Category Archives: RRSP

Odette Morin

Fear Not, You Too Can Live The Dream

Most of us dream one day of having a leisure life and kissing goodbye to the grueling 5 days a week work schedule.  How nice will it feel to be able to sleep in, go for long walks, travel and live the good life.  This dream however is very costly.  You need a lot of money to fund retirement for 30-40 years. A 2016 study by RBC, shows that 56% of non-retired Canadians were worried that they would not be able to enjoy the lifestyle to which they were currently accustomed.

What’s the solution?  Face reality, get the facts on your situation and fear not.

A new Leger poll for Mackenzie Investments finds that 42% of Canadians currently have a financial advisor, while 57% do not. Older Canadians are significantly more likely to have an advisor, Leger says, which may account for their more positive sentiment towards RRSP season than those who are younger. Leger also found most Canadians (68%) say their mood for the approaching RRSP deadline is “indifferent.”
About a quarter of Canadians (26%) say they feel “confident” or “excited” heading into RRSP season. For Canadian respondents who use a financial advisor, that figure jumps to 40%. Leger surveyed 1,522 Canadians online between January 2 to 5, 2017.

So, get help to gain clarity on the future and save as much as you can to ensure a comfortable, stress free retirement!

Odette Morin
Odette Morin

Contact us early to make your RRSP contribution!

RRSP is upon us and soon you will get an email from Anthony or Frank asking you whether you plan to make an RRSP contribution this year.  You should make arrangements early even if you don’t want to make the contribution right away simply because we will have more time to figure out what is best for you.

Here is what we will ask you to optimize your planning and maximize your tax saving now and at retirement.

  1. How much of a contribution do you want to make?  Of course, you should at least make enough of a contribution to meet your annual saving goal as calculated at your last annual review meeting or ask us and we will figure this out with you.
  2. Do you have the RRSP deduction room? If we do your taxes, we will know what your 2016 RRSP deduction limit is.  If not, you can sign a CRA authorization form to allow us to view your tax information online.
  3. If you have a spouse, we will need to know your spouse’s income as well as yours. We need this information to assess and determine if it is best to direct the contribution to a regular RRSP or a Spousal RRSP.
  4. We will also look at both your retirement savings total and try to equalize the accounts to be able to split income at retirement and save taxes.
  5. We will also ask whether your 2017 income is likely to be much greater than 2016’s income.  If this is the case, you can still make the contribution now but may be best to carry it forward to 2017 tax return.
  6. We will also make sure that you make your RRSP Homebuyers plan repayment if you have a repayment to make.
  7. Finally, if you plan to use some of your RRSP to buy a home, we will put these funds in a “short term” RRSP saving fund to avoid any fees and market losses.

Contact us early to get the most of your RRSP planning! Contact email hidden; JavaScript is required or email hidden; JavaScript is required


Terry Broaders

An RRSP Urban Myth

Did you hear that Canada’s new plastic polymer bills contain a special agent that makes them smell like maple syrup?  That’s a great story but that’s all it is; just a story.  It’s another urban myth just like many myths surrounding RRSPs.

One myth we hear often is that RRSPs are a terrible idea because “you lose the lucrative dividend tax credit and the 50% capital gains reduction; that it is always better to invest outside of an RRSP.”   It’s been proven time and time again that investing within an RRSP is more advantageous than investing in a non-registered account.

Let’s consider a simple example.

Assume an individual has saved $10,000 and she’s wondering whether she should invest it inside her RRSP or in a non-registered account. We’ll further assume her marginal tax rate is 40% and that she buys an investment that triples in value over a 20-year period.

Would she be better off investing inside or outside her RRSP?

To answer that question, we need to consider the tax refund.  Assuming she has income tax deducted from her paycheque, a $10,000 contribution to her RRSP will generate a $4,000 tax refund because she’s in a 40% tax bracket.  So, that $10,000 RRSP contribution wouldn’t actually cost her $10,000; it would cost her just $6,000 ($10,000 minus the $4,000 refund).  Stated another way, at a 40% marginal tax rate, $10,000 inside an RRSP (which contains pre-tax dollars) is equivalent to $6,000 in a nonregistered account (which contains after-tax dollars).  This is because if you are paid $10,000 and you are in a 40% marginal tax rate the government would take $4,000 leaving you with $6,000.

