Where to put money for a house: RRSP, spousal RRSP, regular savings account?

[lizi]

I have changed my attitude to RRSPs since reading the excellent thread about investment order and delaying RRSP contributions until income is >$45,000. My income is still far from that, so I'm going to hold off on any further contributions and focus on maxing my TFSA, and then starting a taxable account.

DH and I will probably be buying a house in 3-4 years, and I want to start getting my ducks in a row for that. The HBP seems like a great way to partially fund the deposit, and I'm in the process of opening a spousal RRSP for him to contribute to. It would be awesome if we could get my total RRSP balance over $25K so I can take full advantage of the HBP. I was wondering if in this case it would be worth making contributions to my RRSP, even if my income is <$45,000.

I'm really just writing this as a sanity check, and after spelling it out I'm thinking the best way forward is to max spousal contributions, hold off on personal contributions for a few years until my income increases (2019 is hopefully my year!), and in the meantime max TFSA and then start a taxable.

Obviously the other question is where to actually put the money. I'm torn between sticking to my regular investment allocation and playing in safe in a high interest savings account (or GIC). I guess to be safe I should be looking for a 3 year GIC at ~3%, but would keeping it in the market be a really terrible idea?

[RichMoose]

I have changed my attitude to RRSPs since reading the excellent thread about investment order and delaying RRSP contributions until income is >$45,000. My income is still far from that, so I'm going to hold off on any further contributions and focus on maxing my TFSA, and then starting a taxable account.

DH and I will probably be buying a house in 3-4 years, and I want to start getting my ducks in a row for that. The HBP seems like a great way to partially fund the deposit, and I'm in the process of opening a spousal RRSP for him to contribute to. It would be awesome if we could get my total RRSP balance over $25K so I can take full advantage of the HBP. I was wondering if in this case it would be worth making contributions to my RRSP, even if my income is <$45,000.

I'm really just writing this as a sanity check, and after spelling it out I'm thinking the best way forward is to max spousal contributions, hold off on personal contributions for a few years until my income increases (2019 is hopefully my year!), and in the meantime max TFSA and then start a taxable.

Obviously the other question is where to actually put the money. I'm torn between sticking to my regular investment allocation and playing in safe in a high interest savings account (or GIC). I guess to be safe I should be looking for a 3 year GIC at ~3%, but would keeping it in the market be a really terrible idea?

I don't think putting the money into your own RRSP as well is a bad thing for the purpose of the HBP. You can each take the max amount when you buy a home, so even when you are in a low tax bracket of 20% or so its a nice addition to your downpayment. Of course the spousal and personal can't both be used when the beneficiary are the same.

Waiting to make the RRSP likely makes the most sense if you are expecting an especially large income bump before purchasing. Just make sure there's a large enough lag between your contribution and home purchase.

I would still add some stocks if I were you. For a short time frame 25% might be enough. GICs, especially in taxable accounts, are not great at all.

[daverobev]

Money you need within 5 years shouldn't be invested.

If your TFSA isn't full, save house money inside there - at least your TFSA room will grow a bit. Oaken do decent 2 year GICs, 3.1%.

I don't like the HBP. If you're going to be jumping a tax bracket in a couple of years, you're basically getting 20% now vs 30% later. You still have to repay the HBP, and you are not getting the benefit of the tax free growth in the mean time. Also, if you are going to have children, contributing to an RRSP during those years leads to higher child benefit payments.

I know, it is a tricky balancing act. For low income people, the TFSA really is the thing to be focusing on.

[lizi]

We will definitely be maxing TFSAs as well, and the repayment schedule should be pretty quick as we'll just channel our savings back into RRSPs to repay the HBP. But yes I agree it's less optimal when the money has only been in for a short amount of time.

Mr RM, are you saying I wouldn't be able to withdraw from my personal and the spousal RRSP (where I'm the annuitant, DH is the contributor) for the HBP? From what I had read you can withdraw from any RRSPs in your name, as long as you don't exceed $25K across them all. Thanks for the reminder about the wait period before being able to withdraw, we'll make sure we keep an eye on that. Also I've been reading your blog recently, specifically the article about having joint accounts for any taxable accounts. This year we'll be maxing tax sheltered accounts so taxable is the next big step, your article was really helpful!

[Lews Therin]

spousal RRSP money can be taken out after 3 years, so if he puts it in now, you will be fine to use it in 3 years for any reason. (even if you don't use the HBP, you'll want him to start filling your spousal RRSP, because you might hit a very low income year (due to moving, and getting a new job) that will be the time to pull 11k out (0% taxes, if no other income!))

[RichMoose]

Mr RM, are you saying I wouldn't be able to withdraw from my personal and the spousal RRSP (where I'm the annuitant, DH is the contributor) for the HBP? From what I had read you can withdraw from any RRSPs in your name, as long as you don't exceed $25K across them all. Thanks for the reminder about the wait period before being able to withdraw, we'll make sure we keep an eye on that. Also I've been reading your blog recently, specifically the article about having joint accounts for any taxable accounts. This year we'll be maxing tax sheltered accounts so taxable is the next big step, your article was really helpful!

My apologies for the poor wording. What I meant is that you cannot pull $25,000 from your personal RRSP and another $25,000 from a spousal RRSP in your benefit, essentially doubling the HBP limit. This might impact your decision to contribute to your personal RRSP if your spouse has a higher income and is contributing to a spousal RRSP for you.