The tool

What a week on the country’s Most Pathetic Blog. Scary doctors. Disastrous savers. Doomy polls. Rising debt and falling incomes. The news on the personal finance front just keeps getting worse – exacerbated by wobbly real estate and stock markets which ended 2018 in worse shape than Doug Ford’s cholesterol.

Of course, a lot is self-inflicted. That’s a message most people don’t want to hear, instead blaming modern life for their financial failures. In truth, the world has changed. The days of stumbling from school to marriage, a house and children, then career, retirement and a pension are kaput. It takes a lot more planning now, plus some basic financial literacy and the flexibility to change gigs or locations. But it can be done. The yawning wealth divide is evidence the majority have yet to understand this. They’d rather be pissed and vote for some goof who promises to change everything. And can’t.

I thought about such things as the Amazons cleaned out my garage and brought me a dusty box full of “Garth Turner’s 1999 RRSP Guide”. Wow. Artifacts. Actual you know, like, books. Paper thingys. Two hundred pages of ways to milk the system and build wealth. In fact I used to publish one of those guides every year, then hit the road to stage financial seminars in cities across this frosty, Godforsaken, January nation.

These days books have morphed into blogs. Live events are the preserve of HGTV flippers and now mutual fund flopper Kevin O’Leary. What’s happened to ”RRSP season” is even more acute. It vanished – along with the urgency everyone used to feel to make contributions before the end of February. The amount of money flowing into these things has crashed, and the meme among the moisters is that RRSPs are some olden-tyme vestige. Like the CBC. Or manners.

As far as can be told, we are squandering this tax tool as never before. When I wrote my RRSP guides, fully a third of all people shoveled money into their retirement plans each and every year. By 2016 that declined to just 22%. Anecdotal evidence lately (and I’m in a good position to see it) suggests this has fallen off a cliff in the last few winters. The feds confirm activity has faded steadily since peaking about 2007.

The amount of extra tax people pay as a result is staggering. As of 2016 (the latest reporting year for StatsCan) Canadians had accumulated $1.065 trillion in unused and available RRSP room. That’s $44,500 each. Of 29.6 million taxpayers, 24.5 million have not maxed out their plans. That’s an 85% fail rate.

Just to remind you, the more money earned, the greater the contribution that can be made and the more significant the tax break. It tops out around $26,000, and somebody in the top tax bracket can then save about half that in actual tax paid. The money invested earns untaxed growth, and can stay that way until the year you turn 71. You can give your RRSP room to your spouse (in effect), so you get the tax break and s/he gets the money. If the spouse is in a lower tax bracket, you can save a bundle when it’s withdrawn. You can also use existing assets to make a contribution, turning a taxable portfolio into a taxless one – and getting a refund while you do it.

Yes, RRSPs are taxable when cashed in, so use them wisely. They can finance a year in which you get laid off, take a trip to Drumheller to discover your ancestors or have a baby. They allow tax-shifting during your life, reducing taxable income during those years when you make a lot and turning it into income when you’re not. RRSPs can leverage up a home downpayment, or provide tax-free education financing. You can borrow money to contribute, use the refund to repay a chunk of the loan, and create wealth out of nothing. You can even use a melt-down strategy to get income from a registered plan, and pay no tax.

In short, it’s a tool. A valuable one. Why not use it?

Yeah, I already know the answer. Not enough money. And that brings us back to the discussion of the last two days. When 85% of taxpayers have not maxed their RRSPs and 90% have failed to take full advantage of the TFSA, we have only our own habits to blame. Over-consumptions is all around us. Everybody has Netflix. Take-out replaces groceries. Children are doted upon like wee deities. We suffer, and act upon, house lust. Beach vacations eat massive cash. And, of course, we pay tax on tax – which an RRSP could diminish.

For the self-employed, or anyone who will retire without a plump corporate or defined-benefit pension (most of us), a retirement savings plan should be at the core of your strategy. When you hit 71, just convert it to a RRIF, keep the tax-free compounding in place, and draw the minimum amount annually. Or cash out RRSP funds after you stop working in a way that controls your own income, and tax bracket. Plus, always marry someone a decade younger so you can continue to make spousal contributions long after your libido limps off.

Yes, you have until March 1st to contribute in order to reduce the amount Justin will Hoover from you in April. Or you can eat boxed pizza, watch Bird Box and complain.

148 comments ↓

#1 Godth on 01.22.19 at 3:55 pm

“The gift is life. Jesus knew.”
Chris Hedges, an ordained Presbyterian minister, gave this sermon Jan. 20 at Christ Church Cathedral in Victoria, British Columbia, in Canada.
“The corporate forces that have commodified the natural world for profit have also commodified human beings. We are as expendable to global corporations as the Barrier Reef or the great sequoias. These corporations and ruling elites, which have orchestrated the largest transference of wealth upward in human history, with globe’s richest 1 percent owning half the world’s wealth, kneel, and force us to kneel, before the dictates of the global marketplace. They have seized control of our governments, extinguishing democracy, corrupting law and building alliances with neofascists and authoritarians as the ruling ideology of neoliberalism is exposed as a con. They have constructed pervasive and sophisticated systems of internal security, wholesale surveillance and militarized police, along with criminalizing poverty, to crush dissent.”
Confronting the Culture of Death
https://www.truthdig.com/articles/confronting-the-culture-of-death/

93% of the heating we’ve created has been absorbed by the oceans, if that wasn’t the case our atmosphere would be 97 degrees F. warmer. business as usual sounds like a tenable future to pursue.
The End of Ice & the Destruction of our Planet (w/ Dahl Jamail)
https://www.youtube.com/watch?v=kjOA8qR0-AA

rrsp, tfsa, rrfi – do non existentant fish bite on acronyms?

#2 gfd on 01.22.19 at 4:05 pm

Liberal intervention with real estate in progress.
The Chronicle Herald
Liberals looking to make home-buying more affordable for millennials: Morneau
The Canadian Press
Published: 15 hours ago

#3 The real Kip (Ret) on 01.22.19 at 4:13 pm

“The days of stumbling from school to marriage, a house and children, then career, retirement and a pension are kaput.”

Not really. I just did it. Oh, you mean the people coming through behind me. Yea, I guess you’re right there, that is going to be a bit a problem isn’t it? Oh well, they’ve got the rest of their lives to get over it.

#4 TH on 01.22.19 at 4:20 pm

So how should I split my money between RRSP and TFSA? 50/50? Approx $500 biweekly available to contribute.

#5 mike from mtl on 01.22.19 at 4:20 pm

RIF minimum withdrawal at 71 is 5.25% which is nearly impossible to achieve without excess risk or income funds eating fees. Most likely would mean chipping away at principal if not from risky dividend sources (preferreds).

At age 71, if you make it there I guess, who cares at that point?

#6 Sold Out on 01.22.19 at 4:20 pm

#130 Ronaldo 18/01/21

If all you got is “fast ferry fiasco”, I’ll see your pair of deuces and raise you a Lib/Socred kleptopcracy that brought us the BC Rail scandal, BC Hydro/Site C con job, BC Legislature malfeasance, criminal money laundering, and ICBC dumpster fires.

#7 Not So New guy on 01.22.19 at 4:21 pm

That’s one of the best things about being an independent business person. You can start banking the RRSP money when you get paid because it’s not deducted at source, get it working for you and lower your net income before Justin even gets a look at it

There is no point having your tax dollars sitting in government accounts collecting interest and waiting for you to claw it back at the end of the year. You can collect that income yourself…and at a better rate

#8 paracho on 01.22.19 at 4:24 pm

Great advice !

#9 SunShowers on 01.22.19 at 4:24 pm

“Over-consumptions is all around us. Everybody has Netflix.”

Even with the price hike, Netflix at $14.99 per month beats the pants off of cable TV any day of the week. My wife and I haven’t had cable since we moved in together and haven’t regretted a day of it. All the sports, news, and weather malarkey we’re missing out on is available free online anyway.

#10 A box in the sky on 01.22.19 at 4:26 pm

I’ve been fortunate to have a generous company match that I have always maxed. Now I wonder if maybe I’ll have too much in the RRSP … I know not exactly a real problem.

But – what is a good amount to shoot for in your RRSP at say the age of 40 and 50 … how much is too much?

#11 Life's a beach on 01.22.19 at 4:29 pm

If it’s not… yer doing it wrong.

#12 PastThePeak on 01.22.19 at 4:43 pm

Excellent and timely column Garth! I do maximize mine each year, with the company kicking in 50c on each $1 (to a max of course). While ideally I would balance more between TFSA vs. RRSP if I had the option (take the hit now for a bit more tax free later) – I don’t have that option so RRSP it is.

I do plan to (semi) retire a bit early and meltdown the RRSP somewhat alongside a part-time job (while stuffing the TFSA until at least 65).
————–
“By 2016 that declined to just 22%. Anecdotal evidence lately (and I’m in a good position to see it) suggests this has fallen off a cliff in the last few winters. The feds confirm activity has faded steadily since peaking about 2007.”

– Please, don’t let Justin and Wild Bill know! In the next budget the RRSP contribution limits will be decreased as “only well off Canadians can take advantage of it”…
————–
“They can finance a year in which you get laid off, take a trip to Drumheller to discover your ancestors…”

– pure gold!

#13 Smartalox on 01.22.19 at 4:47 pm

One more thing about making additional RRSP contributions (over and above what you get deducted through work).

If you have a budget, and know in advance that you’ll be making regular RRSP contributions throughout your working year, go to the CRA website, and fill out form T1213, to reduce the income taxes deducted from your pay AHEAD OF TIME. Send it in to the CRA (with supporting documents, like copies of agreements with your financial advisor), and they’ll re-calculate the tax you’ll owe and send a letter back, instructing the person who processes your payroll to reduce your taxes, so that you have less deducted from every pay cheque.

That way, instead of forking out hundreds of extra dollars every pay to the federal and provincial governments to use as interest free loans until they give the money back to you as a tax “refund”, you get to plow those avoided taxes back into your monthly budget, offsetting the cost of increasing your contributions.

The same form can be used for other deductions (alimony, child care expenses, charitable gifts and medical bills, for example). IF you’re forking out for any or all of these – and have documentation to back it up – it can be a game changer.

I did mine, and will avoid about $6000 in taxes: about $500/mo or $250/pay this year, over not doing it.

Here’s the link:
https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t1213/t1213-fill-18e.pdf

#14 Buddy on 01.22.19 at 5:03 pm

This information is pure gold, as usual.

I’m in need of a Financial Planner, though, I don’t think you would take us on, Garth, we’re worth about 150k with combined income at 150k. No house, yet.

Can someone provide an recommendations? Or a list of recommendations in the GTA?

#15 The Wet One on 01.22.19 at 5:07 pm

Once I had a defined benefit pension, my RRSP contributions did decline.

Debt repayment became more of a priority.

I guess I’m a bad guy.

:-(

That said, I’m still saving money, but in my TSFA, not so much the RRSP.

So there’s that.

#16 jess on 01.22.19 at 5:10 pm

…”the report was released to the media, Alan Mullen, adviser to Plecas, told reporters the allegations involve “millions of dollars.”

“I would suggest what’s contained in this report is improper, at times against policy,” said Mullen.

“It’s not speculation, it’s not made up, it’s not opinion. It is fact and it is backed up by documents, receipts, letters and proof.”
…”Mike Farnworth, B.C.’s solicitor general, said he was shocked and saddened to read the allegations in the report, calling them “unacceptable.”

“I think the general public would look at it and say, ‘That’s just wrong,’ ” he said.

