Author Topic: Canada RESP - $2500 max contribution  (Read 3656 times)

Sarnia Saver

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Re: Canada RESP - $2500 max contribution
« Reply #50 on: March 15, 2017, 07:20:07 PM »
I feel like this is being vastly overthought, but I guess MMM is about optimization, and I'm just not understanding the logic. 

I just put 175$ into each kids mutual funds (e-series funds), and the gov adds their 20%.  When they withdrawal the earnings and the grant money it is taxed in their hands regardless of the source, therefore the vast majority comes out untaxed as it is after tax money.

daverobev

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Re: Canada RESP - $2500 max contribution
« Reply #51 on: March 16, 2017, 07:00:39 AM »
I feel like this is being vastly overthought, but I guess MMM is about optimization, and I'm just not understanding the logic. 

I just put 175$ into each kids mutual funds (e-series funds), and the gov adds their 20%.  When they withdrawal the earnings and the grant money it is taxed in their hands regardless of the source, therefore the vast majority comes out untaxed as it is after tax money.

Yes, but RESP money can come from anywhere - ie, it can be 'your' income going into it.

CTB money can earn outside the RESP and be taxed in the child's hands. IF you're going to max the grant from the RESP (CESG), and have spare money (which happens to be the CTB money), you can put the CTB money into a trust in the name of the child, and have them pay (no) tax on that money.

If you get $250 a month of CTB money, which happens to be 'spare', you can put $3k/year into this; over 15 years assuming the markets are somewhat kind, you can expect that $45k to turn into $90k, with an ACB of $90k, throwing off say $2.7k of dividends.

All in the child's hands. And separate from the RESP.
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FIRE_at_45

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Re: Canada RESP - $2500 max contribution
« Reply #52 on: March 16, 2017, 07:43:30 AM »

If you get $250 a month of CTB money, which happens to be 'spare', you can put $3k/year into this; over 15 years assuming the markets are somewhat kind, you can expect that $45k to turn into $90k, with an ACB of $90k, throwing off say $2.7k of dividends.

All in the child's hands. And separate from the RESP.

^^that is truly bad ass and I bet no one in government anticipated that even being possible.  Most people that are eligible for much of a CTB would have nothing left at the end of the month let alone making their kids rich. 

 
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Prairie Stash

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Re: Canada RESP - $2500 max contribution
« Reply #53 on: March 16, 2017, 09:39:50 AM »
I feel like this is being vastly overthought, but I guess MMM is about optimization, and I'm just not understanding the logic. 

I just put 175$ into each kids mutual funds (e-series funds), and the gov adds their 20%.  When they withdrawal the earnings and the grant money it is taxed in their hands regardless of the source, therefore the vast majority comes out untaxed as it is after tax money.
Very true about optimization. We chase low MER funds, we also chase low tax solutions. You can either earn more or save more, saving on taxes is far easier than shaving my power bill any more :)

A similar strategy of capital gains harvesting (dividend payouts) can be applied to a low income spouse or when spouses retire at different times (or long term unemployment). When you wind down a cash investment account it can be done tax free. The trick is to make sure the capital gains is allocated to the non-working spouse, not to both. Its worthy of its own thread, the taxation on Investment accounts. Its complicated by the different tax rates in each province, but it might benefit us Canadians.

Sarnia Saver

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Re: Canada RESP - $2500 max contribution
« Reply #54 on: March 16, 2017, 04:00:40 PM »


If you get $250 a month of CTB money, which happens to be 'spare', you can put $3k/year into this; over 15 years assuming the markets are somewhat kind, you can expect that $45k to turn into $90k, with an ACB of $90k, throwing off say $2.7k of dividends.

All in the child's hands. And separate from the RESP.

This is what I was missing when reading the thread.  Must have been tired.  I get it now, you are talking outside the RESP.

SweetLife

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Re: Canada RESP - $2500 max contribution
« Reply #55 on: March 16, 2017, 06:10:01 PM »
I feel like this is being vastly overthought, but I guess MMM is about optimization, and I'm just not understanding the logic. 

I just put 175$ into each kids mutual funds (e-series funds), and the gov adds their 20%.  When they withdrawal the earnings and the grant money it is taxed in their hands regardless of the source, therefore the vast majority comes out untaxed as it is after tax money.
Very true about optimization. We chase low MER funds, we also chase low tax solutions. You can either earn more or save more, saving on taxes is far easier than shaving my power bill any more :)

A similar strategy of capital gains harvesting (dividend payouts) can be applied to a low income spouse or when spouses retire at different times (or long term unemployment). When you wind down a cash investment account it can be done tax free. The trick is to make sure the capital gains is allocated to the non-working spouse, not to both. Its worthy of its own thread, the taxation on Investment accounts. Its complicated by the different tax rates in each province, but it might benefit us Canadians.

I can't get my head around this. ... I will read the whole thread over again ... I am just starting out in investing and know I need to get the baby's money into an account ... ugh ... give me a new language to learn I can manage in no time ... give me a financial plan and I am like a snail :( (or worse ... that groundhog day movie keep going over and over and never understanding lol) ...
Typos will happen, corrections appreciated, or just ignore ;)

SweetLife

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Re: Canada RESP - $2500 max contribution
« Reply #56 on: March 16, 2017, 06:12:10 PM »
THANK YOU Prairie Stach for starting this thread!!! Even if I don't understand all of it right this moment I know I will eventually get it ...
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Prairie Stash

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Re: Canada RESP - $2500 max contribution
« Reply #57 on: March 17, 2017, 01:39:50 PM »
THANK YOU Prairie Stach for starting this thread!!! Even if I don't understand all of it right this moment I know I will eventually get it ...
I'm learning as I go too! From the comments everyone adds its amazing how much better my understanding gets.

Just always keep in mind; doing something is always better than nothing. Even if what you do isn't "optimal" its still better than waiting, learning, then doing something. I make that mistake far too often, I procrastinate trying to figure it out before I actually get going. Meanwhile a year passed with my daughter before I started her RESP, shame on me.