Steve_

Start an RRSP, put money into the RRSP, invest the money in an RRSP in an index ETF e.g. one that follows the TSX or the S&P 500. If interest rates ever actually do pick up (not likely) you might want to hold some bonds in blue chips and treasuries.

Other than that it's impossible to say because everyone has their own individual circumstances.

Forest fire?

OAS isn't a lot of money anyway and as an immigrant you're not going to get 40 qualifying years so meh.

Yeah you're right I don't agree with your advice. Under the UK-Canada tax treaty there is no withholding tax on periodic withdrawals from an RRSP so the UK income tax rate would apply if you were in the UK. In the US it's a 15% withholding rate which you'd likely hit anyway. So if you buy an annuity say, it's not really an issue.

The problem with TFSAs is that they aren't recognized by any tax treaty, so if the plan is to move abroad, you have to ditch them as soon as you do.

My view is that if your goal is retirement funding, then RRSPs first, TFSAs second. Where TFSAs come in useful is rolling over money from an RRIF when you are forced to make withdrawals. That is in fact the main use of TFSAs if you look at the CRA statistics.

Steve_

Didn't I read somewhere that people are hiding money inside of TFSAs to reduce their income so they get more GIS?

not2old

Retirement related, this is a good thing eh!

Imagine someone that has approx 20 years worth of max TFSA contributions going into retirement, who over that period was savy enough to invest it in a 5% compounding investment that grew it to $200,000 in total.

Still at 5% its producing tax free income of $10k/year & they also get the max GIS because their CPP in todays money is only $500/mth ($6k/yr) (either thats all they get or they income split with their spouse) + max OAS with GST/HST credit + provincial add-on's

Somewhere in the $30k+ per person is not too shabby for some & thats without any private, occupational or UK state pension - just being a Canadian

So why save volumes & have all of that RRSP's?

Steve_

Because RRSPs make more money than a TFSA by miles in the long run. You take the tax credit upfront, which reduces your income tax (and thus you have more money to invest) then when you start to make withdrawals, you have a large degree of control over the amount of the withdrawals so therefore you can control the amount of income tax you pay. Whereas with a TFSA you've got to pay all the tax upfront. Also, obviously an RRSP has the advantage that you can put more money into it.

There is an argument that for people on medium to low incomes, a TFSA makes more sense because you're in a low tax band anyway and unlikely to be saving more than $5,500, but I still disagree with even that.

The problem with TFSAs is that they are very poorly named because they are not actually "tax free". They're free from Canadian tax but not foreign tax.

Say you invest in US equities, there's a 15% non-resident tax on dividends. But an RRSP is a pension, so under the tax treaty, there is no tax. Ditto for dozens of other jurisdictions.

A TFSA is thus quite limited as an investment vehicle.

Another problem is portability - if you become tax resident somewhere else, your TFSA is taxed in that jurisdiction. Once again, your RRSP is usually recognized under the relevant tax treaty so not a problem.

Frankly it's not an either/or choice, you can do both and TFSAs can make sense for things where you're trying to save for stuff other than retirement. But RRSPs are a better method of saving for retirement than TFSAs.

Shard

What is the UK equivalent of an RRSP? Personal pension plan? And ISA being like a TFSA?

BristolUK

One thing I miss from the UK are Unit Trusts. I had one under the Personal Equity Plan umbrella.

I believe the equivalent here are Mutual Funds but I don't find them particularly easy to understand.

In the UK I read a couple of 'finance' columns in the Saturday papers, with comparison tables, and I had packages sent to me from three or four options - I remember Gartmore, Jupiter and Invesco and went with the former.

They all listed their various funds and how they performed over the last few years - with the old "past performance not necessarily a guide" or whatever it said.

I worked out what funds to use and it was great getting the twice a year reports back - especially as my picks were doing so well.

A few years on I did something very similar for some AVCs I was making (in anticipation of making up a shortfall in my civil service pension from my plans to early retire in Spain rather than Canada ).

Not that I have funds to invest until selling my rental (this year or next) but I can't find anything similarly researchable here.