‘Flagrant’ overspending

The report, which includes details of trips and conversations, as well as scanned receipts and tables of expenses, alleges overspending and misappropriation of funds in a number of areas, including:

“Flagrant overspending on luxurious trips” with “questionable” business rationales, and taking overnight trips at the legislature’s expense, for what appear to be “other than legitimate work purposes.”
Expensing personal purchases to the legislature, totalling tens of thousands of dollars over a period of less than two years.
“Inappropriate” cash payouts in lieu of vacation, totalling in the hundreds of thousands of dollars.
Misappropriation of alcohol and electronic equipment.
Potentially “retributive or otherwise unjustified” termination of employees.

The report also alleges that steps were taken to conceal information that could have indicated improperly claimed expenditures, and that attempts were made to access benefits in the millions of dollars.

https://www.cbc.ca/news/canada/british-columbia/darryl-plecas-bc-legislature-1.4986402

#17 Penny Henny on 01.22.19 at 5:14 pm

You wrote ‘spending’ habits and I read ‘speaking’ habits.
Too Funny.

#141 waiting on the westcoast on 01.22.19 at 2:31 pm
Leader seeing the example…

Toronto Sun: EDITORIAL: Trudeau’s spending habits a problem for Canadians.
https://torontosun.com/opinion/editorials/editorial-trudeaus-spending-habits-a-problem-for-canadians

#18 AGuyInVancouver on 01.22.19 at 5:17 pm

#2 gfd on 01.22.19 at 4:05 pm
Liberal intervention with real estate in progress.
The Chronicle Herald
Liberals looking to make home-buying more affordable for millennials: Morneau
The Canadian Press
_ _ _
Great just what we don’t need, another government intervention, didn’t they learn anything from the BC Liberals failed attempt at this?

This sentence from Garth’s post indicates the problem: “The feds confirm activity has faded steadily since peaking about 2007.” In other words while the USA took their medicine at the Great Recesssion, Canada just kept kicking the can down the road, spending money they didn’t have. Time’s up.

#19 Mailey McFortune on 01.22.19 at 5:20 pm

Hi Garth,
I love adding to my RRSP and TFSA every year. It’s not really as much for funding your future as it is for helping you sleep soundly at night.

#20 BlogDog123 on 01.22.19 at 5:23 pm

re: #12 Smartalox,

I agree and also recommend doing the T1213 form every November for the following year’s taxes. You can even fax it in and save the delay/postage/envelope thing. My paycheques are bigger and my refund in April is smaller and that’s the point. It’s my money and I want it when I am paid, not waiting for a big-fat-cheque in April. No interest free loan to the CRA !!!

I asked my payroll admin and she said not a lot of people submit this form each year… They just can’t be bothered to get their own money sooner.

#21 yorkville renter on 01.22.19 at 5:29 pm

been busy starting a biz.. and this is the first year in several that I can contribute to the RRSP. TFSA is maxed though.

feels good to put the $$$ aside.

#winning

#22 David on 01.22.19 at 5:33 pm

Hey Garth,

For those with DB pensions and planning to commute, what’s the best RRSP decision? Use the contribution room now or later when we commute (and use taxable accounts now)? TFSA is a given.

#23 Bob Dog on 01.22.19 at 5:35 pm

You can find out how much you can contribute to your RRSP here.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/contributing-a-rrsp-prpp/where-you-find-your-rrsp-prpp-deduction-limit.html

I added 17K last year. I will begin extracting that once I’m laid off and enjoying the sweet sweet payback of UI or EI or whatever the tools in Ottawa are calling it now.

#24 Guy in Calgary on 01.22.19 at 5:44 pm

TFSA’s also didn’t exist so RSP’s used to be the only option ergo, it was easier to come up with enough money. Now $12,000/year for the TFSA’s (assuming a couple) plus 18% of income for RSP’s and potentially RESP’s, the odds are for most people something is not going to be funded all the way and that’s ok. Which plan should take priority, is dependent on your situation.

#25 Penny Henny on 01.22.19 at 5:53 pm

#76 NoName on 01.14.19 at 9:41 pm

Although “Italian” food is ok, but it does not come nowhere close to stuffed peppers, cabbage rolls, beans with smoked sausage and smoked meat or cevapi. You can print this an put it on a fridge, :)
////////////////

Hey No Name.
With all these low carb meals why are you fat?
Too much pivo?
And here is a proof, i kook them all.
https://imgur.com/a/NOdm7er

#26 Guy in Calgary on 01.22.19 at 5:58 pm

As an example, let’s say you have a family with a combined take home of $150k each parent makes $75k and no DB pension.

It is recommended here they contribute a combined $27,000 to RSP’s and an additional $12,000 to TFSA’s with after tax money.

The reality is that most people, especially if they have children and after the high taxes, cannot come up with this money on this income.

#27 millmech on 01.22.19 at 6:01 pm

Instead of putting the $26,000 into RRSPs would it not be better to go non registered growth assets for say 40yrs. The amount put away would be $1,240,000, and around $3,000,000 in growth, for a portfolio of $4,250,000 approximately.
Now you could withdraw your first $1,240,000 as Return of Capital tax free over ten years before you even get into a taxable event.
After 10 years the portfolio would be all taxable gains and would most likely have grown larger than the 4.25 million, which would only be taxed at 50% for capital gains theoretically.
Now an RRSP portfolio of this size would be 100% taxable, so would you not lose more by going registered versus non registered.

#28 -=jwk=- on 01.22.19 at 6:05 pm

We just dopped 6g on a emergency home repair. Our LOC was cheaper than their financing option (and a 2% cash discount didnt hurt) but here we are again with nothing for the RRSP this year…we did get both kiddos RESP done at least.

#29 earthboundmisfit on 01.22.19 at 6:08 pm

My advice is to give Bird Box a miss.

#30 Keith on 01.22.19 at 6:10 pm

” When 85% of taxpayers have not maxed their RRSPs and 90% have failed to take full advantage of the TFSA, we have only our own habits to blame.”

It’s funny to listen to the battle cry of I can do a better job with my own money than the government can, when the vast majority of people in a wealthy nation have little or no net worth. They scream about a federal debt that is 30% of GDP, when household debt is 170% of income.

Mandatory pension deductions off the paycheck, and a realistic shot at a paid for home were the cornerstones of middle class wealth for decades. There’s no cure for a lack of financial education.

#31 Dolce Vita on 01.22.19 at 6:10 pm

“Plus, always marry someone a decade younger so you can continue to make spousal contributions long after your libido limps off.”

THAT was good.

As for the decade or so younger, NEVER violate the minimum spouse age rule:

= 1/2 * your age + 7

Also, they have the blue or weekend pill for the “limps off” part.

Great advice as always.

#32 Howard on 01.22.19 at 6:30 pm

Flop, are you able to find the price history on this one?

https://www.zolo.ca/vancouver-real-estate/2523-point-grey-road

A 3-bdrm duplex in Kitsilano.
Asking price $12.3million ???

#33 Dolce Vita on 01.22.19 at 6:33 pm

There is a thing such as REALITY & INCOME for the majority of Canadians.

Look at this 2018 CRA data (2016 tax year) – link below:

Individual Tax Statistics by Tax Bracket (2016 Tax Year),
Table 1: Individual Taxfilers by Province or Territory and Tax Bracket

67% or TWO THIRDS of Canadians are in this Tax Bracket:

<=$45,282

THUS Garth, be not amazed at an 85% fail rate.

That tax bracket does not have a lot of money left over at the end of the year to throw at an RRSP… a SNOWBALLS CHANCE IN HELL they will ever max. out the $26,230 deduction LET ALONE 18% of Income.

It remains a deduction favoring the WEALTHY at the end of the day.

Still, a deduction is a deduction and you take anything Gov. throws your way in tax savings.

https://www.canada.ca/content/dam/cra-arc/prog-policy/stats/itstb-sipti/2016/tbl01-en.pdf

#34 Spectacle on 01.22.19 at 6:34 pm

#15 jess on 01.22.19 at 5:10 pm
…”the report was released to the media, Alan Mullen, adviser to Plecas, told reporters the allegations involve “millions of dollars.”

“I would suggest what’s contained in this report is improper, at times against policy,” said Mullen.

“It’s not speculation, it’s not made up, it’s not opinion. It is fact and it is backed up by documents, receipts, letters and proof.”
…”Mike Farnworth, B.C.’s solicitor general, said he was shocked and saddened to read the allegations in the report, calling them “unacceptable.”

“I think the general public would look at it and say, ‘That’s just wrong,’ ” he said.

‘Flagrant’ overspending

The report, which includes details of trips and conversations, as well as scanned receipts and tables of expenses, alleges overspending and misappropriation of funds in a number of areas, including:

“Flagrant overspending on luxurious trips” with “questionable” business rationales, and taking overnight trips at the legislature’s expense, for what appear to be “other than legitimate work purposes.”
Expensing personal purchases to the legislature, totalling tens of thousands of dollars over a period of less than two years.
“Inappropriate” cash payouts in lieu of vacation, totalling in the hundreds of thousands of dollars.
Misappropriation of alcohol and electronic equipment.
Potentially “retributive or otherwise unjustified” termination of employees.

The report also alleges that steps were taken to conceal information that could have indicated improperly claimed expenditures, and that attempts were made to access benefits in the millions of dollars.

https://www.cbc.ca/news/canada/british-columbia/darryl-plecas-bc-legislature-1.4986402

——-/////——/////——/////—–/////——

Thanks Jess, thanks Garth.

I no longer wonder why $2 000,000,000 plus is laundered in BC and nothing is done!

I no longer question Trudeau getting fund$ from theses exact same sources.

I no longer question the diminishing wages. Welcome to Agenda-30.

Ps: wife is 17 years me junior. Tiamo………

#35 TheDood on 01.22.19 at 6:34 pm

#15 jess on 01.22.19 at 5:10 pm
.
.
.
The report also alleges that steps were taken to conceal information that could have indicated improperly claimed expenditures, and that attempts were made to access benefits in the millions of dollars.
________________________________

Yup. And watch what happens. Slaps on the wrist, bad boys, stop doing that. I’ll bet you a shiny new looney they don’t do jail time, they’re allowed to keep their pensions, and they get a huge lump sum on their way out the door. Don’t forget where we live. Hell, twice, thrice, and four times convicted pedophiles roam our streets!

#36 HE Front Load Laundry Machine in BC on 01.22.19 at 6:36 pm

I never understood these RRSP instruments. Even the TFSA. The stuff is registered in Canada. It doesn’t serve my needs.

I have a way better tool.

My income is $13,475 (mostly tips as a super host), collect EI and I buy multi-million dollar homes around Vancouver. Tax problem solved. The government is working for me.

#37 will on 01.22.19 at 6:36 pm

always a pleasure Garth.

#38 espressobob on 01.22.19 at 6:38 pm

I’m self employed and each year is a crap shoot. Been lucky so far. I pay both sides of CPP premiums based on my net regardless of RRSP contributions.

If this year turns out to be a stinker and a withdrawal is required from the RRSP the amount taken is exempt from further CPP torture. Only the taxes based at the marginal rate are payable. Definately lower than when the contributions were made in previous years.

That’s what I call tax shifting and a safety net.

#39 From Davos, with Love on 01.22.19 at 6:43 pm

Last year the message out of Davos was crush crypto.

I warned everone on this blog about it. And boy did crypto get crushed.

This year the message out of Davos is the entire world is going into a global recession by 2020 – consensus is 18 months.

Don’t underestimate what comes out of Davos.

On Tuesday, November 3, 2020 (23 months), US citizens will go to the polls for the US presidential election.

#40 jacki on 01.22.19 at 6:49 pm

“When you hit 71, just convert it to a RRIF, keep the tax-free compounding in place”

5G Networks are a few years away with pods every 300 feet on your street beaming 28 Ghz of radiation 24/7.

