Author Topic: Next step after tfsa is maxed out.  (Read 3298 times)

Islander

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Next step after tfsa is maxed out.
« on: January 14, 2018, 11:15:41 PM »
Hello fellow mustachians!

I have a maxed out tfsa currently holding tangerine index mutual fund funds with some cash left over to invest. Can someone please  point me in the right direction for the next steps. I plan on currently minimizing my MER so currently experimenting with td eseries. Please give me some insights. Also wanted to add I won't be investing in a rrsp because of low income. Thank you in advance.

Lews Therin

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Re: Next step after tfsa is maxed out.
« Reply #1 on: January 15, 2018, 06:23:52 AM »
Unregistered investing.

Depending on how low you are (and location) CAD dividend paying stocks might be better than going with index ETFs.

I personally use Questrade (*For your tangerine accounts, if you switch over to Questrade, it'll bring your MER from 1% down to .07-.14% That's a significant amount of money.)\

I recommend reading Canadian Couch Potato (Or checking out theRichMoose Blog.)

Islander

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Re: Next step after tfsa is maxed out.
« Reply #2 on: January 15, 2018, 07:28:43 AM »
Thanks. I have read both blogs and will keep learning.

Lews Therin

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Re: Next step after tfsa is maxed out.
« Reply #3 on: January 15, 2018, 07:36:52 AM »
While the TD E Series is better than Tangerine, Questrade, Interactive Brokers and others will allow you to hold ETFs directly, at lower than .1% MER (TD is .30 ish and higher)

Most brokers will pay the fee that it costs to transfer the money from where it was previously invested. There's youtube videos explaining how sites like IB or Questrade work, so it's pretty simple if you ensure you always use the "limit" buy/sells (just in case there is weird fluctuations in the day). MMM has two topics that explain a bit (depending on how well versed you are)

I was in TD E series last year, and it was worth switching over, as long as you have enough to ensure that they pay for the transfer fees (25k needed I believe)

https://www.mrmoneymustache.com/2013/09/21/canadian-investing-with-mr-frugal-toque-part-1/
http://www.mrmoneymustache.com/2013/12/15/canadian-investing-with-mr-frugal-toque-part-two/

If you choose Questrade, I can send you a code so I can get 25$, and you get between 25-250$ (1000$ invested, to 100k invested in the first 3 months, including the amount transferred over)
http://www.questrade.com/promotions/refer_a_friend?pid=15-08-00-Qcom-Promotions-link-06-ReferAFriend
« Last Edit: January 15, 2018, 07:38:51 AM by Canadian Ben »

Prairie Stash

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Re: Next step after tfsa is maxed out.
« Reply #4 on: January 15, 2018, 09:14:12 AM »
Congrats on the maxed out TFSA. I understand you also have an adequate RESP for your 2 children (next place to park cash- optimal amount is $2500/child/year and not a penny more).

Ben is spot on, except it ignored your 2 children, which was hidden in your history. I agree with Ben, you should give him a Questrade referral.

There is a difference between people with and without kids. Your refund is NOT your marginal tax rate, its the marginal tax rate + the increased CCB! Any RRSP contribution you do now actually gets you bigger CCB cheques every month, on top of the refund. If you can swing it, the RRSP while you have kids will likely be the same as having a high income and contributing to an RRSP.

Give me the province and we can show you the percentages. The caveat is that once your household income dips under $30,000, there is no further benefit. But also remember, the benefit is based on Household, so you need to include your partners income when determining the increase in CCB (its not just your low income).

My spouse and I are in this category, she is low income (works 60% time) but it still makes more sense to do the RRSP, only because of the CCB increase.

Islander

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Re: Next step after tfsa is maxed out.
« Reply #5 on: January 15, 2018, 09:02:39 PM »
Thanks Ben and Prairie stash. I will definitely look into Questrade and watch the videos you mentioned and remember you when I open my account. As for ccb Iam already receiving the maximum. Let's say once I move everything to questede what do you recommend I look into? A unregistered account for dividend investing? (Not even sure what that is, but will study it if that's the case)

My partner invest completely different, he likes to stock pick and we don't agree so he does his own thing and I do mine. Any advice on this?

