Author Topic: Canadian Mustache: TD e-series vs wealthsimple?  (Read 4905 times)

Reigns2018

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Canadian Mustache: TD e-series vs wealthsimple?
« on: November 09, 2017, 10:37:19 PM »
Hi,

Right now I have around 20k in TSFA with TD e-series with 90% equities and 10% bonds. I think my contribution room is around 50k so I have 30k more to max out. My wife and I are looking to start saving around $2000 a month.

A few questions:

Is it better for me to max out my own TSFA (20k) first or split our savings evenly (1k in each TSFA) with my wife ($0 in TSFA)? We essentially share finances so both accounts would be our money.

Secondly,  what is your view on TD e-series vs wealthsimple? Are returns higher with weathsimple portfolios?  Should I just do 2 canadian couch potatos portfolios with both our TSFAs? Or I can keep mine in TD and start wealthsimple with my wife's.

Thanks for your help!

damyst

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #1 on: November 10, 2017, 02:36:53 AM »
If you want to share details regarding your incomes, that would help determine the optimal strategy for you.
You didn't mention RRSPs - how come? Unlike a TFSA, contributions to RRSP reduce your income tax bill, which can make a massive difference. Unless there is a specific reason to avoid them (e.g. you expect to leave Canada permanently sometime soon and take all your savings with you), you should max out the RRSP accounts first.
Regarding who to invest with: if you're looking to maximize returns, and planning to invest thousands of dollars per month, consider going with Questrade rather than wealthsimple. Wealthsimple charges up to 0.5% in management fees, whereas with a discount broker like Questrade you could build a diversified couch potato portfolio with fees around 0.1%.

jambongris

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #2 on: November 10, 2017, 06:29:30 AM »
Hi,

Right now I have around 20k in TSFA with TD e-series with 90% equities and 10% bonds. I think my contribution room is around 50k so I have 30k more to max out. My wife and I are looking to start saving around $2000 a month.

A few questions:

Is it better for me to max out my own TSFA (20k) first or split our savings evenly (1k in each TSFA) with my wife ($0 in TSFA)? We essentially share finances so both accounts would be our money.

I don't know if it matters from a legal perspective (e.g. in the case of divorce) but that's what I do with our TFSAs. I max my wife's out first then I move to mine. I find it easier to keep track of contribution limits if I'm doing one at a time and since we consider everything "ours" then it doesn't really matter to us which account the money is sitting in.


Secondly,  what is your view on TD e-series vs wealthsimple? Are returns higher with weathsimple portfolios?  Should I just do 2 canadian couch potatos portfolios with both our TSFAs? Or I can keep mine in TD and start wealthsimple with my wife's.

Thanks for your help!

I use the TD e-series funds; they're dead simple. It's my understanding that an investment account with Wealthsimple will have lower returns than an equivalent self-directed account that uses the same ETFs and asset allocation because Wealthsimple is charging you a management fee on top the of the MERs for the ETFs.

Reigns2018

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #3 on: November 10, 2017, 07:22:35 AM »
I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?


damyst

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #4 on: November 10, 2017, 08:30:54 AM »

I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?

Read this.
Saving in RRSP will mean thousands of dollars in tax refunds for you, and you get the same tax-free growth that you would with a TFSA. It's a no-brainer really.

elaine amj

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #5 on: November 10, 2017, 08:45:11 AM »
I checked out wealthsimple but given that I wanted to use Couch Potato, felt the extra fees wasn't worth it and opened a TD Direct Investing account instead. I chose TD based on a lot of recommendations I found online. I will warn you that it ended up being a massive hassle (due to TD staff errors) transferring my money over to TD and when I set up all the auto-transfers, etc, they messed it up continually for 6+ months. I like the e-series but not sure if other banks would be easier. I have heard many other TD horror stories since. Then again, I have had other annoying stuff happen at other banks too so possibly my impatience with the whole matter is the common denominator :) That said, it's all sorted out now and it's been pretty smooth sailing since.