How many of us will get to see 71?

#41 fine prints... on 01.22.19 at 6:57 pm

Is there an upper limit for the curent year contribution on unused RRSP room that is specified in previous year assessment other than the unused room itself?

#42 Jackie chiles on 01.22.19 at 7:00 pm

jacki on 01.22.19 at 6:49 pm
“When you hit 71, just convert it to a RRIF, keep the tax-free compounding in place”

5G Networks are a few years away with pods every 300 feet on your street beaming 28 Ghz of radiation 24/7.

How many of us will get to see 71?

……..

Fear not…… the chemtrails will get you first.

#43 expat on 01.22.19 at 7:01 pm

Great points Garth and others

saving – the life blood of wealth.

It used to be one asked the retailers what it cost.
Now one asks what is the payment…..

A whole fundamental shift of reality.

49% of Canadians believe they are 200 bucks a month from insolvency….

Stock markets are forward looking and the indicators in the G7 are frankly puking……

Markets go up on profits not losses

Its why sold my stocks last week…
time to stand aside to get a clearer picture….

The real kicker today was the home sales number in the US

https://www.cnbc.com/2019/01/22/the-unusually-large-drop-in-home-sales-has-real-estate-agents-baffled.html

The long term bull seems ot be intact but the economies in the G7 puking

#44 Reality is stark on 01.22.19 at 7:08 pm

You don’t have to make lots of money to be rich.
Anyone who worked a normal day job and put the tool belt on for 30 extra hours a week renovating became a millionaire in the GTA several times over. 120 IQ is all that’s needed and a bit of a work ethic.
It wasn’t rocket science. Lots of people did it.
The people making $500,000 a year with no money are either stupid or married.
When you do a $10,000 Reno for $2,000 in materials in one month you make a guaranteed return. Hard to replicate that in the stock market.
Just don’t let anyone throw you off course.

#45 crowdedelevatorfartz on 01.22.19 at 7:10 pm

@#41 chili Jack
“Fear not…… the chemtrails will get you first.”

+++++
The only “chem trails” I have ever seen are the wisps of second hand smoke from the blissed out idiots enjoying legal pot in Canada…..chive on dude……

#46 meslippery on 01.22.19 at 7:14 pm

This could be part of the problem.
How bout you Dogs? wages keeping up?

A truck driver pulled down a $32,500 average salary in 1975, according to the Bureau of Labor Satistics. To have that same purchasing power in 2015, that same trucker should have earned $149,179.11 per year. The average income in 2015 for a truck driver was $40,000.

https://www.fleetowner.com/driver-management-resource-center/case-100000-year-trucker

#47 epat on 01.22.19 at 7:14 pm

I was talking to a buddy today who is a regional VP for a mega large consumer products outfit….

He says buying habits literally changed overnight in December and January is looking ugly…

If the consumer is 70% of most G7 economies this is anothe clear example of the late innings of this business cycle…

BTW other financial news networks and CEO’s haev commented on this.

Something changed in the Fall
I’ve always used car sales as a measure of where we are in the business cycle as they are great indicators….

They suck

#48 Allan Lee on 01.22.19 at 7:16 pm

re: 5G Networks are a few years away with pods every 300 feet on your street beaming 28 Ghz of radiation 24/7.
How many of us will get to see 71?

Thanks for that…I was on the fence with whether to take my CPP (now 61)…going to apply now:)

#49 Remembrancer on 01.22.19 at 7:19 pm

#4 TH on 01.22.19 at 4:20 pm
So how should I split my money between RRSP and TFSA? 50/50? Approx $500 biweekly available to contribute.
—————————————————————–
Depends – first make sure you maximize that sweet $13K…

If you are in an upper tax bracket then RRSP to defer taxes and TFSA the refund is one choice. If you are just starting out and expect some future salary increases in the offing then TFSA it first and use the accrued RRSP limit down the road to enhance tax deferrals / refunds for your TFSA… don’t wait too long though and lose the compounding effect… also watch out for transaction / trading fees etc which may pop up if you are actually doing $500 at a time rather than in one lump sum…

#50 Nothing Surprises on 01.22.19 at 7:22 pm

I’m retired, in my 70’s. A few health issues, but all my faculties. Married 52+ years and just had two of my grandsons drop in with coffee and had a great chat with them…….one in Laurier in Business and his brother apprenticing and working part time in a bar! I read your blog each day including the comments, watch the circus performance in the States, a few good t.v. documentaries and Netflix.
Not financially rich but o.k.

Life is good!

Keep your sage advice coming Garth. If you can get through to just one, it has been well worth it!!

Bravo Zulu.

#51 Sydneysider on 01.22.19 at 7:23 pm

On the surface, the RRSP looks like a great device for smoothing out tax obligations.

But the RRSP also eliminates the substantial (50% or more) tax advantages associated with capital gains and dividends from investments.

So if your marginal rate upon withdrawal will be high (30% or more) you need to model your circumstances, because you might be worse off with an RRSP if your investment has grown by a large amount (relative to the principal).

If someone wishes to provide rebuttal I would be grateful.

#52 Insurance Guy on 01.22.19 at 7:26 pm

If my spouse earns less than say $20K annually is it even worth it to max out her RRSP? My thoughts were always if you earn less, max out the TFSA first since the tax break on such a small income is not very significant.

#53 Victor V on 01.22.19 at 7:36 pm

Liberals seeking to make home-buying more affordable for millennials: Morneau

https://www.bnnbloomberg.ca/liberals-seeking-to-make-home-buying-more-affordable-for-millennials-morneau-1.1202159

Morneau says the Liberal government has focused on three primary housing-related issues since coming to office in 2015: Canada’s shortage of affordable housing, a run-up in real-estate prices in some markets and ensuring millennials can afford homes.

He says Ottawa has already taken steps to increase the supply of affordable housing and to ease hot markets by introducing stress tests to limit people’s ability to take out big mortgages.

Morneau says the challenge of helping millennials enter the housing market is now the priority and that there’s multiple things the government is examining — but he didn’t elaborate on what measures are on the table.

#54 Doug t on 01.22.19 at 7:39 pm

I stumbled out of high school did one year university and took a job at GM in St. Kitts – quit and stumbled another 5 years till I started my own business which saved me – I tell my son to marry for love and if she’s rich well that’s just fine too

RATM

#55 not 1st on 01.22.19 at 7:46 pm

Now instead of a concrete box in the sky, you can get a moldy wooden one instead. Resume condo boom.

https://www.msn.com/en-ca/money/topstories/tall-timber-towers-taking-root-in-canada/ar-BBSuB6L?ocid=spartanntp

#56 A New Business Venture on 01.22.19 at 7:52 pm

Not a bad time to get licensed and open up a nice little Pawn Shop. Business will be booming in the coming years. Buy low and sell high to those with the green because those loans will never be redeemed. Greater Fools Pawn Shop open for business with free coffee and a donut after a deal is made.

#57 Trump on 01.22.19 at 8:13 pm

TRUMP TRUMP TRUMP

#58 espressobob on 01.22.19 at 8:14 pm

#50 Sydneysider

There is no point contributing to an RRSP when one is in a lower tax bracket. That’s what a TFSA is for. Tax free growth, remember.

Those in a higher income bracket benefit from tax relief for their contributions when they withdraw in a lower one.

Strategy is the key.

#59 Ex-Cowtown on 01.22.19 at 8:15 pm

I’ve spent a lot of time wondering why the Left Coasters are so obsessed with Global Warming while Albertans go meh….

It may be that Alberta is dominated by engineers, geologists and scientists. People who make or find things for other people to use.

Today’s BC is dominated by arts types, poli-sci types, film makers, internet gurus, artists, painters and sculptors. People who need other people to make stuff for them to use.

It reminds me of the way it was on the farm when I was growing up; some of my city cousins would cry when it was time to kill a chicken for supper, but they all sat down and ate anyway.

It’s the distance that separates the act that creates the unease and contempt. Albertans are on the front line and deal with resource development tradeoffs everyday and understand what is important to sustenance and what is just noise. Left Coasters stand apart after all is said and done and hear only the noise and react to that.

What does all this have to with Global Warming? Those people with the greatest understanding of science behind it know where the holes in the arguments are and tend to be quietly reserved about as they understand the complexity.

Those unfamiliar with science tend to be the most vocal and radical because they overestimate their understanding of the topic.

It’s all just human nature; the more you know about a topic, the more you realize you know nothing.

#60 theoryAndPractice on 01.22.19 at 8:16 pm

#26 millmech on 01.22.19 at 6:01 pm

Let’s say you are at 40% income tax rate, and you put 26K to RRSP for 40 years. In your calculation, what happened to 0.4*26K=10.4K per year refund for 40 years ~416K you got back and invested outside RRSP with same growth ?

#61 TRUMP20 on 01.22.19 at 8:17 pm

“Trudeau on track to become highest spending PM outside of war or recession”

SHAME!!

https://ca.finance.yahoo.com/news/trudeau-track-become-highest-spending-pm-outside-war-recession-163904514.html

#62 Smoking Man on 01.22.19 at 8:20 pm

Bird Box is a thing in Canada too? World is going insane.

#63 Russ on 01.22.19 at 8:20 pm

first, the rant:
“And, of course, we pay tax on tax –…”

How the hell did we get so beaten down to tolerate a tax on tax?
Check it out, GST is charged on the “carbon tax”. A tax is neither a goods nor a service. How is this even legal?
What would the French do?

Tax on tax is so immoral we should gather at a government building and topple a couple of small cars then set ’em ablaze.

We’re treated worse than a red-headed step child.

And on to the serious question:

Is there any advantage to convert an RRSP to RRIF before 71?

Cheers, R

#64 crowdedelevatorfartz on 01.22.19 at 8:23 pm

@#57 Ex CowTown
“the more you know about a topic, the more you realize you know nothing….”

+++++
After reading your screed…… I agree.

#65 Stan Brooks on 01.22.19 at 8:30 pm

Great article.

There is causal relationship between:

Government policies to boost housing –> increased lending/credit and prices –> increased money supply –> increased inflation and cost of living –> deteriorating economy due to capital miss-allocation –> suppressed wages –> diminished savings. –> further need for debt –> low rates–>

which becomes a closed circle with no breaking point.

Many people have long passed the point of being able to actually save anything, have to borrow in order to barely survive.

This thing with the low rates should have never been implemented in first place, with the current banking and monetary systems it acts like a vortex, ensuring endless stagflation, unless the debt problem is resolved one way or another.

Imagine 10-15 years with cost of living increasing by 8-10 % yearly while wages and payments/pensions increase by 1-2 %.

Giving saving tools – RRSP, TSFA is not enough, more important is to ensure reasonable cost of living so people can actually save and invest.

Keep in mind: We have not even started paying debt yet. We kept on piling with record low rates since the GFC of 2008.

#66 Ronaldo on 01.22.19 at 8:34 pm

#5 Sold Out on 01.22.19 at 4:20 pm
#130 Ronaldo 18/01/21

If all you got is “fast ferry fiasco”, I’ll see your pair of deuces and raise you a Lib/Socred kleptopcracy that brought us the BC Rail scandal, BC Hydro/Site C con job, BC Legislature malfeasance, criminal money laundering, and ICBC dumpster fires.
—————————————————————–
I really don’t give a hoot what party you support. I was simply pointing out another government blunder. While I’m at it, the giveaway of the Expo lands. The 750 million bailout with Olympic Village. And going back further BRIC. Do you still have your 5 shares? And by the way I don’t have any favorite political party.

