The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: cairnipm on September 26, 2015, 03:55:31 PM
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Hi all,
I'm a Canadian just getting started in investing, and I have a lot of money in two savings accounts and one managed investment portfolio that I want to put into passive investing. I'm 22, and I want to put every spare penny towards early retirement planning. I have no debt. I've opened an RSP with Tangerine's Equity Growth portfolio, and I'll deposit the full 18% of 2015's income (about $4700). I'll also open a TFSA. I turned 18 in 2010, so I can invest $36000 through that.
The 'problem' is that I have about $49000 to play with here. Even after I do all that and reserve a few thousand for an emergency fund, I have about $9000 that could be compounding somewhere. I just don't know what my options are! Are there any more tax shelters I could take advantage of? Should I just open a non-registered discount brokerage account and pick a broad allocation of ETFs? I know I'm in a good position, but I don't have the experience to know how to take full advantage of it. Any advice would be very appreciated.
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If you're maxing RSP and full TFSA at 22, you're way ahead of the game. Make a plan to continue to max them out and enjoy the rest! (Yeah, anti-MMM, but hell, he's 22!)
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If you run out of TFSA and RSP room, open a taxable account and continue investing there.
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Yes, to just opening a taxable account and invest there.
As long as your overall portfolio is balanced, I would invest in VCN (Vanguard Canadian equities), or something similar, outside of your registered accounts.
The reason is that Canadian dividends get a tax credit that you cannot take advantage of within a TFSA or RRSP. (So yes there is kind of a tax shelter by properly "locating" your assets.)
I'll dig up a few interesting articles I've found.
Congrats on having those two maxed out already.
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Ok. Here are some links and quotes I saved when researching a similar thing.
http://www.moneysense.ca/taxes/making-smarter-asset-location-decisions
http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/
"general, if you need to hold investments in non-registered accounts, Canadian equities are the best choice, followed by US equities, and then international equities.
it is usually best to keep the low-growth assets (bonds) in the RRSP and the high-growth assets (equities) in the TFSA.
if you use a US-listed ETF for your US equities you would be exempt from withholding taxes in an RRSP. If you use a Canadian-listed ETF then it doesn’t matter whether you hold it in an RRSP or TFSA."
It is a little complicated to figure out what should go where but a spread sheet that totals your allocation (Canadian equities, US equities, International equities & bonds) and location (TFSA, RRSP, Unregistered) is all you need.
Some people also factor in that taxes need to be paid on the RRSP funds in the future.
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I can tell you what I did with mine. Exxon and Conoco directly from the companies. I think we are in a nice buying cycle. They are unloved and with a little patience and not even bothering to check how they are doing in a few years it will prove to be both a prudent and wise investment. Mine wasn't 48 k though. Might want to index half to most of that.
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Thanks, all! And thanks for those articles, K-ice. those are some good resources.
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Don't forget next years RRSP limit will likely get a boost from this years increased income - you could save the cash till then, or plan to fill up next years RRSP from a taxable account if you need to.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/cntrbtng/lmts-eng.html