Now, let’s return to the example, using these numbers as our starting points. First, investing inside the RRSP: The $10,000 would triple to $30,000 after 20 years; that’s an average annual return of 5.65%. If she then sells the investment and withdraws the money, she’ll pay $12,000 of income tax (40 per cent of $30,000) and be left with a net $18,000.

Now, investing outside the RRSP: The $6,000 would grow to $18,000 after 20 years. If she then sells the investment, she’ll pay capital gains tax of 20 per cent (half of 40 per cent) on the $12,000 difference between her sale and purchase prices. After deducting $2,400 in tax, she’ll be left with just $15,600.

Verdict: The RRSP produces a superior return. Notice that the difference between the RRSP and non-registered totals ($18,000 versus $15,600) is equal to the capital gains tax ($2,400) that applies in the non-registered scenario. Far from “losing the 50% capital gains reduction,” the RRSP avoids capital gains tax entirely.

The RRSP will always come out ahead if you assume a constant marginal tax rate and if you start with amounts that are equivalent on an after-tax basis. That’s because capital gains, dividends and interest are not taxed in an RRSP, but they are taxed in a non-registered account.  With an RRSP, the only tax is on withdrawals. People love to complain about the tax on withdrawals because it looks so large, but it’s really just the original tax they deferred plus the growth of that tax over time. As the example above showed, even after paying tax on withdrawals, the RRSP investor still wins. If an investor’s marginal tax rate is lower in retirement as it nearly always is, the benefit of RRSPs is even stronger.

What if someone’s marginal tax rate is higher in retirement?  This would be extremely unusual as most people simply make less money when retired versus while working, But in this case wouldn’t that make RRSPs a bad choice? Not necessarily says Jamie Golombek, managing director of tax and estate planning with CIBC Wealth Advisory Services. In a research paper available at he examined various scenarios.  His analysis showed that, even assuming a fairly drastic 10%-percentage-point increase in the marginal effective tax rate, RRSPs would still enjoy an advantage over non-registered accounts given a long enough investing horizon. That’s because the benefits of tax-free compounding would eventually outweigh the impact of a higher METR on withdrawals.

So given the choice between an RRSP and a non-registered investment the RRSP is the superior choice.

Odette Morin

How bright is the future really?

I walked by a bank the other day. In the window was a cheery poster of a boomer on the golf course. The headline asked if you were ready for retirement. A positive image, but so misleading.

The reality is that we’re living longer. That means your savings will have to carry you for 20, 30, even 40 years. For many, not having enough money to play golf will be the least of our concerns.

The outlook isn’t sunny, but it can be. Before I give you the good news though, we need to face facts. From a report, released last year by the Broadbent Institute:

  • Half of Canadian couples between the ages of 55 and 64 have no employer pension.
  • Of those, less than 20% of middle-income families have enough saved to adequately supplement government benefits and pension plans.
  • A large percentage of working Canadians are heading into retirement without adequate savings to keep them out of poverty.
  • Income trends suggest the percentage of Canadian seniors living in poverty will increase in the coming years, especially for single women who already face a higher than average rate.
  • The poverty rate for seniors will climb at the same time as a sharply rising number of Canadians hit retirement age in the next two decades; more than 20 per cent of the population will be older than 65 within 10 years.

What’s more, people over 40 years old are using credit to pay for exotic vacations, bigger homes and other non-essentials. Imagine being in your 40’s and working on your debt instead of your retirement saving?

The good news is that you have the power to change how your future unfolds and you don’t have to do it alone. See your financial advisor! Book regular planning meetings and take control over your future.

Did you know that 57% of Canadians don’t have a financial advisor? People take their cars to specialists, but they don’t think to bring their financial future to experts.  Mon Dieu!

Okay, okay, I’ll spare you my rant. But do let me leave you with this – if you don’t get expert help to spend efficiently, maximize your retirement savings and defer taxes – funding your golf hobby will be the least of your concerns. Retirement can be freeing or devastating. How you experience it, is up to you.

Anthony Sabti

Weekly Update – February 12, 2016

February 12, 2016 – Weekly Brief

TSX Rallies on Friday, Cutting into Earlier Losses as Oil & Financials Jump

The S&P/TSX Composite finished down again this week, but rallied on Friday with a 2.4%, 293.87 point jump, to finish trading at 12,381.24. The Friday uptick was the first positive finish for the TSX in 6 days. As one might expect, this positive finish was mainly driven by increases in the financial and energy sectors; however, all 10 of the TSXs main sectors were in the black on Friday.

Oil, which hit a 12-year low earlier in the week, rebounded strongly to finish the week only slightly down. Once again, renewed optimism over the possibility of an OPEC deal with other producers to cut supply led the to the rebound. From week to week, analyst sentiment seems to be flipping between optimistic and pessimistic on the future of an OPEC agreement. West Texas Intermediate saw future contracts rise 12%.

The Loonie finished the week at 72.22 cents to the US Dollar, up 0.5% for the week. Gold has been seen all year as a safe haven, and that sentiment did not change this week; indeed, Gold increased on the week to $1238.50 per ounce, up 5.5% for the week. Gold maintained its status trend as a safe haven, as evidenced by it’s nearly 11% increase year-to-date.

In the U.S., data from Friday revealed that consumer confidence has declined in February, with stock prices and the perception of weaker global conditions being front-and-centre in consumers’ thoughts. A difficult week in the U.S. markets did nothing to bolster consumer confidence either, as all markets were down for the week.

Much of the selloff was sparked on Wednesday, as U.S. Federal Reserve Chair Janet Yellen’s Tuesday remarks to Congress indicated a potential delay in further rate hikes. Worries about a softening U.S. economy were certainly not eased by these statements, and Wednesday saw a selloff in Europe and Asia which was followed by similar such selloffs later in the day in North America.

Many banks also scared investors, as plunging rates around the world have led to fears of decreasing profitability for banks; consequently, banks in Greece, France, Italy and Germany saw their stocks decrease. Sweden Central Bank “Riksbank” also added fuel to the fire with an additional rate cut, plunging the key Swedish rate to -0.5% from -0.35%.

Falling markets continue to offer a stellar opportunity for Canadians looking to invest for the long term. By adding to their current portfolios, investors in Canada can enjoy a lowered average cost base on their overall portfolio. To be sure, low oil prices are transferring money out of the hands of oil exporters and into the hands of oil importing countries.

Inevitably, that transfer will lead to increased spending by these importing countries. Increased spending will help the economy to grow, and the ensuing market rebounds will allow today’s investments to enjoy strong growth down the line. It cannot be stressed enough how opportune the timing is of the markets declining, as the RRSP contribution deadline for the 2015 Tax Year is a little over 2 weeks away (February 29th).

Blog Links

Why A Bad Economy Can Make for a Better Lifestyle

Market Update as of February 12, 2016

North America

The TSX closed at 12381, down -383 points or -3.00% over the past week. YTD the TSX is down -4.67%.

The DOW closed at 15974, down -231 points or -1.43% over the past week. YTD the DOW is down -8.33%.

The S&P closed at 1865, down -15 points or -0.80% over the past week. YTD the S&P is down -8.76%.

The Nasdaq closed at 4338, down -251 points or -0.57% over the past week. YTD the Nasdaq is down -13.36%.

Gold closed at 1239, up 56.00 points or 5.54% over the past week. YTD gold is up 17.00%.

Oil closed at 29.08, down -1.77 points or -5.74% over the past week. YTD oil is down -21.51%.

The USD/CAD closed at 1.384803, down -0.0058 points or -0.42% over the past week. YTD the USD/CAD is up 0.08%.


The MSCI closed at 1469, down -80 points or -5.16% over the past week. YTD the MSCI is down -11.67%.

The Euro Stoxx 50 closed at 2756, down -123 points or -4.27% over the past week. YTD the Euro Stoxx 50 is down -15.67%.

The FTSE closed at 5708, down -140 points or -2.39% over the past week. YTD the FTSE is down -8.55%.

The CAC closed at 3995, down -216 points or -4.90% over the past week. YTD the CAC is down -13.85%.

DAX closed at 8968, down -512.00 points or -3.42% over the past week. YTD DAX is down -16.52%.

Nikkei closed at 14953, down -1867.00 points or -11.10% over the past week. YTD Nikkei is down -21.44%.

The Shanghai closed at 2765, up 1.0000 points or 0.04% over the past week. YTD the Shanghai is down -21.87%.

Sources: Globe Advisor, Yahoo! Finance, Dynamic Funds