Author Topic: Canadian RRSP Advice  (Read 5976 times)

chaitea

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Canadian RRSP Advice
« on: October 20, 2014, 12:29:40 AM »
Hello Mustachians - This is the skinny with me:

I'm 26, living with the SO and we share a mortgage.
I owe $220K on my mortgage amortized for another 19.5 years. It's currently at a variable interest rate of 2.35%

I have no interest-incurring debts. I still owe $27000 to my mom for our house loan. I pay her back $500 each month. She'll be retiring soon so I might up the payments if she needs the money but she's fairly frugal so I think we're fine.

I have about 14000 in my DCPP through work. They match 4% of my salary.
I have about $7500 in my Tangerine TSFA mutual funds.
Another $800 floating in my Tangerine TSFA savings account.
I have $2500 in a GIC RRSP earning 1.17% interest. It's locked in for approx 4 more years.
I have $2000 in a  mix of accounts mostly so I don't have to pay a monthly fee on my TD account.

October is the month where I get three pay cheques and I have a bonus coming up next Friday so I'll be coming into nice chunk of money. My question is what kind of RRSP should I get. Via TD there's the daily interest (boo!), GIC, mutual fund and TD waterhouse directed RSP. The last time I was at the bank I trusted the person on the other end. She convinced me to take the GIC one because it was low risk and it's what she bought for herself. It was advertised at 6% for 5 years, but they really meant 1.17% annual interest for the next  5 years and I figured it be better than nothing. I don't want to go that route again... but I'm a little nervous about going straight into investments. I figure I should have at least 2 to 3K to put into this for now.

Thoughts?
« Last Edit: October 20, 2014, 12:31:13 AM by chaitea »

Ziggurat

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Re: Canadian RRSP Advice
« Reply #1 on: October 20, 2014, 07:12:03 AM »
First, congratulations on how well you have done so far at your age, and for getting on this early.

For the RRSP, TD e-series mutual funds comes to mind ... low-cost, good solution until you build a larger RRSP, when it may make sense to switch to self-directed and slightly cheaper index funds.  Check the canadian couch potato portfolios, they show how to build them with specific e-series funds.  You can set up monthly contributions which makes it "set and forget".

Tai

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Re: Canadian RRSP Advice
« Reply #2 on: October 20, 2014, 09:37:01 AM »

Can you contribute to your DCPP and get that matched by the employer? I think for income tax purposes that functions the same as an RRSP. Usually when you have a pension /lower income (your income will increase in the future) TFSAs are better than RRSPS.

Kaspian

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Re: Canadian RRSP Advice
« Reply #3 on: October 20, 2014, 11:09:23 AM »
Please don't take this the wrong way but my opinion is you're an adult--pay back your mom before you concern yourself with making yourself investments.  You have lots of time and can always save that RRSP contribution space for another year.  Personally, I don't think it's fair that you'd be making money in an investment while she's losing money due to lost opportunity and inflation.  She was sweet to loan you the money, prove you're as sweet and appreciative by going above and beyond what you'd agreed.

Meggslynn

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Re: Canadian RRSP Advice
« Reply #4 on: October 20, 2014, 12:24:21 PM »
If you choose to invest I would go with tangerine's TFSA/RRSP balanced growth fund. Its inline with the Canadian Couch Potato and extremely easy to start (considering your already with them) compared to TD e-series or questrade which is usually what is recommended on here.


chaitea

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Re: Canadian RRSP Advice
« Reply #5 on: October 20, 2014, 10:30:57 PM »
To Tai - The DCPP through work matches up to 4%. So that's exactly how much I contribute. I should probably learn more about the funds it buys, but I like going with simplicity and haven't invested enough energy into that. And yes it does count towards my RRSP.

To Kaspian - I'm not offended but you don't really know anything about our family dynamics. North American society is more individual based where as Asian society is way more family oriented. At my mom's age she's already maxed out RRSP, TSFA and is getting ready for retirement. Lending the money to me has way more utilitarian value that it does if she keeps it. And if she needs money later on, then I'd give above and beyond for whatever she needed. And yes, I do feel guilty, but the only reason I'm paying her back at all at this juncture is because I feel guilty. She has repeatedly said that I don't need to, or I can wait until I earn more in a few years to pay her back and that if I'm every hard pressed for money, I can stop for a while.

I'm going to chat a bit more about this because I feel strongly about this. In a more meta kind of level, you are generous by letting people give to you. When I was in university, it turned out that my RESP didn't really pay for very much (mom contributed a lot more to my sister's because she was the oldest and forgot to add contributions to mine when my sister's "ended"), so I just took out a student loan and said I would pay for it on my own. My thoughts were that they wouldn't accrue interest until I graduated and I'd be making decent money than my mom who doesn't earn much at all. And I worked part time as well but not enough to actually cover the entire cost of it.  My mom actually got really mad at me because she wanted to pay for my education, something I didn't realize at the time.

So long story short, I think there's just an element of family dynamic you're missing from my story.
« Last Edit: October 20, 2014, 10:53:57 PM by chaitea »

Bytowner

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Re: Canadian RRSP Advice
« Reply #6 on: October 21, 2014, 07:09:27 AM »
As Tai hints at, you really should figure out if your RRSP is the best option at this point. At 27, I'm guessing you have a bunch of salary potential over the next 30 years.

If you think you'll be earning quite a bit more in the future (at work or in retirement), then RRSP contributions might be a mistake. One option is to max out your TFSA and then use that money once you're in a higher bracket to bring your income down through big RRSP contributions.

chaitea

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Re: Canadian RRSP Advice
« Reply #7 on: October 21, 2014, 08:05:07 AM »
But I've already maxed out my TSFA. What do you think I should do instead...?

Koogie

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Re: Canadian RRSP Advice
« Reply #8 on: October 21, 2014, 08:16:14 AM »
But I've already maxed out my TSFA. What do you think I should do instead...?

??   Have you been in Canada since 2009 ?   If so (and you are obviously over 23) you haven't maxed out your TFSA.   You should have a total of 31,000$ in accrued room.   You say you've only used just over 8000$


chaitea

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Re: Canadian RRSP Advice
« Reply #9 on: October 21, 2014, 02:27:59 PM »
I was only thinking this year and last. I maxed it out last year and this year I took out a whole bunch for my house.

Thanks for that.

Tai

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Re: Canadian RRSP Advice
« Reply #10 on: October 22, 2014, 06:32:46 AM »
If you took out money this year from your TFSA you can't replace that amount until January 1st. You may still have room for contributions this year depending on the numbers.

mattgregg87

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Re: Canadian RRSP Advice
« Reply #11 on: October 22, 2014, 05:25:54 PM »
Take the money out of the GIC. Even though it's locked in, you should be able to take it out by paying a cancellation fee. 1.17% is the dumbest thing I have ever seen. Do some math, even if you have to pay a cancellation fee, it's probably worth paying it to invest at 7 to 9% in some ETF's. The rate of return of 7% for the next 4 years will probably offset the cancellation fee of getting out of the GIC. Talk to your bank about getting out of it.

Cheers

Ziggurat

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Re: Canadian RRSP Advice
« Reply #12 on: October 22, 2014, 08:16:24 PM »
Take the money out of the GIC. Even though it's locked in, you should be able to take it out by paying a cancellation fee.

And some GICs I had recently had an option to remove most of the money on an annual date without penalty.  Could be worth double-checking for that kind of loophole.

Kaspian

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Re: Canadian RRSP Advice
« Reply #13 on: October 23, 2014, 11:38:37 AM »
So long story short, I think there's just an element of family dynamic you're missing from my story.

Yes, of course there is.  I have no clue about it.

There just seems to be a rising trend in Canada of kids (no longer kids--aged 24-35) running to the Bank of Mom for everything from a student loan to a car to a house downpayment.  It's embarrassing.  Some recent poll suggested something like 40% of Millennials *expected* their parents to help with a house downpayment.  Expected?  That's just a sad commentary on society.  Then the same kids bitch that there are no good jobs.  Yeah, there are no good jobs because your parents can't retire because they're still busy paying for your ass even though you're a grownup.

Anyway--that's probably not your situation, but it's become so commonplace in the Canadian news lately.

I'm not sure you're "generous" for letting people give to you, or that's some element of mental reverse-framing.  But as a stranger asking for advice on a forum?  Pay back your mom before you go investing.  It's really the right thing to do.

chaitea

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Re: Canadian RRSP Advice
« Reply #14 on: October 24, 2014, 08:38:30 AM »
I have an appointment with my bank next week. I'll try to get out of the GIC! Thanks.

chaitea

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Re: Canadian RRSP Advice
« Reply #15 on: October 24, 2014, 08:43:18 AM »
You're generous for letting people give to you if you don't want the money.

I'm not talking about my case, here, but I think it applies. There was a thread in here earlier about being gifted money for a wedding and really not wanting to take it.

And as the case with at least some Asian parents... for my boyfriends family, he did ask his parents for a small loan and they tried to give him his entire half of the down payment because he was getting a very good rate on his mutual funds and they didn't want him to take it out. They WANT to help.

Blue girl

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Re: Canadian RRSP Advice
« Reply #16 on: October 27, 2014, 01:59:13 AM »
You're generous for letting people give to you if you don't want the money.

I'm not talking about my case, here, but I think it applies. There was a thread in here earlier about being gifted money for a wedding and really not wanting to take it.

And as the case with at least some Asian parents... for my boyfriends family, he did ask his parents for a small loan and they tried to give him his entire half of the down payment because he was getting a very good rate on his mutual funds and they didn't want him to take it out. They WANT to help.

I just want to say I understand where you are coming from, re money and Asian family. I think in a way, this is how they show love. My mom is always asking if I have enough money, and offering to help pay my mortgage, despite me making more than my parents combined.

Tai

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Re: Canadian RRSP Advice
« Reply #17 on: October 27, 2014, 08:52:49 AM »
I'm not Asian myself, but I would still want to be able to help my teen out as an adult. She'll still be my daughter, 18+ or not. And traditionally many cultures helped grown children with buying their first property. I'm an older Gen X and ALL my friends who bought young, of a variety of backgrounds, had help from their parents. I'm 100% sure that if I offered help (without strings of course) and was refused I would be hurt about it.