RichMoose

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Re: Next step after tfsa is maxed out.
« Reply #6 on: January 15, 2018, 10:40:48 PM »
Thanks Ben and Prairie stash. I will definitely look into Questrade and watch the videos you mentioned and remember you when I open my account. As for ccb Iam already receiving the maximum. Let's say once I move everything to questede what do you recommend I look into? A unregistered account for dividend investing? (Not even sure what that is, but will study it if that's the case)

My partner invest completely different, he likes to stock pick and we don't agree so he does his own thing and I do mine. Any advice on this?
If you switch to Questrade, you would just apply the CCP portfolio with ETFs. Normally your XAW.TO would go into your TFSA first. The Canadian allocation XIC.TO and bonds ZAG.TO/ZDB.TO would go into the unregistered account.
I wouldn't pursue dividend investing, especially via stock picking. Maybe you could choose a Canadian dividend ETF like XDIV.TO as your Canadian allocation. I'm not a big fan of dividend investing though, so I'll hold my thoughts here...
If you and your SO have different investment ideas, just keep things separate. Maybe he will convert himself as time goes on and your returns beat his more consistently.
Low costs are a big plus though and, as Canadian Ben says, saving that 0.9% in fees year after year will easily pay for the switch to ETFs.

Freedomin5

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Re: Next step after tfsa is maxed out.
« Reply #7 on: January 15, 2018, 11:17:31 PM »
My partner invest completely different, he likes to stock pick and we don't agree so he does his own thing and I do mine. Any advice on this?

My DH is the same. Knows next to nothing about investing and likes to pick stocks. So, he invested his earnings and I invested my earnings. At the end of the year, we compared returns and volatility. Eventually, he agreed to let me handle most of the investments (CCP's portfolio). We have basics (property, retirement nest egg) that I manage in less volatile investments (Index ETFs), and an agreed upon amount that goes into these basics each year. Anything he earns above and beyond these basics is his to stock pick with to his heart's content.

Islander

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Re: Next step after tfsa is maxed out.
« Reply #8 on: January 15, 2018, 11:49:27 PM »
Yes, me and my SO will definitely continue to keep our investments separate and like Mr. rich moose said maybe he will eventually convert. No pressure from me.

Great, so I will follow through with Questrade and CCP portifolo with ETFs. Thanks for the support everyone. I really appreciate your time responding to me and I look forward to planning my next steps.

Lews Therin

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Re: Next step after tfsa is maxed out.
« Reply #9 on: January 16, 2018, 06:22:08 AM »
For Questrade, you'll need two accounts after creating your login to start, TFSA and a "margin account" (means open/unregistered) which depending on your tax bracket, time frame and future income it might be worth to look at either dividend paying ETFs (if you are very low income in Ontario for example, but make sure the income doesn't push up your income too high for the CCB); Index ETFs like Rich Moose named, or swap based ETFs (which are ETFs that don't pay dividends, but rather increase the cost basis of the ETF, so you only have capital gains, which can be taken whenever it is better for tax optimization)

If you do want to use my referral code, it's the QPass key: 766630906408846


Prairie Stash

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Re: Next step after tfsa is maxed out.
« Reply #10 on: January 16, 2018, 08:59:02 AM »
Thanks Ben and Prairie stash. I will definitely look into Questrade and watch the videos you mentioned and remember you when I open my account. As for ccb Iam already receiving the maximum. Let's say once I move everything to questede what do you recommend I look into? A unregistered account for dividend investing? (Not even sure what that is, but will study it if that's the case)

My partner invest completely different, he likes to stock pick and we don't agree so he does his own thing and I do mine. Any advice on this?
That is seriously badass to get max CCB. That's a family net income of $30K (combined with spouse) to get $6,400/child ($533/month/child), which means a household net of $42,800. From that you are able to max out $11,000 in TFSA, RESP of $5000 and live off the rest (ignoring the RESP, most people would struggle with that income). Then you have extra to invest, well done! I'm looking at the budget here and realizing something very important, this isn't just random praise.

Even low income Canadians need some RRSP money to do the FIRE plan optimally. Lets say you and your husband want to retire on $30k annually (getting max CCB implies you currently spend under this). You would each pull $5k tax free from the RRSP then pull $10k from the taxable account (total of $30k). In retirement some of that (for me) will be capital gains, which is taxed weird, you multiply $10k x 50% and pay tax on the $5000, so your net income will be $10k ($5k from RRSP and $5k from the taxable account); below the basic deduction! Thats the $30k plan for spouses, the quick version.

A low income Canadian with $100,000 in RRSP can avoid paying all taxes on it upon withdrawal. If they don't need the money to live on they can transfer the money into their TFSA in FIRE, to avoid OAS/GIS clawbacks in older age (always withdraw the most you can and transfer any leftovers to TFSA). They can still get the RRSP deduction now and get an extra $10-20K in money as refunds, which they can use to increase the stash.

You can still set up the RRSP in Questrade, just do it the same time as the TFSA and taxable accounts to get it all done at once (easier to do all 3).

Islander

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Re: Next step after tfsa is maxed out.
« Reply #11 on: January 16, 2018, 11:39:51 AM »
Thanks for the praise Prairie stash. I use to be a spendthrift and spent everything, living paycheque to paycheque while living at home. My SO on the other hand saves Everything and is a real mustachian even before I even knew there was such thing as FIRE community. My turning point was when we decided to have kids and needed more space. Both our parents gifted us some some funds. With that + my SO savings we relocated from a crazy real estate place to Vancouver island where it is way more affordable for housing. Our biggest factor was reducing our housing cost. With no mortgage and living within our means we are definitely in a good place to be able to save and invest. It was a lifestyle change from leaving the big city but worth it in so many ways. I went from spending everything (trying to fill a void) to saving everything instead (having kids changed me and I did a 360). My ultimate goal is to raise these kids and then pursue some hobby where I can give back to this world, do myself some soul searching. Anyway sorry to go on a tangent. Mr money mustache is true in saying his blog is actually a self help blog disguised as a financial blog. Well at least that's how it relates to me.

Thanks for all the great information, lots for me to learn and figure out but it is all very exciting and fun more than anything. Glad to have time on my side. All this rrsp/tfsa/resp stuff use to be mumbo jumbo stuff for me that I would just brush aside but now I actually understand lots of it all thanks to this mmm community. Can't thank you guys enough.

Islander

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Re: Next step after tfsa is maxed out.
« Reply #12 on: January 16, 2018, 11:44:57 AM »
All that information on rrsp is interesting ^^. Will definitely look into that some more. Do you have any info with that regards to rolling over unused resp incase the kids don't use all the funds. Where does that tie in?

bluebelle

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Re: Next step after tfsa is maxed out.
« Reply #13 on: January 16, 2018, 12:16:42 PM »
I went from spending everything (trying to fill a void) to saving everything instead (having kids changed me and I did a 360).
because I'm very literal and a PIA, I have to point out - A 360 is a circle, meaning you're back exactly where you started.....A 180 is when you've changed direction completely.

But seriously, as PairieStache pointed out, RRSPs can still have a place in a lower income earners retirement strategy

I don't have children, and know little about CCB, so I'll leave that to others to comment on that impact.  If you expect to retire early (before age 65), I still think an RRSP has benefits even if you will be in the same tax bracket during the withdrawal years as contribution years.  Example, you retire at 55 (meaning no income, you're going to live off investments).  If you're only pulling from your TFSA, you have no income, pay no tax, but can't use the basic tax credits.  If you had pulled $11K from an RRSP, you'd still pay no tax (except for Man, you'd pay $187), the money grows tax free, and you'd get a refund for the year you contributed.

If you're planning on working until 65 or will still have monies in your RRSP (or RRIF in converted), withdrawals do mess up possible GIS payments once CPP and OAS have kicked in.

I like the ernest and young calculators
http://www.ey.com/ca/en/services/tax/tax-calculators-2017-personal-tax
http://www.ey.com/ca/en/services/tax/tax-calculators-2017-rrsp-savings

Prairie Stash

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Re: Next step after tfsa is maxed out.
« Reply #14 on: January 16, 2018, 01:58:52 PM »
All that information on rrsp is interesting ^^. Will definitely look into that some more. Do you have any info with that regards to rolling over unused resp incase the kids don't use all the funds. Where does that tie in?
Its very hard to have unused money, the easiest is to stop contributions when they're teenagers. However, RESP can be used to pay rent and living expenses, as well as tuition. It can even be used to fund a child's TFSA while they're in school if desired. It can pay all their school expenses, which can add up.

If you want the money returned to you, the parent, the easiest is to charge the young adult rent. So you pull it out and pay tax in their hands (0% hopefully), then they pay you $800/month for 8 months ($6,400) which is tax free in your hands. its 100% legal and normal for a 19 year old to pay rent to their parent. I plan on my 20 year old kid (she's 4 now) to pay a token rent and a small amount for groceries, what I do with the money (I could give it back for a house payment) is up to me.