#67 Blessed Canadian Millenial on 01.22.19 at 8:37 pm

Guy in Calgary on 01.22.19 at 5:44 pm
TFSA’s also didn’t exist so RSP’s used to be the only option ergo, it was easier to come up with enough money. Now $12,000/year for the TFSA’s (assuming a couple) plus 18% of income for RSP’s and potentially RESP’s, the odds are for most people something is not going to be funded all the way and that’s ok. Which plan should take priority, is dependent on your situation.

—————-

Hi Guy in Calgary,

That’s precisely it, isn’t it? Where really are your priorities?

As a financial advisor, I see this every day: people over-extend themselves when it comes to their house.

We have been easily able to max all our registered accounts (and putting $3K aside each year in RESP) simply because our home costs 3x our annual family gross income and our mortgage is less than 2x our annual gross income.

It’s true that we live in a low cost of living area but we moved from a super-expensive area. We left our family & friends but we made new ones. And we couldn’t be more happy.

Most folks do not take ownership, as Garth alluded to. He is spot on. Great post, Mr. T!

#68 David Driven on 01.22.19 at 8:42 pm

Canada is already in a deepening recession, don’t expect savings to increase. Taxes are going way up with the newest wave of Trudeau Taxes. Every Canadiannwill pay $2200 more in taxes this year. The Liberal plan is to kill all initiatives in Canada so that the UN mass migration / vote buying problem will be forgotten as secondary in the face of mounting personal tragedy. If Canada doesn’t have a revolutionary wave of woke resistance against the takeover before the next election you may be wise to bundle up and get out before the confiscation begins. I truly believe that the Liberal Socialists will take the EU model and begin forced acceptance of unwanted unpaid tenants who the UN has mandated to shift into Trudeaus Canada into secondary properties and even unused bedrooms as was required informational in Trudeaus last census.

https://business.financialpost.com/news/economy/can-canada-slip-into-recession-without-the-u-s-bca-says-yes

#69 Blessed Canadian Millenial on 01.22.19 at 8:44 pm

Dolce Vita on 01.22.19 at 6:33 pm
There is a thing such as REALITY & INCOME for the majority of Canadians.

Look at this 2018 CRA data (2016 tax year) – link below:

Individual Tax Statistics by Tax Bracket (2016 Tax Year),
Table 1: Individual Taxfilers by Province or Territory and Tax Bracket

67% or TWO THIRDS of Canadians are in this Tax Bracket:

<=$45,282

——————–

Hi Dolce,

Don't be fooled by the #s you listed above. The under $45K income also includes post-sec students and seniors, whose income is obviously different (read: lower).

#70 Sydneysider on 01.22.19 at 8:46 pm

#56 espressobob

“There is no point contributing to an RRSP when one is in a lower tax bracket.”

That’s for sure. You might be in a 40% bracket when you contribute and 35% when you withdraw, for example.

That 35% rate will apply to all capital gains in the RRSP, but only half of the capital gains in the taxable account.

At some point (depending on individual circumstances) the after-tax amount you pull out of an RRSP falls behind what you can get from not using the RRSP at all.

#71 Doug t on 01.22.19 at 8:50 pm

#1 Godth

I live in Victoria and this guy Chris Hedges is speaking truths – I have to get my ass back to church lol

RATM

#72 Bottoms_Up on 01.22.19 at 9:02 pm

14 Buddy on 01.22.19 at 5:03 pm
————–
Garth will take you if you have 150k to invest.

#73 espressobob on 01.22.19 at 9:16 pm

#70 Sydnersider

This is what a non registered account is for. Mostly for the affluent crowd looking for tax advantage. At the same time individuals in this scenario generally have their accounts managed by a professional advisor.

There are good reasons for this.

#74 NoName on 01.22.19 at 9:26 pm

25 Penny Henny on 01.22.19 at 5:53 pm
#76 NoName on 01.14.19 at 9:41 pm

Although “Italian” food is ok, but it does not come nowhere close to stuffed peppers, cabbage rolls, beans with smoked sausage and smoked meat or cevapi. You can print this an put it on a fridge, :)
////////////////

Hey No Name.
With all these low carb meals why are you fat?
Too much pivo?
And here is a proof, i kook them all.
https://imgur.com/a/NOdm7er

I did mention that doc describes me as morbidity obist. That why i use only fiberglass stepladders, dont trust much aluminum… As for beer i remember few yrs back driving to Orangevileto get last few cans of “Ozujsko pivo”, but since yoy cant find it in store any more. To bad it can’t be bought any more, very good beer by the way, so back then i switched to bud light and belgium beer bit more expensive but alcohol per volume is 2 to 4 more so in a sense is cheaper.

https://imgur.com/a/O3u1rRx

#75 TurnerNation on 01.22.19 at 9:30 pm

The tools: us. One bank is offering me a new 10k LOC at a locked-in rate.

The other’s online banking site gushes:

“You’ve been rewarded with a new offer. Check out your offer now before it expires!
You’re eligible for a credit limit of $10,000
Interest rate: ____ Prime + 3.50% = 7.45%”

–Thank you Sir may I have another? :(
Oh, Kanada. Rewarded by more debt slavery.

#76 Barb on 01.22.19 at 9:32 pm

#66 Ronaldo on 01.22.19 at 8:34 pm

“And going back further BRIC. Do you still have your 5 shares?”

—————————————————-

Yup, in my filing cabinet.
One day they’ll buy me the ground on which the Legislature sits.

Oh wait…it just did. Today.

#77 not 1st on 01.22.19 at 9:49 pm

Guy in Calgary on 01.22.19 at 5:44 pm

—–

$12000 per year for TFSA, after tax money
Assume the average couple frees up $20k in RRSP room every year. Guess you can try to do Garths tax refund to TFSA move some years. And then don’t forget $2500 per year kids RESP, which for 2 kids is Like $7000 in before tax money.

How does the average couple free up $40-50k in savings for this. Wife might work but paying another $3000 to a nanny. Pretty good stretch for a lot of families. Almost the entire second salary would be needed and if I know most couples, the entire second salary is paying the mortgage.

Average families never will. So they stay average. – Garth

#78 Lead Paint on 01.22.19 at 10:06 pm

#1 Godth on 01.22.19 at 3:55 pm

Glad to see I’m not the only one who posts about Chris Hedges on this blog! I saw him in Toronto. He doesn’t sugarcoat much… scary as hell.

#79 dilydony on 01.22.19 at 10:10 pm

“The days of stumbling from school to marriage, a house and children, then career, retirement and a pension are kaput.”

What? No divorce in there?

#80 Remembrancer on 01.22.19 at 10:24 pm

#52 Insurance Guy on 01.22.19 at 7:26 pm
If my spouse earns less than say $20K annually is it even worth it to max out her RRSP? My thoughts were always if you earn less, max out the TFSA first since the tax break on such a small income is not very significant.
—————————————-
If its an either/or proposition for a $3600 contribution (18% of $20000) then I’d vote TFSA – the tax free future withdrawal should beat the same income taxed RRSP withdrawal all other things considered equal…

#81 Dominoes Lining Up on 01.22.19 at 10:27 pm

So true, “RRSP Season” used to be a big media meme this time each year.

Too much financial stress and debt, methinks, for that to happen now.
———————————————–

Things often bounce before they crash. So say my friends who work in the property tax field in the GTA.

In Peel and Toronto, they tell me there was a huge increase in 2018 in people whose automated debit payments for property taxes went NSF. As a result, they are looking at adding new fees to cover all the paperwork when that happens. Toronto has apparently added a new charge just for that if people want to restart their automated payments, on top of a hefty NSF fee, when a payment bounces.

Plus Toronto council has to find some way to cover for the $100 million land transfer tax shortfall due to declining real estate sales the last year. My friends tell me things look to be even worse for 2019. Not sure if this means an increase in property taxes or laying off a bunch of city staff, but local governments are not allowed to run deficits, so it will be an interesting year in the GTA when those councils vote on their budgets in the next few months..

#82 ww1 on 01.22.19 at 10:31 pm

#26 millmech on 01.22.19 at 6:01 pm
Instead of putting the $26,000 into RRSPs would it not be better to go non registered growth assets for say 40yrs. The amount put away would be $1,240,000, and around $3,000,000 in growth, for a portfolio of $4,250,000 approximately.
Now you could withdraw your first $1,240,000 as Return of Capital tax free over ten years before you even get into a taxable event.
After 10 years the portfolio would be all taxable gains and would most likely have grown larger than the 4.25 million, which would only be taxed at 50% for capital gains theoretically.
Now an RRSP portfolio of this size would be 100% taxable, so would you not lose more by going registered versus non registered.

#60 theoryAndPractice on 01.22.19 at 8:16 pm
#26 millmech on 01.22.19 at 6:01 pm

Let’s say you are at 40% income tax rate, and you put 26K to RRSP for 40 years. In your calculation, what happened to 0.4*26K=10.4K per year refund for 40 years ~416K you got back and invested outside RRSP with same growth ?

It’s worthwhile to rerun millmech’s scenerio but to assume that one puts $26,000 into RRSPs and then puts the resulting ~$13,000 tax refund into non-registered growth assets. Compare the results in 40 years to not using an RRSPs.

Exactly the same “cash out of pocket” each year ($26K) – substantially better net worth in 40 years. Even if much of it is then taxable.

Future values if cashed out after 40 years and all required taxes paid:

RRSP only = $2,012,000
Non-registered investments only = $3,278,000
Hybrid = $3,651,000

(all assuming 6% return and 50% marginal tax rate)

Note that your marginal tax rate when you withdraw has a huge effect on how much better the hybrid scenario works out.

(spreadsheet with the math behind this available on request)

#83 Ponzius Pilatus on 01.22.19 at 10:43 pm

#5 mike from mtl on 01.22.19 at 4:20 pm
RIF minimum withdrawal at 71 is 5.25% which is nearly impossible to achieve without excess risk or income funds eating fees. Most likely would mean chipping away at principal if not from risky dividend sources (preferreds).

At age 71, if you make it there I guess, who cares at that point?
————-
Don’t be so fatalistic.
As per Garth, you can enjoy a happy life until 95.
Take a cue from Prince Phillip.

#84 millmech on 01.22.19 at 11:12 pm

#60
Going with a 50% tax bracket so roughly $13k back reinvested in growth stocks you would have a total of $6.6 million. Pretty hard to spend that all in your golden years, might even trigger some OAS clawbacks.

#85 Drew on 01.22.19 at 11:31 pm

Can I gift my girlfriend money for her rrsp and tfsa, without her claiming it as income?

#86 Another Albertan on 01.22.19 at 11:43 pm

Quick update…

Just about all the 2018 projects our clients deferred in the fall have been indefinitely shelved. We are still very busy with a 5-month backlog on work, but that’s because we sold work like sons-of-bitches last year and did whatever it took to land the deal. If we can’t continue to refill the pipeline, I already have sorted out the 30% of my staff that is going to get pink-slipped in the summer. Harsh, but realistic.

I have also had two of my staff ask for significant salary increases. I politely declined and hope that my explanation, along with my bewildered face and tilted head, was sufficient to pound the message home. Four solid years into the oil price decline and people STILL aren’t getting it. Zero clue that their bosses have been making less $$$ than they have in an attempt to keep this place viable. Yes, they are on my list.

I live in inner-city Calgary. There is an interesting trend I’ve been seeing… a bunch of the homes within 5km of downtown are listing either 10 to 15% OVER city assessment OR 10 to 15% BELOW city assessment. The best I can infer from the property reports is that more recent owners are the OVER and long-term owners or “more professional investors” are the UNDER. It will be interesting to see where this trend goes…

There are two reasonably-prominent, privately-held companies whose line of business is related to housing and housing products. Both are prepping for sales in 2019. Respective ownership teams have decided they aren’t interested in a 5 to 10 year exercise of digging out of the current economic hole.

