Canadian Investor - Comments on my portfolio

[max9505672]

Hey Mustachians!

I've been following for MMM and investion towards FIRE for almost 4 years now. I am doing it by myself with Questrade and, over the years, it has become more or less automatic and now I kind of feel I might be on cruise control and doing something wrong.

I'd like to have input on my current AA and funds I am investing in. I definitely make my life a little harder that it should by having many different ETF's (mainly for tax reasons), but it's fun for me and unless I am making something wrong, I don't really mind dealing with all those.





Thanks!

[dclarke1]

The links didn't work for me.

[max9505672]

The links didn't work for me.

Thanks for letting me know. It should be solved now.

[cool7hand]

What's your thinking behind the asset allocation? Why so complex?

[sixwings]

This seems pretty complex but your call, if you like doing it then that's great for you. I do 75% VGRO, 10% VFV, and 15% VGT, I like being tech heavy. When I stop being lazy I'll just hold the underlying ETFs of VGRO.

[FIRE Artist]

I would say the whole point to buy and hold investing is to be on “cruise control”.  I follow the Canadian Couch Potato investing model for that very reason.

[Retire-Canada]

Just looking at the bottom line AA there's nothing wrong with that allocation. If it makes you happy/comfortable no reason to change anything. I didn't look at the detailed breakdown of your ETFs.

[max9505672]

What's your thinking behind the asset allocation? Why so complex?

Basically, in addition to my AA%, I am trying to optimize my taxes by having canadian preferred shares (VCN) in my Margin account, international in TFSA and VTI in RRSP.

On top of that, my RRSP and TFSA are full, so I need to be creative in my margin account to keep my AA% and optimize my taxes (therefore the swap based ETFs).

But to be honest, I feel like I kind of lost track of what to buy where and would be open to a simpler option if it can be as tax efficient as what I have right now.

[daverobev]

It's fine.

I wouldn't worry about it at all; just add to what you have, where you have it, as you need to rebalance. No need to sell and rebuy to make it simpler - just roll with it. As you say, those H-ETFs are more tax efficient so it's all good.

My only comment would be 20% outside North America seems low to me. That's a lot of world and people. I'd reduce Canada by 5%, US by 5-10% and put it into RoW... but that's me. We all have our biases.

[cool7hand]

I'm always talking about Ray Dalio's All Season's (aka All Weather) Portfolio, which is designed for low volatility. My wife and I have used it since about 2014. Give it a Google and see if it interests you. I would think you could find a way to replicate it in Canada.

[max9505672]

It's fine.

I wouldn't worry about it at all; just add to what you have, where you have it, as you need to rebalance. No need to sell and rebuy to make it simpler - just roll with it. As you say, those H-ETFs are more tax efficient so it's all good.

My only comment would be 20% outside North America seems low to me. That's a lot of world and people. I'd reduce Canada by 5%, US by 5-10% and put it into RoW... but that's me. We all have our biases.

Thanks for the input. Might be easier to just keep buying than selling and re-buying.

That’s a good point about US exposure. Would you mind sharing you thought on that? And what ETF are you looking at for RoW exposure?

[daverobev]

It's fine.

I wouldn't worry about it at all; just add to what you have, where you have it, as you need to rebalance. No need to sell and rebuy to make it simpler - just roll with it. As you say, those H-ETFs are more tax efficient so it's all good.

My only comment would be 20% outside North America seems low to me. That's a lot of world and people. I'd reduce Canada by 5%, US by 5-10% and put it into RoW... but that's me. We all have our biases.

Thanks for the input. Might be easier to just keep buying than selling and re-buying.

That’s a good point about US exposure. Would you mind sharing you thought on that? And what ETF are you looking at for RoW exposure?

In an RRSP or unregistered, VXUS - which, admittedly holds Canada, but then just reduce Canada elsewhere.

[max9505672]

It's fine.

I wouldn't worry about it at all; just add to what you have, where you have it, as you need to rebalance. No need to sell and rebuy to make it simpler - just roll with it. As you say, those H-ETFs are more tax efficient so it's all good.

My only comment would be 20% outside North America seems low to me. That's a lot of world and people. I'd reduce Canada by 5%, US by 5-10% and put it into RoW... but that's me. We all have our biases.

Thanks for the input. Might be easier to just keep buying than selling and re-buying.

That’s a good point about US exposure. Would you mind sharing you thought on that? And what ETF are you looking at for RoW exposure?

In an RRSP or unregistered, VXUS - which, admittedly holds Canada, but then just reduce Canada elsewhere.

Why is USD? What would be the CAD equivalent?

[daverobev]

It's fine.

I wouldn't worry about it at all; just add to what you have, where you have it, as you need to rebalance. No need to sell and rebuy to make it simpler - just roll with it. As you say, those H-ETFs are more tax efficient so it's all good.

My only comment would be 20% outside North America seems low to me. That's a lot of world and people. I'd reduce Canada by 5%, US by 5-10% and put it into RoW... but that's me. We all have our biases.

Thanks for the input. Might be easier to just keep buying than selling and re-buying.

That’s a good point about US exposure. Would you mind sharing you thought on that? And what ETF are you looking at for RoW exposure?

In an RRSP or unregistered, VXUS - which, admittedly holds Canada, but then just reduce Canada elsewhere.

Why is USD? What would be the CAD equivalent?

AFAIR there isn't a good equivalent - all the Canadian ones were more expensive or more limited last time I looked.

ZEA + an emerging one isn't too far off but does miss some things I think. Though it does omit Canada, so that's good.

[max9505672]

It's fine.

I wouldn't worry about it at all; just add to what you have, where you have it, as you need to rebalance. No need to sell and rebuy to make it simpler - just roll with it. As you say, those H-ETFs are more tax efficient so it's all good.

My only comment would be 20% outside North America seems low to me. That's a lot of world and people. I'd reduce Canada by 5%, US by 5-10% and put it into RoW... but that's me. We all have our biases.

Thanks for the input. Might be easier to just keep buying than selling and re-buying.

That’s a good point about US exposure. Would you mind sharing you thought on that? And what ETF are you looking at for RoW exposure?

In an RRSP or unregistered, VXUS - which, admittedly holds Canada, but then just reduce Canada elsewhere.

Why is USD? What would be the CAD equivalent?

AFAIR there isn't a good equivalent - all the Canadian ones were more expensive or more limited last time I looked.

ZEA + an emerging one isn't too far off but does miss some things I think. Though it does omit Canada, so that's good.

So you'd do the Norbert Gambit technique to buy USD in your RRSP / unregistered account?

[daverobev]

Yup, DLR journalling all the way.

[max9505672]

Yup, DLR journalling all the way.

Will look into it! Any counter indication to do this in a unregistered account?

[daverobev]

Depends on the broker. If their exchange rate is good it isn't worth it, but for most of them it will be. I think some won't allow it though, not sure. I've only ever done journalling with Questrade to be honest.

[max9505672]

Depends on the broker. If their exchange rate is good it isn't worth it, but for most of them it will be. I think some won't allow it though, not sure. I've only ever done journalling with Questrade to be honest.

I am using Questrade as well so should be good.

My question was more regarding holding USD in my unregistered account for taxes reasons ou any other reason that I might not think about.

[sixwings]

I don't worry about the withholding taxes too much. It creates a bit of a mountain out of a molehill.

[Retire-Canada]

I don't worry about the withholding taxes too much. It creates a bit of a mountain out of a molehill.

Well "worrying" about withholding taxes cost me 1hr and $30 of my life once and "pays" me ~$2K/year higher return. Seems well worth the effort to me.

[dclarke1]

Two comments:

- Personally I prefer to include a fund of REITS in my portfolio because they are a different asset class from stocks. ZRE or VRE are a couple good options that I know of. There may be some REITS in the funds you have listed, but they likely wouldn't add up to a sizeable chunk like 5 or 10% of your portfolio.

- Watch out for those Horizon funds. There are other expenses not included in the MER. This is copied from the regulatory document on HXS:
"Management expense ratio (MER)
This is the total of the ETF's management fee and operating expenses. 0.10%
Trading expense ratio (TER)
These are the ETF’s trading costs. 0.27%
ETF expenses 0.37%"

[Retire-Canada]

- Watch out for those Horizon funds.

Also make sure you stay on top of any issues that crop up with swap based funds that require your action.

https://canadiancouchpotato.com/2019/09/06/horizons-swap-etfs-the-next-generation/

[max9505672]

I don't worry about the withholding taxes too much. It creates a bit of a mountain out of a molehill.

Well "worrying" about withholding taxes cost me 1hr and $30 of my life once and "pays" me ~$2K/year higher return. Seems well worth the effort to me.

Any input about holding USD in an unregistered account, mainly regarding taxes (in QC)?

[max9505672]

- Watch out for those Horizon funds.

Also make sure you stay on top of any issues that crop up with swap based funds that require your action.

https://canadiancouchpotato.com/2019/09/06/horizons-swap-etfs-the-next-generation/

Yes, not exactly the simpler option, but at the same time they’re tax efficient. As least until legislation changes...

[Retire-Canada]

Any input about holding USD in an unregistered account, mainly regarding taxes (in QC)?

I don't know anything about tax laws in that province sorry. I don't see why you'd bother holding stocks in USD in a non-reg account though. The main benefit is in the RRSP due to the way our tax treaty with the US is structured. In a non-reg account you get to deduct the withholding tax kept by the US from the taxes you owe the CDN Gov't so the only difference is the lower MER on USD ETFs holding US stocks. For VUN vs. VTI that's only 0.13% not nothing, but not worth the hassle of dealing with USD in my opinion unless your non-reg account is quite large.

[max9505672]

Thanks everyone for your answers.

To be honest, I would prefer to follow a proven and well thought structure. I have found this one from Canadian Portfolio Manager which is pretty optimized in terms of fees and foreign withholding taxes even if a little more ''complex'', but I don't really mind the complexity as long as I have something to refer to and not question what to buy everytime.

Are there any negative comments (other than complexity) about this structure? Any red flags? If not, I will most likely adapt to my AA% and start following it.

[daverobev]

Too much Canada, and it doesn't make an integrated solution - they are looking at the account types in isolation. IE, you don't want ANY Canada inside an RRSP or TFSA if there is other stuff to go in - you want the divi tax credit.

1 Work out what you want to hold

2 Work out where to hold it

That's all.

US-listed stuff goes in the RRSP; world-ex-NA where the ETF holds the shares directly (ie isn't a wrapper for a US one) goes in the TFSA, Canadian stuff goes outside.

I mean... 14.52% of one thing? Yeah, Ridiculous is exactly what I'd call it!

[Retire-Canada]

I have found this one from Canadian Portfolio Manager which is pretty optimized in terms of fees and foreign withholding taxes even if a little more ''complex'', but I don't really mind the complexity as long as I have something to refer to and not question what to buy everytime.

I don't see the tax/withholding fee optimization in that portfolio. I agree Daverobev that's more CDN content than I want to hold and calculating stuff to 2 decimal places seems silly. All that said it's fine for an AA as would be any number of similar sample AAs you can find online. At the end of the day it's more important to find an AA you can stick with and have confidence in than worrying about it being "perfect" in some regard. If this is the AA you want to follow for a couple decades go for it.

I created my own AA and just log my account values in a spreadsheet when I have money to add/withdraw. The speadsheet calculates how far each asset component is off its allocation target so I can easily see where to add or withdraw money. That makes it very simple to manage my portfolio.

[max9505672]

I mean... 14.52% of one thing? Yeah, Ridiculous is exactly what I'd call it!

Yes, looking at it again this morning and it’s not so optimized. What I liked was there’s all 4 of US, Canada, RoW and bonds in all accounts which makes the rebalancing easy.

The issue I have is with RRSP and TFSA full, I need all my exposure in my unregistered (US, Can., RoW and possibly bonds). That was my intend with those “H” swap based ETFs. However, I am worried of a legislation change and since I am not following the news closely and those, it might have more negative effect than positive for me.

That being said, is there anything wrong with VUN, VIU+VEE (instead of VXUS to avoid Norbert Gambit) and ZDB in my unregistered?

[max9505672]

I have found this one from Canadian Portfolio Manager which is pretty optimized in terms of fees and foreign withholding taxes even if a little more ''complex'', but I don't really mind the complexity as long as I have something to refer to and not question what to buy everytime.

I don't see the tax/withholding fee optimization in that portfolio. I agree Daverobev that's more CDN content than I want to hold and calculating stuff to 2 decimal places seems silly. All that said it's fine for an AA as would be any number of similar sample AAs you can find online. At the end of the day it's more important to find an AA you can stick with and have confidence in than worrying about it being "perfect" in some regard. If this is the AA you want to follow for a couple decades go for it.

I created my own AA and just log my account values in a spreadsheet when I have money to add/withdraw. The speadsheet calculates how far each asset component is off its allocation target so I can easily see where to add or withdraw money. That makes it very simple to manage my portfolio.

I agree, maybe I try to be too “perfect” and optimized, but as the accounts get bigger, I think it’s positive especially on the long term.

I have a spreadsheet too to calculate my AA status. This is the easy part for me. The hard part for me since I am not spending time researching different ETFs, tax legislation, etc. is to find a “optimized” structure in my 3 accounts. Then I  simply have to rebalance as I buy bi-weekly.

[Retire-Canada]

I agree, maybe I try to be too “perfect” and optimized, but as the accounts get bigger, I think it’s positive especially on the long term.

Well as I noted above I don't see the tax/withholding optimization when I look at that last portfolio you posted. So if that's important to you this wouldn't be the one I'd use.

[daverobev]

I mean... 14.52% of one thing? Yeah, Ridiculous is exactly what I'd call it!

Yes, looking at it again this morning and it’s not so optimized. What I liked was there’s all 4 of US, Canada, RoW and bonds in all accounts which makes the rebalancing easy.

The issue I have is with RRSP and TFSA full, I need all my exposure in my unregistered (US, Can., RoW and possibly bonds). That was my intend with those “H” swap based ETFs. However, I am worried of a legislation change and since I am not following the news closely and those, it might have more negative effect than positive for me.

That being said, is there anything wrong with VUN, VIU+VEE (instead of VXUS to avoid Norbert Gambit) and ZDB in my unregistered?

Who's your brokerage? But honestly, unreg, no it's fine to use US-wrapped Canadian ETFs.

What's the saying, perfect is the enemy of good? Don't worry (too much) - just get the general AA set, and work away. Make the best choice you can now - honestly I'm not sure I'd "trust" the swap based stuff, it is risk for little gain, the real physical replicating ETFs are not expensive. Vanguard is decent (and ethically from a client-company point of view by far the best; the other companies compete with Vanguard, it is them that have brought fees down).

[max9505672]

Who's your brokerage? But honestly, unreg, no it's fine to use US-wrapped Canadian ETFs.

What's the saying, perfect is the enemy of good? Don't worry (too much) - just get the general AA set, and work away. Make the best choice you can now - honestly I'm not sure I'd "trust" the swap based stuff, it is risk for little gain, the real physical replicating ETFs are not expensive. Vanguard is decent (and ethically from a client-company point of view by far the best; the other companies compete with Vanguard, it is them that have brought fees down).

I use Questrade for brokerage.

Thanks for the input. I’ll get rid of the swap based stuff, for peace of mind mainly, and get VCN (CAN), VUN (US),  VIU+VEE (RoW) and ZBD (bond) in my unreg. Will be easy to re balance as I go.

[daverobev]

Ok, Norbert's is easy with Questrade, and worthwhile as their exhange rates aren't good.

Is your RRSP 100% full of US already? Seems like you have everything unreg - which is fine if that's what your AA says and the tax shelters are full of optimal stuff already.

[max9505672]

Ok, Norbert's is easy with Questrade, and worthwhile as their exhange rates aren't good.

Is your RRSP 100% full of US already? Seems like you have everything unreg - which is fine if that's what your AA says and the tax shelters are full of optimal stuff already.

RRSP is not 100% full of US (as per original image, I have XAW in there and VUN that I’ll transfer to VTI shortly). I’ll optimize this and post again.

[max9505672]

I am currently reviewing my AA% and I am not to sure how what tool to use to properly determine a good AA% for me.

When I began investing about 4 years ago, my AA% target was:

• 50% US
• 20% CAN
• 20% RoW
• 10% bonds

Now, I would like to lower my exposure to US a little bit and increase my RoW exposure and add some emerging market, something like:

• 43% US
• 22% