ChrisBoar

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Actually that's pessimistic. The S&P 500 index returned 12.5% over the period 1980 to 2005. We're talking average return, not year on year. The whole of point of holding for the long term is you smooth out the peaks and troughs. For instance my pension funds have almost recovered from the 2008 crash.


Well you can expect to lose about 50% to fees if you 'invest' in the average mutual fund.

johnh009

I always put my money into Blue Chip dividend paying stocks outside of an RSP. Only 50% of the gains are taxable and very low tax on the dividends. Less than $10 for a buy or sell transaction. And, no nasty surprises with the tax man when you withdraw. I never ceased to be amazed at how many people are unaware of the rules when it comes to taking money out of RSPs. Tax defferal not tax avoidance.

Alan2005

What was the S&P in 2000? What is it now?

You are making a common mistake of assuming that the political and financial system for the next 25 years will be the same as the previous 25. It's human nature to do this - but you shouldn't.

Edit: Not that there is anything wrong with your strategy; just don't rely solely on your pension for retirement income.

ChrisBoar

Not sure what your point is exactly? Sure RSP's are tax deferral. But the big advantage of RSP's is that that you the money you would have paid in tax gets to grow for 20-30 years, and you then have to the option of paying a lower tax rate when you do come to withdraw funds.

ChrisBoar

Why does that matter? Pension investments should be for the long term. The crash of 2008 will be small blip over the long term. You just have to make sure that the closer you get to your retirement date that you minimise the fund risk by moving into safer investments.

Well I wouldn't call it a mistake, given there is no evidence to the contrary, e.g. the S&P 500 has grown consistently over the last 100 years, providing an average of around 9.9% growth/yr.

Agreed. I'm just pointing out there are better ways of saving for retirement than dumping your funds into high fee mutual funds, which I suspect is what a lot of folks will be doing when they transfer over their pensions.

johnh009

Yes, this can happen but remember, with RSPs, you have to withdraw the money by the time you are 71 so this could mean large withdrawals for some depending on how much they have which will be taxed at a higher rate. Also, if you have enough RSPs, you will see a clawback on your CPP payments. I concede that this could apply to other forms of wealth. Of course, everyone should do what they are comfortable with. I am merely saying that the stock market in Canada has favourable tax advantages and low fees if you take an online account as compared to a managed pension fund. As the saying goes, I can lose my own money cheaper than I can pay someone else to do it for me.

Steve_P

This is totally incorrect.

You have to start to withdraw the funds from your RRSP by the time you turn 71 but in no way are you required to withdraw all funds by this time.

johnh009

So when do you have to convert to a RIF?

johnh009

According to this you do. It says an RRSP must be collapsed by the 31 December on the year you turn 71. Then you have three options.

http://blog.taxresource.ca/what-happ...hen-i-turn-71/

ChrisBoar

Agreed, but even some 'low-cost' Canadian funds, like ETF's still have management fees two to three times higher than their U.S equivalents.

I'm having 'fun' at the moment researching how I'm going to achieve my pension transfers. I want to transfer 3 pensions into one QROPS approved RSP, which I want to be self-directed with online brokerage, preferably offering me US holdings in the RSP so I can buy some of the really low cost U.S ETF's like the Vanguard ETF's, and try to minimise FOREX fees as I will have to buy/selling in U.S $. I'm hoping I can do this with Scotia Itrade/Macleod.

johnh009

Have you tried iShares Canada? They have a management fee of way less than 0.17% on their S&P Top 60 ETF, for example. Cannot go wrong with this fund. You cannot get a much lower fee than that.

http://ca.ishares.com/home.htm

ChrisBoar

You can convert your RSP to a RIF at any time. But ultimately it only becomes taxable when you start to draw income, and you have to draw minimum thresholds based on age. So your tax liability depends on the size of your RIF fund.

ChrisBoar

Well that's the lowest example you've picked. Most of the iShares MER's are greater than .4/.5% and some are almost 1% which is daylight robbery if you ask me for passive ETF's.

I'd love some of the Vanguard ETF's but the FOREX fees are the initial killer.

johnh009

Yes, I agree, I am not an RSP fan but I concede it is horses for courses. Initially, I was only saying that the stock market, and specifically well managed ETFs, can be a cheaper alternative some of these expensively managed pension funds and provide good tax advantages.

johnh009

I just picked that one because it is secure (and passive) and is a good one for someone who does not want to be actively involved managing the fund themselves.

Not only are the FOREX fees a killer but you have to keep one eye on the stock market and the other eye on the exchange rate. I have been in a position where I have made on the stock and lost overall on the conversion.