RBC offered some 'practice' thing which I registered for but I couldn't make head nor tail of it.

There used to be something on BE where you could buy shares or whatever it was with your Karma points. That was fun.

Perhaps N2O can advise a source of an easy to understand guide/comparison of funds tables for mutual funds?

not2old

disclaimer: I am not & have never been a financial advisor/consultant. Anything that I learned about this is purely 'seat of the pants' experience

This whole 'financial investing' can be a maze

In the following, from my own perspective....

@ post #64 steve.
First off, not everyone has surplus cash for RRSP's - those that do & do the contribution, either themselves or a spousal - as everyone knows at the end of the day 'the taxman commeth' when folks start to withdraw from the RRSP.

Taking the postion that RRSP's are a good thing .....

Over the long years that I have been in Canada, from time to time I contributed to RRSP's, then found out that I would have been way better paying off the mortgage debt faster instead of RRSP contributions (yeah I know today its impossible to even afford a down payment, never mind the mortgage + everything else that goes with it), for the reason

a) Take a typical 25- 30 year mortgage at todays rate, folks end up paying at least double of what the intial mortgage amount was from day one

b) That, should you have a mortgage, that any money that would go to an RRSP - just plonk it into paying off the mortgage.

Then 15 years down the road, when hopefully a person is earning more than they would have done 15 years ealier, they would have a huge unused RRSP contribution. Mortgage free, take all those yearly mortgage payments + more if one can afford too, putting them into an RRSP, maybe get a larger refund to put back into the RRSP

@post 66 Bristol
At the end of the day its all about sophistication, EITHER doing it yourself with some basic knowledge or putting into the hands of a financial planner/advisor (who never loses) they always paid to play with 'other peoples money (OPM). No risk on their part ever.

http://www.osc.gov.on.ca/documents/e...l-funds_en.pdf

I am not a Mutual fund investor, never have been, nor with or into the funds that the personal financial planner/advisors or those at the banks try to get customers into.... for the reason

a) There are costs associated with mutual funds, such as, Yearly Management fees, front load or back load fees (fees just for the priviledge of investing in Mutual funds)

b) With technology today, there are options. Banks & FA's make money on individual investors, there is never a guarantee on Mutual funds or anything they invest in on your behalf.... other than a GIC or daily interest savings account

The mutual fund industry is huge, simply 'investment products' run & managed by hundreds if not thousands of companies. They invest in all sorts, from Bonds, Commodities, financials/banks, emerging markets, foreign whatever, REIT's (real estate investment trusts) - something an individual can do on their own with little knowledge

An alternate investment 'DIY' product are ETF's, CEF's (closed end funds), income trusts (believe it or not), blue chip dividend paying equities, preferred shares, even bonds, that individuals (not just mutual fund companies) can invest in

BTW, mutual fund companies invest in a wide broad range of products that are available to individual investors

http://www.theglobeandmail.com/globe...nd-etfs/funds/

http://globefunddb.theglobeandmail.c...lter?pi_type=B

OK, back to the intial question on 'Trust units/trust fund' & other products


Trust units
Income Trusts - Frequently Asked Questions | TMXmoney

exchange traded funds
Exchange Traded Funds - ETF Providers in Canada | TMXmoney | Exchange Traded Funds (ETFs)

Closed end funds (CEF's)
Closed-End Funds | TMXmoney

Closed-End Fund Report | Globefund

Bank stocks that pay dividends (nice ones), as well as corporate/financial preferred shares

https://www.cibcwg.com/c/document_li...&groupId=92706

Safe as houses, well, as safe as it gets

Stick with an 'fixed rate savings' (UK), certificate of deposits (CD's in the US) known in Canada as GIC's

.

BristolUK

Yep, that's what I did in the UK
Depending on their role, no risk is different to no gain
But this was also true of the Unit/Investment Trusts in the UK too. I don't know if the structure in Canada is any different but I recall that the fees in the UK were a % of value rather than a % of the investor's contribution.

So the big money to be made by the fund managers was where the fund had done well.

