 160 said…

Buffet also missed Google and Apple twenty years ago when it was dirt cheap. –

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

Silly comment of the day. Buffett (two ts btw) is up a cool one million percent on his Berkshire shares since 1965, from $15 to $150,000. 10,000 bagger, and counting.

To say Buffett missed anything is just silly.

to suggest that the greatest investor in history should have bought Apple or Google is very silly.

Buffett buys things that he kows in advance are good. You wish to judge his decisions in hind sight.

Oh, why waste my time responding to such a loopy cooment.

Smart people learn from and follow Buffett. It’s not smart to bash Buffett.

#168 Piccaso on 03.01.13 at 7:12 pm

You don’t invest in RRSP’s when you have capital losses to make back tax free.

#169 My thoughts on 03.01.13 at 7:23 pm

More price drops in the GTA on MLS. On a side note. Lots of people at the groceries buying heavily discounted fruits, veggies and meat. Not a good sign!

#170 Ron on 03.01.13 at 7:28 pm

As noted your US dividend stocks (gotta have some of them) should be in your RRSP because the Americans will not deduct any taxes on your dividends.

Inside a TFSA they will and there’s no getting it back.

Held outside you can file to get it back but it’s a PITA.

What would be nice is if people actually understood the basics of investing accounts.

Your RRSP. (Also known as your Tax Deferral Investing Account)

Your TFSA (Also known as your Tax Free Investing Account.)

And your run of the mill investing account (Which could be known as your Standard Rules Investing Account)

It would be nice if people were actually taught the basic rules under which they have to play. One would think they would cover this in school.

#171 Ron on 03.01.13 at 7:33 pm

“When we bought our house i bought it specifically to be good for Asian buyers”

Really? When the market goes boom and I actually do buy a house I am hoping for….

3 bedrooms
2 baths
Massively overgrown back yard
70s decor
Broken Furnace
Cool address like 444 4th ave
Nearby funeral home and cemetary

And when the time comes I will offer $444,444.44

#172 Nostradamus Le Mad Vlad on 03.01.13 at 7:34 pm

#104 Gunboat denier — “88 beach girl – the government will drain your RRSP before your sons get a hold of it…” — Alternatively, Beach Girl could leave the RRSPs to a charity or two, and get a tax break on her final taxes.

#146 Daisy Mae — “BC’s HST will be gone April 1st. Just before the May provincial election…..” — Then the Libs. will rumble, tumble and stumble leaving us with the NDP and a bunch of other political ninnies, all of which are inept and incapable of organizing a cup of tea.

I recommend voting for The Monster Raving Loony Party. They don’t exist here and, hence will never be elected!

#173 Dr. Hoof Hearted on 03.01.13 at 7:41 pm

Ay ay ay

why you do NOT do drugs

http://www.thesun.co.uk/sol/homepage/showbiz/tv/4534267/Ex-Americas-Next-Top-Model-star-Jael-Strauss-beauty-destroyed-by-meth-addiction-as-she-appears-on-Dr-Phil.html

#174 AK on 03.01.13 at 7:47 pm

Invest the Buffett Way: Buy Common AND Preferred Shares

http://investorplace.com/2013/02/invest-the-buffett-way-buy-common-and-preferred-shares/

#175 Dodged-a-Bullit-in-Alberta on 03.01.13 at 9:17 pm

Greetings: ” But if you trust what the government’s going to do in thirty years, then I also have a grow-op in Surrey your wife will Love.”

Same statement can be applied to TSFA, as well as RRSP eh!!!!

Wrong. The TFSA is far cheaper for the feds. And if personal tax rates rise, RRSP withdrawers will be nailed. TFSA withdrawers will feel nothing. — Garth

#176 marek depta on 03.02.13 at 1:22 am

Mr. Garth. Can You , please youse litttle easer leanguage becouse
most of your readers are new imigrants and they are expecting little bit easier explanation about the economic situation. Please , try to youse simple worlds,then we can follow YOU!!!! Thank You GARTH!!!! MARK . D.

#177 T.O. Bubble Boy on 03.02.13 at 2:49 am

@ #127 Silent Fan on 03.01.13 at 1:23 pm
Can’t…stay…silent…
#49 (and 53 and 96) Shawn Allen
#65 T.O. Bubble Boy
TFSA = Tax Free
$6000 + 50% growth = $9000
ZERO tax on withdrawal. Thats the TF part of TFSA.
RSP: $10,000+50% = $15000
Tax on withdrawal at 40% (you must be in Alberta): $6000
Net =$9000
WHY SET YOURSELF UP TO PAY TAX?
_______________________

I’ve maxed out both the RRSP and TFSA, and have many investments in non-registered accounts as well, so my decision isn’t choosing between these various types of accounts, but where to allocate investments across all of these types of accounts.

So, if you assume a Garth-style diversified portfolio with say 40% Income via Preferreds/REITs/Bonds and 60% Equities via Canadian/US/International ETFs, you might as well put the investments in the account with the lowest tax treatment (Canadian Preferreds outside, U.S. Preferreds inside, Bonds inside, most REITs inside, Canadian equity ETFs typically outside, various forms of U.S. and Int’l equity ETFs in all types of accounts).

Also – the way I see it these days: capital losses (which you don’t get in RRSP or TFSA) are one key reason to hold certain investments inside vs. outside…

If you’re holding a bond to maturity, there is a very small chance of a loss — the company would need to default. Putting that outside of a RRSP makes little sense.

On the other hand, a growth-focused investment (e.g. a small-cap ETF) has a higher likelihood of a loss, so having that outside the RRSP can make sense. Garth also promotes the idea of growth-focused investments in a TFSA to get that sucker expanding beyond the baseline $25,500 cumulative contribution limit all Canadians have up to 2013.

#178 Louise on 03.02.13 at 9:12 am

Move to Kelowna and buy some real estate .. Everything is cool.. Don`t worry,,it`s just the media picking on Kelowna http://www.castanet.net/edition/news-story-88092-906-.htm#88092 Even the RCMP superintendent`s daughter sells dope here.. http://www.castanet.net/edition/news-story-88158-1-.htm#88158

#179 Cici on 03.02.13 at 2:02 pm

#1

Yes! Going cross-country skiing. Yee Haw!

#180 Grantmi on 03.02.13 at 4:11 pm

#107 Spiltbongwater on 03.02.13 at 1:55 pm

If peoples property taxes were in serious arrears, shouldn’t their first call be to a Realtor, to sell their house, and likely the last call should be to Second Mortgage Hub to take on more debt to pay the debt? I hear the ads on CKNW non stop about home equity loans, so people can pay their credit cards, property taxes or go on a vacation.

that’s all you hear on CKNW.. plus Federal and Provincial ads about how well we’re doing!!

Both are delusional slight of hand trying to put one over on the masses!!!

#181 nonplused on 03.02.13 at 11:24 pm

Invest in a Harley? Even if it were an investment, it would take a lot of RRSP contributions to pay for it.

Is it me or is Harley finally scraping air cooling? I saw one the other day that looked to be definately water cooled, without even a good attempt to hide the radiator v-star style. Oh well, welcome to the 21st century, harley hasn’t been making (all) their own motors for years.

#182 Shane on 03.04.13 at 1:54 pm

Good Article