In the event neither child attends school, if you have RRSP room it gets rolled into there (or husbands). If you don't have room you end up losing the government match and it rolls into your investment account.

There really isn't any penalty at all, at worst its the same as having an investment account. Make sure you have a private RESP though, some if the big group plans will steal your money (Heritage Fund for example) if your kid doesn't go to school.

Islander

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Re: Next step after tfsa is maxed out.
« Reply #15 on: January 16, 2018, 08:00:04 PM »
Thanks for correcting me bluebelle.

Since I have your attention Prairie stash. Where is your resp held? Mine is at TD and I wanted to invest the kids resp with the eseries but I cannot hold the Canadian learning bond (additional grant for low income in BC) in a mutual fund account, therefor I can only invest that part in a GIC. It seems it would be confusing when it comes to withdrawing and not to mention balancing 2 different accounts.

Do you have any recommendations? Iam thinking about transferring my whole resp out of TD and perhaps into a RBC account. Iv read somewhere that at RBC they are able to receive the Canadian learning bond in a investing account that way I can get exposure to equites instead of just GICs for the Canadian learning bond part. Do you think I should go this route?

Islander

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Re: Next step after tfsa is maxed out.
« Reply #16 on: January 16, 2018, 08:04:23 PM »
As well, how did you get you calculations for the amount of rent? $800 a month X 8 ($6400). Is there a reason for capping at those numbers?

Thanks for your patience and helping me understand.

Prairie Stash

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Re: Next step after tfsa is maxed out.
« Reply #17 on: January 17, 2018, 07:43:03 AM »
I hold mine at RBC. I'm in SK so there was an issue with the Saskatchewan grant (the program ended Dec. 31, 2017), it really limited my options. However I previously had it in RBC Direct, the investing side of RBC and had no problems. I purchased ETF's in the same manner as the RRSP or TFSA accounts. You just made me realize I messed up this years contributions...I put them in the RBC side instead of opening up the RBC Direct side again. Thank you for the reminder!

For those unfamiliar with RBC, RBC direct is where you can buy stocks and ETF. RBC (bank) also has accounts but sells mutual funds (ugh). RBC Dominion is the third option for high net worth individuals and they will manage your money for a fee. 

I picked arbitrary rent numbers. If I had a roommate that I cooked meals for, I might charge around that. A room in my house use to rent for $350, it would now go for $500 but that wouldn't include food. Unlike a rental property, a room mate sharing your house is not taxable income. Essentially an adult child can be considered a roommate. The point was that its allowed to charge your children rent, that is paid from the RESP. As long as its a reasonable amount, can't charge $5000/month cause that would raise flags if discovered, its allowed. You can charge less if desired, giving a discount is always allowed. To find the appropriate rent look at local area listings for room mates and then charge extra for food (I chose $300, since I'm cooking it as well as buying it I can charge for those services).

Lews Therin

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Re: Next step after tfsa is maxed out.
« Reply #18 on: January 17, 2018, 07:45:54 AM »
I've heard from a few people that using TD E Series for RESP works well.

Prairie Stash

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Re: Next step after tfsa is maxed out.
« Reply #19 on: January 17, 2018, 07:55:23 AM »
RESP holdings of Prairie Stash are held at RBC (mutual funds) because of location. I spent several appointments with RBC getting this sorted out.

I'm currently heavy on US, because I hate balancing and I'm lazy. For the dollar amounts involved the difference is negligible. I typically buy only one thing a year (like american index) and get around to rebalancing when I purchase more, if I bother. I believe the American index also holds a lot of world exposure; Apple, Boeing, Johnson&Johnson, McDonald's etc. are global.

Bond    - 10% (I skip bonds in my TFSA and RRSP, but for my kids I keep a little)
Canadian Index - 20%
Us Index           - 70%

My biggest problem (still) is paralysis. I procrastinate because I try to optimize before I purchase and then delay getting it dealt with. Its better to just get it done and fix it after (what I currently try to do, while failing). I still regularly fail and find myself procrastinating while I keep learning.

RichMoose

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Re: Next step after tfsa is maxed out.
« Reply #20 on: January 17, 2018, 09:19:46 AM »
As well, how did you get you calculations for the amount of rent? $800 a month X 8 ($6400). Is there a reason for capping at those numbers?

Thanks for your patience and helping me understand.

Something to consider here is the way taxes work in each province. RESP withdrawals are taxable, but no one pays tax on the first ~$15k of income. So you can design your rent fee to be the difference between their tuition & books & fees and the $15k.

Then, as an added bonus, you can have your child transfer any portion of their education fees not used to reduce their own taxes to $0 to you so that you can reduce your own tax bill (limited to $5,000).
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-323-your-tuition-education-textbook-amounts/transferring-carrying-forward-amounts.html

Islander

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Re: Next step after tfsa is maxed out.
« Reply #21 on: January 17, 2018, 10:05:25 AM »
Bluebelle, td is good for resp eseries investing except that it won't support the Canadian learning bond which is an additional grant for low income. That's why Iam looking elsewhere. But honestly I have paralysis with what to do with the kids resp. Iam kinda stumped at the moment so it's just sitting there earning nothing at the moment.

Islander

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Re: Next step after tfsa is maxed out.
« Reply #22 on: January 17, 2018, 10:07:40 AM »
Sorry meant to address that to Canadian Ben. ^^

RichMoose

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Re: Next step after tfsa is maxed out.
« Reply #23 on: January 17, 2018, 10:46:16 AM »
Here are some options you might consider for the family RESP which are eligible for CESG, A-CESG, CLB, and BCTESG:

National Bank Directhttps://nbdb.ca/en/investment-solutions/accounts/registered-accounts/#index=4: No commissions on ETF transactions (where more than 100 units are bought/sold), but I believe they charge a $100 fee on accounts less than $20,000.

Wealthsimplehttps://www.wealthsimple.com/en-ca/investing-101/resp: All management done for you for a 0.5% fee (first $5,000 free), you just pick the portfolio you want based on the risk level.
« Last Edit: January 17, 2018, 01:29:32 PM by Mr. Rich Moose »

Islander

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Re: Next step after tfsa is maxed out.
« Reply #24 on: January 17, 2018, 11:01:14 AM »
Just what Iam looking for. Thank you Mr. Rich Moose!

Prairie Stash

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Re: Next step after tfsa is maxed out.
« Reply #25 on: January 17, 2018, 11:05:20 AM »
Bluebelle, td is good for resp eseries investing except that it won't support the Canadian learning bond which is an additional grant for low income. That's why Iam looking elsewhere. But honestly I have paralysis with what to do with the kids resp. Iam kinda stumped at the moment so it's just sitting there earning nothing at the moment.
https://www.canada.ca/en/employment-social-development/services/student-financial-aid/education-savings/resp/resp-promoters-list.html

Questrade also does CLB I see. RBC bank does CLB and BCTESG, I'm no familiar with the rules for the BC grants program.

Leave the RESP you currently have alone for now. Set up a new account, which takes a while to get the paperwork done (up to a couple weeks), and fund it with your 2018 contribution. Then you can move the money over after (say january 2019) and retroactively claim for the CLB.

I did a retroactive claim for grants. It was problematic but eventually (18 months) I received all the money.  I hope its easier for you. I used the wrong bank for SAGES (initially no bank offered SAGES grants), transferred it over and then had to be the only person the bank had met who tried getting it, luckily I'm stubborn.

As an aside, if your income increases you can use an RRSP contribution to get your Household income below the threshold, something to watch for, the 2017-2018 income level is $45,916. You just taught me that trick, thank you. It will apply to me when I FIRE.

Islander

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Re: Next step after tfsa is maxed out.
« Reply #26 on: January 17, 2018, 11:13:04 AM »
And if I go with either Questrade or National bank for example I would then invest in ETFs according to a CPP model?

RichMoose

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Re: Next step after tfsa is maxed out.
« Reply #27 on: January 17, 2018, 01:20:25 PM »
And if I go with either Questrade or National bank for example I would then invest in ETFs according to a CPP model?
Yes you could do that. Generally you would want to invest in a more conservative portfolio because your timeline is much shorter than a retirement account. Something like 50% stocks (XAW.TO) and 50% bonds (XBB.TO) would be pretty reasonable.

Reggie

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Re: Next step after tfsa is maxed out.
« Reply #28 on: January 17, 2018, 02:27:48 PM »
This thread has been really insightful.  I also have 2 young kids and I maxed out TFSA and nearing the max on RRSP.  I plan on living on and earning less than $30K a year in declared income once we reach FI.  That will go a long way in increasing our CCB benefits.  Plus the GST tax credits we get too. 

We're actually planning on FIing this year so we contributed a huge amount to RRSP in 2017 so that we can start collecting some increased CCB in 2018.