The Fund managers were like football managers though. Well, top ones anyway. If they were good at it, they made more money but it was done from the money you made rather than the money you invested.

Yes, they're playing with OPM but the incentive is that the better they are, the better they do. Or that was, at least, my impression.

That was the same in the UK too. I just found Unit Trusts were a whole lot more accessible. I remember being aware of many different markets - geographical, industrial, scientific etc...even ethical investing.

Thanks for the links. I shall check them out later. I thought you may be aware of some because of other useful ones you've posted

Perhaps I need to look at a weekend Globe and Mail or that otherwise awful paper National Post too.

From that other thread, there are a couple of savings accounts - EQ (Equitable) in particular - giving better returns on straightforward savings accounts than GICs.
I thought I'd seen some GICs that were quite similar to UK Unit Trusts.

scrubbedexpat091

Only thing we have currently is the 130 my wife gets at work from her employer into the employer RRSP. Only 1 month in, and the job is 1-3 years in duration, so not long term plan.

Currently not feasible to save, but maybe in 10 year or so we will be in a better position, but then pushing 50, may not be enough time to save enough, scary times.

Piff Poff

Oh and I have an amount in RRSP's - his is far higher than mine as he has been a higher earner and in FT work since forever. We no longer add to our RRSPs unless either of us have a job where the company puts a little in and you add to it. Reminds me, must figure out if I have one with Eddie Bauer - can't remember Ooops!

We invest our money in cars (big surprise hey?) Slowly but surely we are making our way up to the bigger money collector cars, some are complete projects (my 55 chevy) some just need a paint job or an engine rebuild and some are running and being used - these ones will get sold on and replaced as and when. OH's philosophy is whatever he buys, if he can't sell it tomorrow for what he paid for it (or more) then it's not worth it.

The county had decreed we have too many, a big sell off is in process. I'm not sad lol.

scrubbedexpat091

My great uncle was a collector of cars, all from his era growing up/young adult so 20's to 40's stuff, he had a huge garage filled with cars, and related parts belonging to cars....


I imagine you may have a large garage of some sort as well?


I'd like to say my hobby would bring back some return, but despite everything costing a fortune, aquarium stuff just become mostly worthless once bought....

Piff Poff

We have a shed that holds 6, a garage that holds 3 and are in process of building a lean too, similar to a horse shed, should take 4-6, we need to get rid of 10 -15 (if not more) by end of July 2017. It's all good fun until one too many is bought and Mrs Piff loses her shit for a few days

scrubbedexpat091

Math and investing and such I am clueless about.

Assuming 30 more years of working, maybe 25, working til almost 70 might be pushing it.

Is it even possible at say 100/month to even get to an amount one in older years could even live on for basic needs?

I use 100/month as that is the largest viable amount we could do currently

ann m

Someone will have a funky table that works out estimated compound interest on your proposed $1,200 per year - I don't. But whatever way you look at it, it would be at least $40,000 (minimum) sitting in a pot somewhere. That's $40,000 more than you have now. You can't 'live off it' exactly, but it would be super useful for something in your more mature years.

I think along the lines of 'it's never too late to start saving something' - no matter how modest.

We had a financial fella come and chat to our employees in the Spring - he mentioned that if you could accumulate about $30,000 cash before you're 30 - that amount will do most of the work for you for retirement. You wouldn't really have to do too much more after that. How realistic that is, I don't know, but I've got one 18 year old working on it.

He was also a fan of TFSA's - in that people should max them out if at all possible. That's tax free income later when you want to cash it in for the Winnebago.

scrubbedexpat091

True, something is better then nothing.

Using TD website calculator for retirement, they say based on our current income, we would need to have 18,000/yr in retirement to keep the same quality of life. (I guess somehow life gets cheaper in old age?)

"To enjoy a monthly income of $1,500 when you retire, you will need to save a total of $78,464 by age 68."

TD says one needs 60-80% of their current income in retirement to maintain the same quality of life, not sure I understand what changes in old age that makes life cheaper, but going with their numbers.