I've been reading absolutely everything on this site over the past couple of weeks, and I'm learning so much! This is the first time I've submitted a post.
I am a Canadian desperately seeking some guidance as to how to move forward with our financial affairs. This year I am 58 and my husband is 70.
Current situation:
Husband retired 10 years ago and he has a combined net monthly income of $2,000 (defined benefit pension, CPP and OAS).
I’m receiving disability benefits from my employer and continue to contribute to defined pension plan ($462), and health benefit plan. My net monthly income is $1,870 ($1,100 is from CPP-Disability, and the remainder of $800 is non-taxable from employer).
Rental Income: $1,400
Total monthly income: $5,270
Expenses:
Our monthly expenses are running about $5,000 since January. We’ve been withdrawing from RRSP/non-registered investments as needed. I’ve started tracking to really see where exactly the $$ is going. This does cover the costs of our home away from home, vacations, medical expenses, gifts, and we subsidize a rental property by about $400/month, as the $1,400 monthly rental income doesn’t quite cover everything, although we are continually increasing equity. Otherwise no debts.
Investments:
Husband – RRSP $100,000 in laddered GICs. One just matured so $18,000 in RRSP Savings. TFSA $5,200 in a savings account Total: $105,200
Me – RRSP $168,000 in 5 yr laddered GICs. Some matured recently so have $85,000 in RRSP Savings as I haven’t known what to do. TFSA $10,000 (can’t put anymore in this year) Non-registered Savings – about $70,000 again in GICs/Savings Total: $248,000
We have an additional $10,000 spread out in accounts avoiding monthly account charges.
Our property consists of our 27 year old home valued at approximately $500,000 (recently updated roof, windows, interior, furnace, etc.). We also have a vacation home valued approximately $300,000, and a rental condo with about $180,000 equity ($360,000-$180,000 mortgage). We have a 10 year old minivan (wheelchair accessible) valued about $30,000.
Total Assets: $1,373,200
• My main dilemma is how to structure our investments (Registered Disability Savings Plan, Tax Free Savings Accounts, Registered Retirement Savings Plans and non-registered savings). We are far too heavy in GICs and savings not earning any interest. Until recently I’ve felt our risk was in our real estate holdings. I don’t think I’d withdraw money from my RRSP until I’m 71 (13 years), as we’d have income from husband’s RRSP, non-registered investments, TFSAs and an RDSP.
• I’m really feeling the crunch as next year is the deadline that I have to contribute a maximum of $200,000 to a Registered Disability Savings Plan as I will be 59 by the end of 2015. My understanding is that tax is paid on the investment portion as it’s withdrawn and there are requirements to withdraw starting in the year in which the person turns 60 at the latest according to the formula (83-age)/30. The RDSP is a under-utilized plan as I’ve read recently that of about 500,000 Canadians eligible to open an RDSP, only 77,000 have.
Registered Disability Savings Plan
www.esdc.gc.ca/eng/disability/savings/index.shtml RDSP Resource Centre
http://rdspresource.ca/ Note: So far I have not come across anything about RDSPs, except on the Canadian government website, in any of the Canadian finance books released in recent years other than an excellent article in Moneysense in Spring 2014
www.moneysense.ca/save/rdsp-a-path-to-prosperity I haven’t been able to get any advice from our bank as the plan is so new that staff only know about opening a plan, not how to incorporate the plan into the overall financial picture. My investment advisor (where we get our GICs), doesn’t deal with RDSPs. I’ve also approached a couple of other financial advisors and continue to receive the same information that no one is familiar with them.
An option to fund the RDSP would be to sell rental condo in 2015 and put the proceeds towards maxxing out the RDSP with $200,000. Being that I’d have to start withdrawing about $8,500 each year starting in 2016, what type of investments would be best in an RDSP.
• With my RRSP, I’m considering using TD e-series investments as the GICs mature since I have a timeline of 13 years for money to grow before withdrawing.
• My husband will have to convert his RRSP to a RRIF by next year when he’ll be 71 and start making withdrawals. He has the option to withdraw a lesser percentage based on my age instead 1÷(90 – your current age), or follow the prescribed table of percentages starting at age 71. Other than GICs, I’m not sure what would be best the best investments since he’d be starting to draw money down in the next year.
I would so appreciate any comments/advice anyone might have. Thank you.