Political side comment… based on my recent dining with execs in Edmonton, the expectation is that the provincial election call could come as early as the next handful of weeks. NDP will want the vote to occur before the next budget is due in 8 weeks or so.

The bottom line is that the next 12 weeks or so will determine a significant amount of what happens in the next 12 months here in Alberta.

Everyone else’s mileage may vary.

#87 Yellow Vest on 01.22.19 at 11:48 pm

Keith on 01.22.19 at 6:10 pm
” When 85% of taxpayers have not maxed their RRSPs and 90% have failed to take full advantage of the TFSA, we have only our own habits to blame.”

It’s funny to listen to the battle cry of I can do a better job with my own money than the government can, when the vast majority of people in a wealthy nation have little or no net worth. They scream about a federal debt that is 30% of GDP, when household debt is 170% of income.

Mandatory pension deductions off the paycheck, and a realistic shot at a paid for home were the cornerstones of middle class wealth for decades. There’s no cure for a lack of financial education.

When you add up all the taxes a family of 4 pays in Canada especially in places like Vancouver and Toronto it works out close to 60%. So you are left with 40% in a country that is almost close to double what it is to live in the United States.

So theirs that…..

#88 Smoking Man on 01.23.19 at 12:09 am

The machine vs the Indivdual.
Machine has no chance vs a found bottle in back yard. Truth.

Individualism rules, suck ups and followers are a rain drop in the ocean of other suck ups.

You lose

#89 Smoking Man on 01.23.19 at 12:25 am

DELETED

#90 DON on 01.23.19 at 12:51 am

#35 TheDood on 01.22.19 at 6:34 pm

#15 jess on 01.22.19 at 5:10 pm
.
.
.
The report also alleges that steps were taken to conceal information that could have indicated improperly claimed expenditures, and that attempts were made to access benefits in the millions of dollars.
________________________________

Yup. And watch what happens. Slaps on the wrist, bad boys, stop doing that. I’ll bet you a shiny new looney they don’t do jail time, they’re allowed to keep their pensions, and they get a huge lump sum on their way out the door. Don’t forget where we live. Hell, twice, thrice, and four times convicted pedophiles roam our streets!
***************

These are just the small potatoes allegations back up with receipts. The bigger taters are the RCMP investigation with an unprecedented two special Crown prosecutors. It appears more to come.

In any event the Legislature is supposed to be an example of upholding our values, integrity, policy with the public interest in mind.

This could be a Monty Python skit. Welcome to the Province of Northern Corruption or better know as
North Colombia. Did you hear that El Chappo is running for Premier in our next election. He is going to campaign and govern from his prison cell.

Hey Quebec. We’re number 1…we’re number 1. Pfft Charbonneau Inquiry. Lightweights!

#91 Al on 01.23.19 at 1:23 am

“That’s one of the best things about being an independent business person. You can start banking the RRSP money when you get paid because it’s not deducted at source, get it working for you and lower your net income before Justin even gets a look at it”

The salaried just need to fill out a form to do that.

#92 David Paquette on 01.23.19 at 5:41 am

I am up early with free time to kill. Yesterday’s cat picture was funny. I have no idea why I am fond of smart cats and red pandas.

I received an e-mail from RBC regarding a robo advisor system product. Royal Bank is upping their game in the wealth management industry like every other “financial” business. My thoughts are you won’t get rich fast with this product and the bank will profit from selling their own ETFs with a 0.5% management fee. But it will save you from yourself and useful idiots. Plus it is geared to the small unsophisticated saver. A $1,000 dollars is enough to start.
https://www.rbcinvestease.com/dms/campaign/index.html?creative=yoga&utm_campaign=ie_acquisition_wave1_nat&utm_content=jan22_challenger&&utm_source=rbc_et&utm_medium=email

Personally, I might give them a few bucks just to see what they do with my money and the level of service I get. Let’s just say that I am not impressed with their stable of ETF’s but in reality, ETFs are pretty vanilla until you get to Emerging Market ETFs. This is an area which I operate with blind faith. I would use this product to learn about ETFs and rebalancing for a small tuition.

Then on the other hand, we have a SAAS operation that I find intriguing. I think it will diminish the role of corporate CEOs and their egos. Imagine decent people running a business using a smartphone app. I got a kick from the title of an article “The best product teams crave truth and do math”.

https://www.insightpartners.com/onsite/

For the youthful elites there is this service. https://insight-onsite.com/ Man, some people are spoiled with their good fortune. I read a ZH article (The generation that will save the world?) that 84% of millennials can’t or won’t change a light bulb. Once you get past the title, it is a good written opinion. It fits with my view that the world is in for a long slow period. https://www.zerohedge.com/news/2019-01-22/generation-will-save-world If you got yours – good for you. The rest of us are going to struggle mightily just to stay in place.

Meanwhile, I have several smart devices to control my lighting and heat through my smartphone and Alexa’s. I have to adjust my behaviours when it comes to Alexa and learn to use it more.

I even set up a low grade solar power system to provide supplemental heat. Doubtful it will pay for itself but it does make me a bit more green and self-sufficient. It does make me appreciate how cheap energy is and how much it raises our standard of living. I don’t want 19th century living.

January is going well for me, investment wise and I have gotten back my December losses already. If my luck holds, I should get back my October and November losses in a few more weeks. It feels like 2008/2009 again only super faster. However I don’t expect this streak to continue much longer as the world has too many mal investments and shaky debts.

My mortgage is up for early renewal and I am holding out for a 3.5% fixed term. I am biased that a few more interest rate increases will come toward the end of 2019 which will likely herald a recession and asset value compression – stay tuned. I may start to promote bonds for 2020 if rate increases come through.

#93 Shelley Condone on 01.23.19 at 6:47 am

DELETED

#94 millmech on 01.23.19 at 7:20 am

WW1
Thanks for the math, tax brackets can be a real pain in retirement and people need to consider how large their portfolio can grow to as I know a few people now paying more tax now than when they were working.
Careful planning is needed to have a tax efficient retirement, perhaps our host can delve more into this topic when time permits.

#95 Headhunter on 01.23.19 at 7:33 am

Life has some weird quirky twists and turns and hopefully this will help put things in perspective.

Flag at Honda in Alliston is at half mast

Amigo of mine ran a Paint Shop. Had his 30 stamps in 2018 so could retire at 56.. guy was a health nut and loved O.T. to “pad his pension”So whats another year he says? maybe 2.

Died in his sleep on weekend. Ya so save for retirement but dont forget to “live” on the way. I bet he wished he had all those weekends back that he worked in the plant.

#96 Canadians on 01.23.19 at 8:09 am

Cmon Garth , ship has sailed in Canada . You cater to high net worth clients id imagine you don’t see the struggles .

Folks living pay cheque to
Pay cheque .savings ?

So stop coming here. Wallow in mediocrity. – Garth

#97 not 1st on 01.23.19 at 8:12 am

86 Another Albertan on 01.22.19 at 11:43 pm

The bottom line is that the next 12 weeks or so will determine a significant amount of what happens in the next 12 months here in Alberta.
——–

There is only one thing left to happen. The libs aren’t changing their tune towards oil, so referendum on equalization is the logical step. That will trigger a larger national discussion about weening our welfare queens.

Notice how numerous provincies begged and met with Trudeau. Notley practically groveling for 2 yrs and nothing. Trudeau meets with Legault for 20 minutes and Quebec has a dozen new policy changes for their province in hand like nothing.

West wont stand for it. Trudeau might buy back power, but he will cleave the country in the process. He will end up court jester with a poisoned chalice at the end of it all. There is no scenario where he comes out on top.

#98 Need to be more paternalistic on 01.23.19 at 8:42 am

The people that save, hated when the CPP was increased. However, for the people that do not save, it will help them.

I am fiscally conservative but looking at this behaviour (poor savings/investing), I strongly believe that the gov needs to be more paternalistic and impose forced savings. The “option” of using RRSP/TFSA does not work – look at the numbers you stated.

Case in point: My father was a teacher. Mom was at home with 5 kids. If his pension plan had not impose his contributions, my parents would have spent those extra dollars on us. He passed away 15 years ago. My mother is still alive (85) and financially independent. This is a win/win/win: she is independent, her children do not have to support her financially and we (the people) do not have to support her (ex. GIS).

#99 dharma bum on 01.23.19 at 8:45 am

I thought about such things as the Amazons cleaned out my garage and brought me a dusty box full of “Garth Turner’s 1999 RRSP Guide”. Wow. Artifacts. Actual you know, like, books. – Garth
——————————————————————–

This is what I keep telling everybody about!

Garth’s treasure trove of books from gone by decades are a wealth of financial information that is still relevant today.

I read many of those books and sucked up as much knowledge as I could over the years.

Now, I am free.

Read.
Learn.
Listen.

Free yourself.

#100 Armpit on 01.23.19 at 8:47 am

#85 Drew
“Can I gift my girlfriend money for her rrsp and tfsa, without her claiming it as income?”

Sure…but why? It becomes her money and if all don’t end well, it’s gone. Not recommended, unless it is really a gift with no return payment.

THINK WITH YOUR RIGHT HEAD!!!

#101 dharma bum on 01.23.19 at 9:00 am

#23 Bob Dog

I will begin extracting that once I’m laid off and enjoying the sweet sweet payback of UI or EI or whatever the tools in Ottawa are calling it now.
——————————————————————–
Just like Bubbles in Trailer Park Boys!

https://www.youtube.com/watch?v=9ZX91SyQVsA

#102 Gravy Train on 01.23.19 at 9:16 am

#85 Drew on 01.22.19 at 11:31 pm
“Can I gift my girlfriend money for her rrsp and tfsa, without her claiming it as income?” Yes—unless she’s deemed to be your spouse, in which case special rules apply, or unless she’s also your employee, in which case the gift may be considered a taxable benefit. (See links below for details.)
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it511r/archived-interspousal-certain-other-transfers-loans-property.html
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/contributing-a-rrsp-prpp/contributing-your-spouse-s-common-law-partner-s-rrsps.html
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4130/employers-guide-taxable-benefits-allowances.html#P515_51151

#103 jess on 01.23.19 at 9:19 am

A long-standing effort to make big investment funds abide by the same rules that banks and brokerages follow has bogged down. The fund industry says it supports the rules — it just has a few quibbles.

by Heather Vogell Jan. 23, 5 a.m. EST

For many years, the federal government has required banks, brokerages and even casinos to take steps to stop customers from using them to clean dirty money.

Yet one major part of the financial system has remained stubbornly exempt, despite experts’ repeated warnings that it is vulnerable to criminal manipulation. Investment companies such as hedge funds and private equity firms have escaped multiple efforts to subject them to rules meant to combat money laundering.

The latest attempt, which began in 2015, appears to have ground to a halt, according to sources familiar with the process.

“You’ve got several trillion dollars, the management of which nobody is required to ask any questions about where that money is coming from,” said Clark Gascoigne, deputy director of the Financial Accountability and Corporate Transparency Coalition. “This is very problematic.”

The Financial Action Task Force, an intergovernmental organization that seeks to combat money laundering around the world, characterized the lack of anti-money laundering rules for investment advisers, such as those who manage hedge funds and private equity funds, as one of the United States’ most significant lapses in a report two years ago.