I use TD e-series for my monthly (under $1k) contributions to each account. But for larger amounts (over $1k per fund purchased is my personal rule of thumb), I buy Vanguard funds based on the Couch Potato portfolio. It means that in my RESP, we have 7 funds (4 e-series + 3 Vanguard). Vanguard has a lower MER than the e-series but costs me $10 per purchase. So e-series works for my $300/mo contribution to the RESP fund while I use Vanguard for my lump sum contributions.

I finally caught up on my unused TFSA contribution room last year so just have $5500 to invest (today actually) for this year. I will be catching up on most of our unused RRSP contribution room (today also, hopefully). I think DH will still have a some unused room left but that will have to wait until next year.

As for TFSA vs RRSP, I've read of arguments both ways. I ended up choosing to put a chunk into RRSPs (at least enough to reduce our income tax bill) and dumping the rest in my TFSA. Now I'll keep TFSA maxed and am working on catching up to our RRSPs - I should hopefully max both RRSPs out by next year.

Our finances are completely merged so I worked through this person by person. That said, I chose to start with myself because my DH had many more other investments in his name so I decided it was more prudent for me to have more investments in my name to start off with. So my suggestion would be to protect your wife a bit more by starting with her and then working on yours.

elaine amj

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #6 on: November 10, 2017, 08:47:37 AM »
I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?

If I recall correctly, her pension counts as RRSP contributions - so add that into your calculation of her RRSP contribution room. https://turbotax.intuit.ca/tips/how-do-contributions-to-a-pension-plan-affect-rrsp-6346

jambongris

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #7 on: November 10, 2017, 09:49:42 AM »

I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?

Read this.
Saving in RRSP will mean thousands of dollars in tax refunds for you, and you get the same tax-free growth that you would with a TFSA. It's a no-brainer really.

Unless I'm misunderstanding what you're saying then I'll have to disagree. Specifically, money invested within an RRSP does not result in tax-free growth as it would inside a TFSA.

TFSA are filled with post-tax contributions while RRSPs are filled with pre-tax contributions. Money in a TFSA can be withdrawn at any time with no concern for taxes. Money withdrawn from an RRSP is considered income and taxes must be paid on those withdrawals.

RRSPs are good for deferring taxes which works best if you're in a higher tax bracket now than you'll be in when you withdraw the money. I believe the rule of thumb is that if your marginal tax rate when you contribute to an RRSP is higher than your average tax rate when you withdraw from the RRSP then you'll come out ahead.

The article you linked to by FrugalToque covers this well.

Personally, we're maxing out our TFSAs first and saving the RRSP room because we expect to be in higher tax brackets in the next few years where the RRSP deductions will be worth more to us.

damyst

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #8 on: November 10, 2017, 10:20:33 AM »

I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?

Read this.
Saving in RRSP will mean thousands of dollars in tax refunds for you, and you get the same tax-free growth that you would with a TFSA. It's a no-brainer really.

Unless I'm misunderstanding what you're saying then I'll have to disagree. Specifically, money invested within an RRSP does not result in tax-free growth as it would inside a TFSA.

TFSA are filled with post-tax contributions while RRSPs are filled with pre-tax contributions. Money in a TFSA can be withdrawn at any time with no concern for taxes. Money withdrawn from an RRSP is considered income and taxes must be paid on those withdrawals.

RRSPs are good for deferring taxes which works best if you're in a higher tax bracket now than you'll be in when you withdraw the money. I believe the rule of thumb is that if your marginal tax rate when you contribute to an RRSP is higher than your average tax rate when you withdraw from the RRSP then you'll come out ahead.

The article you linked to by FrugalToque covers this well.

Personally, we're maxing out our TFSAs first and saving the RRSP room because we expect to be in higher tax brackets in the next few years where the RRSP deductions will be worth more to us.

