Making Sense of RRSP Season for Canadian Investors.

We’re down to our final week of RRSP season. Canadians will first have to decide if an RRSP contribution is the right move for any monies that are available. That’s not a given. If you don’t have an emergency fund, if you’re carrying high interest debt, if don’t have proper insurance to protect your spouse and family an RRSP contribution might not make sense.

Planswell found that they would only recommend an RRSP contribution to less than half of the Canadians who completed their free online financial plan.

And even if you have monies available and you have your financial house in order, is an RRSP contribution still the right move? Have a read of RRSP vs TFSA: Why the Tax Free Savings Account Is Often The Best Choice for Savers.

Many financial advisors will suggest that if you make $40,000 or less, the TFSA is the better option. On that same subject but reminding us that RRSPs still rock, here’s a great piece from Jonathan Chevreau for The Financial Post Three Reasons Why RRSPs Still Matter – And One Of Them You Probably Didn’t Know.

And what if an RRSP is the right choice but you don’t have the cash available; how about an RRSP loan? On Boomer and Echo Robb Engen offers RRSP Loans: Why You Should (And Shouldn’t) Get One. I had also recently discussed RRSP catch up strategies in this post for the Tangerine Forward Thinking blog, here’s Playing Catch Up With Your RRSP Portfolio.

One Day You’re Going To Spend Those RRSP Dollars

And of course one day you’re going to need those RRSP monies and they become fully taxable, no different than employment income. That’s why you get that RRSP T4 slip. Here’s The RRSP Strategies Every Investor In Their 60’s Should Know. That article is courtesy of fee-for-service financial planner Jason Heath.

And on building a successful retirement portfolio for self-directed investors I offered How To Create A Retirement Portfolio With Exchange Traded Funds. No matter how you invest you’ll find some useful tips on what goes where for retirement and at any stage with respect to RRSP vs TFSA vs Taxable pots of monies.

There are so many considerations when it comes to preparing your portfolio for retirement and finding the most successful strategy for creating durable and growing income. One of those head scratcher questions that is often asked is ‘Annuity or no annuity?’ Mark Seed of My Own Advisor recently offered Why You Should Consider Pensionizing Your Nest Egg. The idea is that we create more pension-like guaranteed income by way of annuities and then still hold a growth portfolio to beat off inflation. I have a copy in hand, stay tuned for Cut The Crap Investing’s review of Pensionize Your Nest Egg: How To Use Product Allocation To Create a Guaranteed Income For Life.

I’ll be back with many more articles on retirement spending strategies and investment portfolio models. There are many important considerations such as By Not Claiming Your CPP Until 70, You Can Get 150 Percent Of The Income You Would Receive at 65.

Most advisors don’t recommend that you draw down your own RRSP and TFSA portfolios early allowing you to delay CPP and OAS even though the math suggests it’s a wise move. Why? Because many advisors get paid from your investments. They don’t want you to deplete your investments that pay them handsomely. They also don’t want to recommend an annuity as part of your strategy. They only get a one-time, and modest payment from that annuity. We know that advisors that create their own perpetual income from your investments don’t often do the right thing for in the accumulation stage. There’s a lot of evidence to suggest that they don’t ‘do right by you’ in the retirement planning stage as well.

But don’t worry, Cut The Crap Investing has your back. 

You are likely better off with a fee-for-service advisor that is not attached to your investments. You’ll also find some of The Canadian Robo Advisors are a good option for retirement. Send me a note and I can give you some ideas about which Robo’s are the strongest in the retirement Robo arena.

Where To Invest Those Monies in 2019

Of course we want to keep those fees low. That’s no longer a problem in Canada. You can even access complete managed One Ticket Portfolios for about 1/10th the cost of traditional funds. BMO joined the One Ticket Family, here’s BMO Keeps It Simple With Their One Ticket Portfolio Solutions.

But then you’re likely wondering, ‘how do I know what portfolio to select?’ Well, we’re way ahead of you. On The Hub Which All-In-One One Ticket Portfolio Is Right For You?

Of course there are many wonderful low fee options available, from One Ticket, to Robo’s to a few low fee fund providers. I’m a fan of Steadyhand, the undexers.

You might even self direct to create your own ETF Portfolio, or use a combination of ETFs and individual stocks. The key is to keep your fees low and get the advice that you need.

Other Great Reads For The Week

I really enjoyed this oldie but a goodie post that was re-shared by Ellen Roseman on Twitter. It details the ‘what if’ in regards to the Bell shares her Grandma gave her. Ellen spent hers, one of Ellen’s siblings kept the shares. Have a read.

Bell Shares

And here’s Rob Carrick (back to that retirement theme) with Critics Of The Overhauled CPP Say It’s A Bad Deal – Here’s Why They’re Wrong.

This is not a bad thing to happen at a time of growing concern that two-thirds or so of Canadians don’t have a pension plan at work and are saving too little for retirement.

I am normally on the side of choice but the evidence is clear; most Canadians are not saving and investing enough. They need help by way of a forced automatic savings plan.

Thanks for reading, have a great weekend. Hit those share article buttons, don’t forget to follow Cut The Crap Investing so that you can retire one day, or retire richer.

 

 

5 thoughts

  1. Dale!

    What a crazy awesome email newsletter. So many awesome articles, well thought out are a for people to consider, supporting a range of people (ages.. incomes.. ). Just wow.

    Pumped to dive into some of these myself as my wife and I need to figure our own finances out in time, and wanted to say thanks for the great work – I know he people on your list appreciate great content like this.

    Greg

    On Sat, Feb 23, 2019, 9:42 AM Cut the Crap Investing, wrote:

    > Dale Roberts posted: “We’re down to our final week of RRSP season. > Canadians will first have to decide if an RRSP contribution is the right > move for any monies that are available. That’s not a given. If you don’t > have an emergency fund, if you’re carrying high interest debt, i” >

    Like

  2. Good article. I have a small RRSP, some in whatever ING’s Streetwise mutual funds are now called after rebranding to Tangerine. Also some ETFs and stocks.

    With my income, TFSA makes more sense and that’s what I’ve been focused on funding.

    It also comes down to the old tax issue. I deposit my paycheque and the taxes and other deductions have already come off, leaving me with my net income. I set aside some for retirement savings, and years ago the only choice was RRSP. Which also taxes me when I withdraw the funds. So I get taxed coming and going with money I put in an RRSP. With the TFSA I don’t get taxed taking the money out, so that makes better financial sense.

    I do get a kick out of the annual Revenue Canada assessment that shows how much money I can contribute to an RRSP, like more than I make in a year!

    Like

    1. Thanks Cheryl and thanks for the share on Twitter. We certainly need that share help in spreading the good word. The Streetwise Portfolios are now simply called the Tangerine Portfolios. Yes, important to find your optimal mix of RRSP vs TFSA. But it’s a great idea to use both. That tax free income can come in handy in retirement. Knowing the correct order of asset harvesting in retirement is very important as well. Most Canadians will be surprised at what is the correct order according to the math. And so many moving parts in retirement from traditional buckets of monies to inheritance, real estate, downsizing, meaningful work part time employment income. Heloc monies perhaps? Annuity vs no annuity. etc. etc.

      Like

      1. You may also get a kick out of this. I worked on the launch of the Streetwise Funds at their advertising agency GWP Brand engineering. I was their ‘money guy’ ha. I was mostly working on ING Direct US (way more fun, than Canada – commercial shoots in California etc) but I consulted to Canadian team. I then went full circle to become an advisor on the same portfolios. I even pounded the tables for dividends. I still do some work with them, blogging and training. Great company. Great group of advisors. Great place to bank IMHO.

        Like

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