The push to regulate hedge funds and similar investment firms took off after the Sept. 11 attacks, when Congress passed the Patriot Act. Among other things, the law required federal agencies to take new steps to keep illicit money out of the U.S. financial system. The Treasury Department exempted investment firms at the time, planning to return to them after tackling other sectors. “Eighteen years ago, the Patriot Act required investment companies to install their own AML [anti-money laundering] programs,” said Elise Bean, a former staff director of the U.S. Senate investigations subcommittee who supports the proposed rule. “But Treasury has yet to enforce the law,” she said.

https://www.propublica.org/article/why-arent-hedge-funds-required-to-fight-money-laundering

============
https://www.bloomberg.com/news/articles/2017-06-20/mnuchin-completes-ethics-divestitures-without-naming-buyers

#104 LivinLarge on 01.23.19 at 9:31 am

It seems like less than a week ago that some financial journaists were being pilloried for justifying their claims using best case scenarios while ignoring real life and now we see it cropping up here.

If, if, if, yes under perfect conditions an RSP “can” be an OK financial instrument but perfect conditions are not the norm are they. Surprises in life ARE the norm.

Marginal tax rate keep on creeping upwards just like every other expense in life. If they stayed static then I think I’d jump on RSPs. For at least the first half of your working life, you are likely contributing at a significantly lower marginal rate than in the latter half so your RSP contributions in the first half needs to double in value to hopefully just break even after 40 years…not my idea of investing for anything.

As our country continues to grow, we need to keep replacing the retiring cohort with new “bodies” to keep the taxes rolling in to cover all aspects of the federal spending. With our birth rate slowing every year it seems, that new cohort must come from immigration and those folks need and use all the gov services like everyone else so things like healthcare keep increasing in costs without having the years of tax paid to cover it. It’s not like we only allow immigration by 16 year olds. I am not in the least “anti immigration” we absolutely need it today but it does indeed put very real strain on the cost of the federal spending. Sure, the children of those immigrating today will be paying taxes throughout their lives but that’s the future income.

While impossible to prove, IMO RSPs were initially created with a naive view that inflation would stay at the low rates of the 50s and that way the “contribute now and withdraw later” concept works. Alas that is simply not the way life has turned out. The inflation of the 70s started us on a perpetual downward spiral to financial oblivion. Raising marginal rates may indeed “cover” the income issue for governments but there is a limit.

Every government since the RSP plan was first implimented have kept the core principal intact because they thought they knew to a mathematical certainty that subsequent governments could count on more taxes in than were sheltered years ago but they were also ignoring the fundamental fact that continually providing more and more services would result in greater and greater costs thus mooting the original expections from the RSP by Canadians.

RSPs aren’t “bad” investments…just not very good ones.

They are not investments. An RRSP is a tax shelter. – Garth

#105 BillyBob on 01.23.19 at 9:35 am

#3 The real Kip (Ret) on 01.22.19 at 4:13 pm
“The days of stumbling from school to marriage, a house and children, then career, retirement and a pension are kaput.”

Not really. I just did it. Oh, you mean the people coming through behind me. Yea, I guess you’re right there, that is going to be a bit a problem isn’t it? Oh well, they’ve got the rest of their lives to get over it.

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

Yeah, but the rest of their lives is a lot longer than yours.

And with your smug “I got mine” attitude I highly doubt anyone will shed a tear as you shortly head to your next phase pushing up daisies.

I’m neither millennial nor boomer, but you sure make it easy for the former to dislike the latter.

#106 David Pylyp on 01.23.19 at 10:18 am

Great Advice; but I seem to have more month than money.

The daily distractions of Cell phones, cable, netflix, car payments, rising insurance, buying gas, the dentist, the dance classes for the kids seems to strain everything. Pizza day Surprise; Do you have $5?

Wish I had the extra $500 or $1,000 per month to squirrel away but it seems to have slipped away somewhere, yet every ledger accounts for each dollar.

#107 Phylis on 01.23.19 at 10:55 am

#106 david, nice of you to answer your own question, how trolly of you, or just plain sarcasm.

#108 LivinLarge on 01.23.19 at 10:58 am

Playing devil’s advocate for a moment, here’s a novel taxation idea.

As we all know, or at least should know, governments are affected by inflation like the rest of us are. Their basic income requirements increase every year with inflation. Add to that the costs of program spending, the govs need to continually raise more money each year. The usual solution is to cut spending or raise tax revenue.

So, rather than cutting spending which can be a real re election buzz kill, lower the lowest marginal tax rate. How does lowering any marginal rate increase revenue significantly you ask? Simple, the lowest income folk will increase their spending a bit which increases some indirect tax collection but more importantly, it decreases the tax rate at which non refundable tax credits are calculated and I think that would create an almost invisible increase in total gov revenue.

Not many Canadians, in my experience, pay much attention to the lowest marginal rate, they just freak out when their top marginal rate increases. There was hardly any grass roots rebellion when in the 80s most deductions were replaced with tax credits at the lowest marginal rate. Deductions came at the tax payer’s top marginal rate and credits at the lowest rate so the gov collected much much more with that one simple move.

Again, just playing devil’s advocate.

#109 LivinLarge on 01.23.19 at 11:04 am

“They are not investments. An RRSP is a tax shelter. – Garth”…ok, I consider anything you put your money into with a reasonable expectation that they will be worth more in the future than they were when you put the money in is an investment. So, let’s call them “tax sheltering investments”.

#110 LivinLarge on 01.23.19 at 11:14 am

Maybe the industry supporting RSPs is to blame for muddying the water but RSPs have always been “sold” or promoted using the “contribute now and get keep more when you retire and your tax rate is lower”. Since the real world has proven than due to inflation, very very few people actually do lower their income requirement tremendously after retiring, I’d say that RSPs have been sold and promoted as long term investmest.

#111 Penny Henny on 01.23.19 at 11:21 am

#74 NoName on 01.22.19 at 9:26 pm

I did mention that doc describes me as morbidity obist. That why i use only fiberglass stepladders, dont trust much aluminum… As for beer i remember few yrs back driving to Orangevileto get last few cans of “Ozujsko pivo”, but since yoy cant find it in store any more. To bad it can’t be bought any more, very good beer by the way, so back then i switched to bud light and belgium beer bit more expensive but alcohol per volume is 2 to 4 more so in a sense is cheaper.

https://imgur.com/a/O3u1rRx

////////////////

Bud Light. Ugh!
Try the buck a beer “Cool”, available at LCBO.
Best ‘low carb’ beer I’ve tried so far. 4 grams per bottle. and bonus is it’s cheap too.

Nasdrovia

#112 Guy in Calgary on 01.23.19 at 11:28 am

A lot of people on this forum asking questions about their own situation while on other days, others bash advisors and fees. Gotta love it.

#113 RRSP on 01.23.19 at 11:41 am

#109 LivinLarge – An RRSP has always been more of a tax shelter than an investment by definition. Its sold as a tax shelter, and anything that comes to mind can be thrown in once qualified. Its bought as a tax shelter, and not as an investment.

#114 Doug in London on 01.23.19 at 11:46 am

Of course, a lot is self-inflicted. That’s a message most people don’t want to hear, instead blaming modern life for their financial failures. They’d rather be pissed and vote for some goof who promises to change everything. And can’t.
————————————————————–
Sums it up quite well. You’re one of the few who has balls enough to tell it like it is. The bleeding heart liberals won’t like that at all. Yes, I know a lot of low income people are having a hard times making ends meet, but apparently a lot of these people having troubles are making a good income, like that couple in Oakville making 500 grand.

#115 Dogman01 on 01.23.19 at 11:49 am

It is very hard to be different and maintain it over a lifetime. Doing the same thing as everyone else is safe from an evolutionary perspective; Humans follow the herd and maintaining a perception that you are a lead dog in the pack is critical to most.
Many don’t concern themselves with a future they measure their life by what they have now, big house, Cancun Vacation, BMW—check (day to day is a nice way to live if you think about it)

“You can’t always measure the eventual outcome of an action by what has happened thus far. If a man jumps off a 45 storey building, nothing has really changed during the first 40 floor freefall, it’s the last few that make it interesting and we all know what the final outcome is.” – Warren Buffet

Beach vacations are aspirational and extra-ordinary. Debt is bad, “owning your house” means no mortgage. Dinner out is special! $5 for a coffee must be some good coffee. – Is this a weird way of thinking?

43% of Canadians $200.00 bucks from disaster….? Huh? Do they expect a debt jubilee.
Who knows maybe I am missing the utter bliss of a new Mercedes.

I do thing Netflicks is worth the $15.00. (that’s just three trips to Blockbuster)

#116 IHCTD9 on 01.23.19 at 11:49 am

#12 PastThePeak on 01.22.19 at 4:43 pm
Excellent and timely column Garth! I do maximize mine each year, with the company kicking in 50c on each $1 (to a max of course). While ideally I would balance more between TFSA vs. RRSP if I had the option (take the hit now for a bit more tax free later) – I don’t have that option so RRSP it is.

I do plan to (semi) retire a bit early and meltdown the RRSP somewhat alongside a part-time job (while stuffing the TFSA until at least 65).
____

Sounds like me. I think we have too much in RRSP’s. We have jack in TFSA’s, or anything else – but I’m thinking that will change soon.

It’ll be a pile of tax 20-30 years from now if it stays there principal intact. I won’t likely even really need to draw down the principal on it. The only efficient way to get it out from the looks of it, is go part time for 5+ years or so before retirement and get as much of it out of there while still padding the portfolio via TFSA’s/Non Reg.

I guess the main thing is wanting to pass on most of the residual to the kiddies instead of the government – and without a bunch of headaches if possible. Otherwise I’d I’d be aiming to efficiently drain the thing entirely, principal and all :).

#117 Doug t on 01.23.19 at 11:54 am

Cmon Garth , ship has sailed in Canada . You cater to high net worth clients id imagine you don’t see the struggles .

Folks living pay cheque to
Pay cheque .savings ?

So stop coming here. Wallow in mediocrity. – Garth

Garth sometimes you are such a pompous ass – on that note I will “stop coming here”

RATM

Your choice. Go get your free, totally unbiased financial advice at the bank. – Garth

#118 IHCTD9 on 01.23.19 at 11:59 am

#111 Penny Henny on 01.23.19 at 11:21 am

////////////////

Bud Light. Ugh!
Try the buck a beer “Cool”, available at LCBO.
Best ‘low carb’ beer I’ve tried so far. 4 grams per bottle. and bonus is it’s cheap too.

______

Thank-you, I Googled that – I’ll be picking up 4 on the way home, even if it’s just OK, at 1.10 that’s good enough!

Another low cost one that popped up on the LC site was “Loon Lager” – I’m going to try that one too – 1.65/ea, but made by Barley Days who makes some really good beers IMHO. In fact, it’s only because BD makes it that I am trying it!

#119 LivinLarge on 01.23.19 at 12:02 pm

“Its bought as a tax shelter, and not as an investment.” We’ll just have to disagree as to the mindset of the buyers. If Canadians almost universally plowed their enhanced return each year then it might be construed as a tax shelter but a tax shelter is an incestment that actually “shelters the investment” from tax rather than just deferring the taxes until a later date.

I doubt a fraction of those folks dropping money into their RSP now are doing so expecting they will likely pay more tax in 20 or so years. They want their enhanced refund in a couple of weeks and so, few follow the correct practice of plowing it back into their RSP. Those enhanced refunds are more often than not squandered.

The functional difference between “tax sheltered” and “tax deferred” is not understood by the average working Canadian. They do however understand, “I get a bigger refund from the gov.”.

All growth is sheltered from tax, thus it is a tax shelter. Plus people get an upfront refund to cover future tax on withdrawals. How is that not a sweet deal if done correctly? – Garth

#120 Guy in Calgary on 01.23.19 at 12:18 pm

#109 LivinLarge on 01.23.19 at 11:04 am
“They are not investments. An RRSP is a tax shelter. – Garth”…ok, I consider anything you put your money into with a reasonable expectation that they will be worth more in the future than they were when you put the money in is an investment. So, let’s call them “tax sheltering investments”.
—————————————————————-

What you hold in the RSP is the investment. An RSP in itself is just a tax advantaged account.

#121 LivinLarge on 01.23.19 at 12:20 pm

RRSP, I was a “financial planner” for a few years but left because I was expected to be nothing more than a mutual fund flogger. So I have known quite a few “planners” and [email protected] types and I can say with 100% certainty every one was trained to present RSPs as investments as investments in your financial future in retirement and forbidden to bring up “tax shelter”.

Their keepers knew they could be in deep regulatory shit if in the future their client found out they hadn’t actually sheltered anything, just defered it with a potential to have their funds actually decrease due to economic melt downs like 2008-12. No, RSP have always been “sold” on the premise that yes you have to pay tax on the contribution but only in the future when presumably you are in a lower tax bracket.

Every advisor I have known have had that wonderful chart showing the Dow over 100 years climbing ever higher thus justifying the potential growth in mutual funds

#122 IHCTD9 on 01.23.19 at 12:28 pm

#118 IHCTD9 on 01.23.19 at 11:59 am
#111 Penny Henny on 01.23.19 at 11:21 am

////////////////

Bud Light. Ugh!
Try the buck a beer “Cool”, available at LCBO.
Best ‘low carb’ beer I’ve tried so far. 4 grams per bottle. and bonus is it’s cheap too.

______

Thank-you, I Googled that – I’ll be picking up 4 on the way home, even if it’s just OK, at 1.10 that’s good enough!

Another low cost one that popped up on the LC site was “Loon Lager” – I’m going to try that one too – 1.65/ea, but made by Barley Days who makes some really good beers IMHO. In fact, it’s only because BD makes it that I am trying it!
______

I guess I’m not trying either of these tonight – “out of stock” according to the web page for my local LC!

Oh well – they’re on the list for later.

#123 James on 01.23.19 at 12:36 pm

DELETED

#124 45north on 01.23.19 at 12:40 pm

Dominoes: In Peel and Toronto, they tell me there was a huge increase in 2018 in people whose automated debit payments for property taxes went NSF.

I look forward to your reports. I think the banks hide repossessions but they don’t have control over news of property tax delinquencies.

#125 45north on 01.23.19 at 12:43 pm

Another Albertan: I live in inner-city Calgary. There is an interesting trend I’ve been seeing… a bunch of the homes within 5km of downtown are listing either 10 to 15% OVER city assessment OR 10 to 15% BELOW city assessment. The best I can infer from the property reports is that more recent owners are the OVER and long-term owners or “more professional investors” are the UNDER.

yes interesting

#126 Remembrancer on 01.23.19 at 12:46 pm

#120 Guy in Calgary on 01.23.19 at 12:18 pm
#109 LivinLarge on 01.23.19 at 11:04 am
An RRSP is a tax shelter. – Garth”…ok, I consider anything you put your money into with a reasonable expectation that they will be worth more in the future than they were when you put the money in is an investment. So, let’s call them “tax sheltering investments”.
—————————————————————-

What you hold in the RSP is the investment. An RSP in itself is just a tax advantaged account.
==================================
Like finger nails on a chalk board when someone still says they are buying a RRSP…

#127 Renter's Revenge! on 01.23.19 at 12:50 pm

#117 Doug t on 01.23.19 at 11:54 am
Cmon Garth , ship has sailed in Canada . You cater to high net worth clients id imagine you don’t see the struggles .

Folks living pay cheque to
Pay cheque .savings ?

So stop coming here. Wallow in mediocrity. – Garth

Garth sometimes you are such a pompous ass – on that note I will “stop coming here”

RATM

Your choice. Go get your free, totally unbiased financial advice at the bank. – Garth

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

Haha! Garth has FU money. That’s why his blog is free. If you threaten to leave, he can say “FU”, and you’ll only be hurting yourself.

In fact, Garth is trying to help you get FU money. It’s better to stick around.

FU money speech from The Gambler, for your reference:

https://www.youtube.com/watch?v=rJjKP8vYjpQ

#128 LivinLarge on 01.23.19 at 12:52 pm

I think many here are forgetting the history of the RSP sales system. For the longest time you effectively had only two and usually only one source to contribute to an RSP. Usually it was the [email protected] who had little if any more training than passing the IFIC exam and that was designed so a brand new bank teller fresh out of high school could pass it and was “qualified” to sell the banks mutual fund family.

Sometimes there was a “financial planning” enterprise in town populated by more folks with just IFIC credentials or life insurance agents.

Later and more recently we have seen the rise of certified career financial professionals and “fee for service advisors. These folks have far more education and skill than [email protected]

#129 Fish on 01.23.19 at 1:12 pm

Sudbury
Greater Sudbury proposes a 3.5% property tax increase

Budget expected to be approved later in February
CBC News · Posted: Jan 23, 2019 10:21 AM ET | Last Updated: 2 hours ago

https://www.cbc.ca/news/canada/sudbury/sudbury-2019-proposed-budget-1.4989334

#130 Shawn Allen on 01.23.19 at 1:25 pm

Garth on RRSPs

All growth is sheltered from tax, thus it is a tax shelter. Plus people get an upfront refund to cover future tax on withdrawals. How is that not a sweet deal if done correctly? – Garth

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

Looks like Garth and I are going to be besties after all.

The Math by WW1 at 82:

RRSP only = $2,012,000
Non-registered investments only = $3,278,000
Hybrid = $3,651,000

(all assuming 6% return and 50% marginal tax rate)

***********************
To be clear, WW1 is saying here that an RRSP with tax refund invested beats the marginal account.

The RRSP only scenario ignores the value of the refund and is therefore an unfair comparison.

Consider that at a 50% tax rate and tax refund, the choice is for example $10,000 in an RRSP growing tax free but ultimately taxed at say 50% but it only cost you $5000 net after tax dollars,

Or just $5000 after tax dollars in a margin account where tax is lower due to capital gains and dividends.

With double the money growing tax free and then lose half to tax in the end, you still beat half the money growing if it attracts even 1% tax.

In addition, while most people might “need” the same income after retirement, at least 90% will earn less in retirement and by far most will in fact be in a lower tax bracket.

RRSPs and TFSA both are great. Both beat margin accounts.

#131 n1tro on 01.23.19 at 1:25 pm

#69 Blessed Canadian Millenial on 01.22.19 at 8:44 pm
Dolce Vita on 01.22.19 at 6:33 pm

Hi Dolce,

Don’t be fooled by the #s you listed above. The under $45K income also includes post-sec students and seniors, whose income is obviously different (read: lower).
——————————-
Yes, but what is the % of the two thirds are students and seniors? Taking them out leaves people making under $45K at 1/2, 1/4, 1/8 of Canadians?

Even without this much needed context, making less than $45K a year still sucks as cost of living is high for 100% of us.

#132 Penny Henny on 01.23.19 at 1:49 pm

118 IHCTD9 on 01.23.19 at 11:59 am
#111 Penny Henny on 01.23.19 at 11:21 am

////////////////

Bud Light. Ugh!
Try the buck a beer “Cool”, available at LCBO.
Best ‘low carb’ beer I’ve tried so far. 4 grams per bottle. and bonus is it’s cheap too.

______

Thank-you, I Googled that – I’ll be picking up 4 on the way home, even if it’s just OK, at 1.10 that’s good enough!
///////////////

In Welland the deliveries are made on Thursday and they usually sell out sometime on Saturday. So don’t be surprised if they are sold out.
Pro Tip- If you try it and you like it I would suggest ordering the equivalent of two 24’s (12 – 4 packs) online (free delivery over $50) and the LCBO will delivery to your local store and they will call you when it’s in.

#133 jess on 01.23.19 at 2:18 pm

“correct seniority mix.”

If You’re Over 50, Chances Are the Decision to Leave a Job Won’t be Yours
A new data analysis by ProPublica and the Urban Institute shows more than half of older U.S. workers are pushed out of longtime jobs before they choose to retire, suffering financial damage that is often irreversible.“There’s no safe haven in today’s labor market,” said Carl Van Horn, a public policy professor and director of the Heldrich Center for Workforce Development at Rutgers University in New Jersey. “Even older workers who have held jobs with the same employer for decades may be laid off without warning” or otherwise cut.
https://www.propublica.org/article/older-workers-united-states-pushed-out-of-work-forced-retirement

see (https://features.propublica.org/ibm/ibm-age-discrimination-american-workers/)
Older job seekers are almost universally counseled not to answer questions like this. The ADEA bars employers from putting age requirements in help-wanted ads, but as job searches have moved online, companies have found other ways to target or exclude applicants by age. Last year, ProPublica and The New York Times reported that employers were using platforms like Facebook to micro-target jobs ads to younger users. Companies also digitally scour resumes for age indicators, including graduation dates.

=========

#134 jess on 01.23.19 at 2:27 pm

so why is this called avoidance rather than evasion?

The inquiry concludes that the charity’s trustee, Mountstar Limited, is responsible for “clear mismanagement and misconduct” and failed to fulfil its legal duties as trustee in entering the charity into the scheme and managing its participation in the scheme.

The report also details failings to address or manage serious conflicts of interest arising from relationships between the corporate trustee and individuals who devised the tax avoidance scheme and had benefited from entering the charity into it and advertising it to tax payers….

Harvey Grenville, Head of Investigations at the Charity Commission, said:

Our inquiry demonstrates beyond doubt that The Cup Trust was misused by the corporate trustee to assist higher-rate tax payers in reducing their tax bills, and earning individuals connected to the scheme lucrative fees. Those personal benefits were far more than incidental and the fact that the charity would, had the scheme been accepted by HMRC, have benefited from gift aid, does not legitimise these intentions or actions.

Charities rely on the public’s goodwill in supporting tax benefits designed to encourage genuine charitable donations. It is right that we take robust regulatory action where trustees’ actions abuse that goodwill. It is clear that this charity, through its involvement in an attempted tax avoidance scheme, undermined public trust in charity generally. The Commission has learnt from this case: over recent years, we have significantly strengthened our approach to identifying and dealing with risks facing charities, have improved our pre- and post-registration processes and are more proactive and robust in using our legal powers to ensure trustees comply with their legal duties and responsibilities.

We have also successfully called for our legal powers to be strengthened to help us better disrupt and stop the abuse and mismanagement of charities. Some of the new powers we asked for and are using are as a direct result of this case.

The Commission first investigated The Cup Trust in 2010, following concerns reported to it about the charity’s participation in a tax avoidance scheme. The statutory inquiry was launched in 2013, when the charity’s trustee failed to provide information to HMRC regarding its gift aid claims. The regulator then immediately appointed an interim manager (IM), granting the IM all the powers of trusteeship and excluding Mountstar from decision making at the charity.

The report sets out why the inquiry has taken 5 years to conclude read more @
https://www.gov.uk/government/news/corporate-trustee-of-the-cup-trust-responsible-for-clear-misconduct-and-mismanagement

———
MPs have attacked the charity watchdog for its “astounding” failure to close down a fake charity that gave just 3p out every £100 of donations to good causes.

Margaret Hodge, chair of the influential public accounts committee (PAC), said that if the Charity Commission had “only bothered to pick up the phone” to the tax authorities it would have discovered that the Cup Trust charity was a front for a multimillion-pound tax-avoidance scheme.

The Cup Trust, the claimed objective of which was to “improve the lives of young children and adults”, donated just £55,000 of its “staggering” £176m income to charitable causes. Despite its scant donations, the trust used a complex web of transactions to seek £46m in gift aid, and its “donors” claimed £55m in charitable-giving tax relief.

https://www.theguardian.com/politics/2013/jun/04/cup-trust-charity-watchdog-tax-avoidance

#135 Nice Policy on 01.23.19 at 2:48 pm

This was brought out by an insurance company owned by Aetna, whereby the Actuary made a mistake in Toronto. It was made for an RRSP, but didn’t need to be registered. Your deposit equalled the 10 year Canada Bond Yield plus 1/2% guaranteed for 10 years. It mattered not if the deposit was monthly or annual or whatever. The policies were quickly taken off the market about a year later.

#136 LivinLarge on 01.23.19 at 2:53 pm

“All growth is sheltered from tax, thus it is a tax shelter. Plus people get an upfront refund to cover future tax on withdrawals. How is that not a sweet deal if done correctly”…well two things here. “If done correctly” is critical and that requires the sort of knowledge you posses. Yes, if done correctly the balance advantage can shift to the RSP holder as long as their advisor REALLY knows their stuff…you do, no sure all advisors do but that’s another debate.

IMO RSP funds are not sheltered from tax but just delay the tax to a later date, maybe I’m totally incorrect but I think of tax shelters as structures that keep the CRA’s paws off the money or some of the money forever. I’m thinking “shelters” are the convoluted arrangements that folks like KPMG or Credit Suisse like folks create for their 1%er clients to avoid paying taxes on. Like I said I could be totally wrong and this might just splitting hairs.

I recall, about this time last year that you said here that RSPs can created tax traps for elderly folks. I still buy that. If there are appropriate methods to withdraw RSP funds without paying any or much tax then I’ll accept that they can be shelters and not just deferral vehicles. I don’t think any gov has ever intended them to be true tax shelters or they would have enshrined that idea in the RSP rules from the start.

Remembrancer, you really are splitting the hair fine there. To be more realistic, the registering of the investment as RSP forever changes the investment so if you buy a Red Porsche and then repaint it blue, it never stops being a Porsche, it just stops being red and you are required to reregister it as blue.

I spent 3 years as a contract CRA collector in the 90s and I can say to an absolute certainty that they never intended RSP to be defined as you state.

Yes, yes, yes, in the long history of RSPs there have been changes to the underlying legislation that have resulted in some changes to the withdrawal status rules and those are the things you need a very well qualified advisor, tax accountant or tax lawyer to shepherd you through but the basic concept of the RSP is to provide a suppliment to CPP et al and to be taxed only when the funds are withdrawn at the then going rate. Can you massage that intention? It seems you can but if the Feds ever find that too many folks are massaging and cutting the Feds out of whay they consider their “due” then at some point expect those massagings to be disallowed. It would likely take a legislative change to do that and at present they seem fine with just letting things run as is.

The Feds do change rules periodically, often to benefit some disadvantages group, buy votes or level a playing field but find subsequently that they have unforeseen consequences. When the intent of the rule changes out weighs the unforeseen consequences, things don’t get changed again.

#137 Guy in Calgary on 01.23.19 at 2:56 pm

#128 LivinLarge on 01.23.19 at 12:52 pm
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Stop blaming the system and [email protected] for you not knowing what an RRSP is. It’s ok to admit you are wrong sometimes instead of writing novels about the various people/institutions you blame for your ignorance. Be happy that you learned something.

#138 Remembrancer on 01.23.19 at 3:10 pm

#134 jess on 01.23.19 at 2:27 pm
so why is this called avoidance rather than evasion?
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Different things in Canada…

https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/tax-alert/tax-avoidance.html

Tax avoidance results when actions are taken to minimize tax, while within the letter of the law, those actions contravene the object and spirit of the law.

Tax evasion typically involves deliberately ignoring a specific part of the law. For example, those participating in tax evasion may under-report taxable receipts or claim expenses that are non-deductible or overstated. They might also attempt to evade taxes by wilfully refusing to comply with legislated reporting requirements.

Tax evasion, unlike tax avoidance, has criminal consequences. Tax evaders face prosecution in criminal court.

#139 LivinLarge on 01.23.19 at 3:11 pm

DELETED

#140 LivinLarge on 01.23.19 at 3:22 pm

“so why is this called avoidance rather than evasion?”…maybe avoidance and evasion are defined differently in the UK than in Canada???

Avoidance is legal. Evasion is not. – Garth

#141 IHCTD9 on 01.23.19 at 3:28 pm

#132 Penny Henny on 01.23.19 at 1:49 pm

In Welland the deliveries are made on Thursday and they usually sell out sometime on Saturday. So don’t be surprised if they are sold out.
Pro Tip- If you try it and you like it I would suggest ordering the equivalent of two 24’s (12 – 4 packs) online (free delivery over $50) and the LCBO will delivery to your local store and they will call you when it’s in.
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Yep you’re right – sold out. I’ll try again on Thursday.

#142 RyYYZ on 01.23.19 at 4:38 pm

#70 Sydneysider on 01.22.19 at 8:46 pm

At some point (depending on individual circumstances) the after-tax amount you pull out of an RRSP falls behind what you can get from not using the RRSP at all.
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OTOH, when you get a multiplier effect by your employer matching your contributions, it becomes a relative no-brainer. My employer was matching me 100% up to, IIRC, about $9,000/yr. I guess I could have taken my money back out of the RRSP after they matched it, and invested it in a non-registered account.

#143 Christina on 01.23.19 at 4:42 pm

Hey Garth,

is @LivinLarge the new Screwedcanadianmillenial or whatever his name was? HA! 8+ posts in one day? Dear lord!

#144 RyYYZ on 01.23.19 at 4:48 pm

#95 Headhunter on 01.23.19 at 7:33 am

Died in his sleep on weekend. Ya so save for retirement but dont forget to “live” on the way. I bet he wished he had all those weekends back that he worked in the plant.
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That’s what I learned from my parents – plan for the future, but enjoy yourself now, too. I wouldn’t say my parents were frugal, but rather they were sensible. So over the years we had a minimum of new cars – just what was needed, and relatively modest cars at that. I know my dad always lusted after a nice Mercedes or Volvo turbo back in the day (he had sports cars when he was a young man), but they were too expensive and he couldn’t justify one when a cheaper car would provide transportation just as well. Although, considering he died at the age of 54, I kind of wish he’d indulged himself a little more.

Anyway, we had a nice home, and nice things. I never really wanted for anything as a child. I didn’t get the huge piles of toys some of my friends and neighbours did at Christmas, but I got what I really wanted. We didn’t do a lot of expensive vacations, but we did own a cottage in Pugwash for years, which we got a lot of enjoyment out of.

But too many today seem to have no regard at all for the future. Me, I’d like to live as well in retirement as I do now.

#145 Punchline on 01.23.19 at 5:09 pm

#135 Nice Policy – I forgot the punchline, the policies were issued in 1974, and could not be cancelled for those that bought, and a year later no more policies were issued. Some bought two of them; one registered and the other non-registered.

#146 Alistair McLaughlin on 01.24.19 at 9:16 am

@#110 Living Large, tax brackets are indexed to inflation, so inflation will not result in higher taxes years later. Yes, there was a period when they weren’t indexed, but that was fixed in 2000. Unless you’re Stan Brooks, and you experience an 8% per annum inflation rate that nobody else does.

You have yourself all tied into knots over RRSPs. It’s an incredibly straight forward, simple tool. You put money in, you get a tax refund on what you put in. Take money out in the future, you pay tax on your withdrawals at your going rate. In the interim, you pay no tax on that money, nor an any gains. Call it a tax shelter. Call it a tax deferral vehicle, it doesn’t matter.

One can twist themselves into a pretzel over the possibilities about lower or higher tax rates in the future, lower or higher income in retirement, etc., but none of that changes the very simple, basic concept of an RRSP, which has remained the same for 60 years, despite numerous cosmetic legislation tweaks. The concept of tax deferral is inherently easy to grasp. If people fail use RRSPs to their advantage, so be it, but they don’t get to use “too complicated” excuse.

#147 LivinLarge on 01.24.19 at 12:24 pm

“@#110 Living Large, tax brackets are indexed to inflation, so inflation will not result in higher taxes years later”. You are correct with maybe the exception of T2 adding the new top marginal rate relatively recently.

Maybe you miss my larger point or maybe I didn’t explain it properly. Here goes again. When you put the money in, say before 2000, you were most likely at a significantly lower income and therefor significantly lower marginal rate. You got your enhanced refund and if you are like the majority of Canadians, you didn’t plow it right back into your RSP. That’s foolish I absolutely agree but that is the real world we live in.

So, this process continues for twenty or 30 years, all the while your initial capital in the RSP has grown tax defered. Some of those years your RSP had great growth, sometimes it barely kept up with consumer price inflation and, god forbid, it even lost the inflation fight like 2009-12. From reading here, a recession like event comes around about every decade or so eating into your total capital for a couple of years yet inflation generally kept on eating into your spending power.

Now, 30 years later and you are retired and looking to withdraw the some of the funds each year. What do most average (without competent advisor) Canadians find? First, their cost of living the lifestyle they have come to enjoy has dramatically increased over what it was in the year they deposited into the RSP. To enjoy that lifestyle, they have to withdraw much more than they needed 20-30 years earlier and what does that do to their taxable income? Yes it increases that too and that increase in taxable income shifts them into one or two marginal rates higher. Even though the marginal rate bands have only risen at an inflation defifined yearly rate, that rate is (I think) based on CPI and CPI rarely represents true consumer inflation because it is based on a set basket of goods and the fact that almost no two Canadians experience the exact same real consumer inflation due to their differing lifestyles.

The real problem therefor is not really the top marginal rate only rising by CPI but the real cost of the lifestyles most Canadians aspire to and the periodic financial downturns that flatten the growth curve in the RSP.

I know people here claim that their real cost of living went down after retiring and I’ll just have to accept that is 100% true. But even then they still have to withdraw more and more each year to maintain that lowered lifestyle expense. With RSP contribution limits in place that constrains everyone’s capacity to adjust contributions according to personal circumstances each year. I would have to do a lot of digging but my recollection is that RSP contribution limits didn’t increase by 15% each year durring the ugly 1970s inflationary period. And if they actually did, how many could afford to contribute more when they were facing enormous mortgage rate increases in the same period along with other inflation increases while just struggling to keep a job and food on the table?

The last decade has been unique in Canadian economic history. A financial meltdown for 4-5 years without a corresponding consumer price inflation to ballance it. Low interest rates coupled with poor market returns just wiped out those 4 years of what should have been inflation compensated growth in the RSP capital. Losing those 4 years or so has had incredible impact on long term growth in that capital by reducing the compounding of the capital.

So, as I keep saying, an RSP isn’t a bad investment but over the years the rules haven’t kept up with the real world.

BTW, I really am sorry that my explanations are so ling winded but this subject is much more complex than “money in, enhanced refund and tax deferred for 30 years.” If life remained static for those 30 years and the return in the RSP at least doubled real consumer inflation the the RSP would be an absolute no brainer for most Canadians but as you correct point out, the rules governing RSP have been pretty constant for 60 years but alas ecerything else has changed.

#148 dodgedbullet on 01.24.19 at 12:37 pm

Garth,

[insert obligatory suck up here] (Thank you!)

I dumped a lot of cash in my spouse’s (stay at home mom) RRSP over 3 years ago… can my spouse now take out a lump sum today (with the assumption she will be looking after the kiddies for another year) while I put that same amount back into her RRSP before the tax window closes?

Does this look dodgy to the feds?

Thanks, DB

Spousal funds removed before three years have passed will be attributed back to you, and taxed. – Garth