Fair point - I don't think we disagree on any of the facts.
In practice, almost everyone is better off utilizing the RRSP first if they're saving substantial money (and $2000 per month is substantial money). OP's wife will be at around 30% marginal tax otherwise. Assuming they're holding on to the funds for a long time before withdrawing, this tax deferral is extremely valuable even if you just consider at compound gains on the taxes that they'll be deferring.

damyst

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #9 on: November 10, 2017, 10:22:03 AM »
I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?

If I recall correctly, her pension counts as RRSP contributions - so add that into your calculation of her RRSP contribution room. https://turbotax.intuit.ca/tips/how-do-contributions-to-a-pension-plan-affect-rrsp-6346

OP, are you referring to Canada Pension Plan (CPP) dues, or is this an employer-sponsored pension plan? If it's CPP, it does not affect RRSP contribution room.

Lews Therin

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #10 on: November 10, 2017, 10:30:29 AM »
If you are comfortable with following a CCP plan, go with TD over Wealthsimple. Wealthsimple has a higher MER in exchange for doing things that are unimportant for you, since you can rebalance yourself, and don`t need to cash in capital losses, or you could simply do it yourself.

That said, Questrade, or other discount brokerages can be exactly as simple as TD accounts (If you stick to the main index ETFs), so you'd go from .33 MER (Intl, can us) to 0.07-0.14. At 25k, it`s worth making the switch to Questrade.

Reigns2018

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #11 on: November 10, 2017, 11:43:10 AM »
I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?

If I recall correctly, her pension counts as RRSP contributions - so add that into your calculation of her RRSP contribution room. https://turbotax.intuit.ca/tips/how-do-contributions-to-a-pension-plan-affect-rrsp-6346

OP, are you referring to Canada Pension Plan (CPP) dues, or is this an employer-sponsored pension plan? If it's CPP, it does not affect RRSP contribution room.

it is her contributions to a defined benefits plan

Lews Therin

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #12 on: November 10, 2017, 11:55:37 AM »
I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?

If I recall correctly, her pension counts as RRSP contributions - so add that into your calculation of her RRSP contribution room. https://turbotax.intuit.ca/tips/how-do-contributions-to-a-pension-plan-affect-rrsp-6346

OP, are you referring to Canada Pension Plan (CPP) dues, or is this an employer-sponsored pension plan? If it's CPP, it does not affect RRSP contribution room.

it is her contributions to a defined benefits plan

Then her RRSP will likely be quite small, however she can use spousal RRSP and fill your RRSP room (since you are taxed less). Then fill the TFSA.

damyst

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #13 on: November 10, 2017, 12:03:46 PM »
I make around 40k while wife makes 70k, her pension takes away around $190 each paycheque

I am not sure about the math.. is RRSP or TSFA better?

If I recall correctly, her pension counts as RRSP contributions - so add that into your calculation of her RRSP contribution room. https://turbotax.intuit.ca/tips/how-do-contributions-to-a-pension-plan-affect-rrsp-6346

OP, are you referring to Canada Pension Plan (CPP) dues, or is this an employer-sponsored pension plan? If it's CPP, it does not affect RRSP contribution room.

it is her contributions to a defined benefits plan

Then her RRSP will likely be quite small

Back-of-the-envelope calculation:

Contribution room: 18% of 70k = 12.6k
190 per paycheque, assuming 2 paycheques per month (?) = $4,560
Still a decent amount of contribution room left.

Lews Therin

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #14 on: November 10, 2017, 12:05:18 PM »


Contribution room: 18% of 70k = 12.6k
190 per paycheque, assuming 2 paycheques per month (?) = $4,560
Still a decent amount of contribution room left.

You don`t know how much the employer is putting in. That reduces the amount left. DB usually have at least 1$-1$ match.

KelStache

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Re: Canadian Mustache: TD e-series vs wealthsimple?
« Reply #15 on: November 10, 2017, 02:47:44 PM »
I just wanted to jump and and second the recommendation for Questrade.  DH and I recently switched over from TD, and it's very very easy, with lower MERs.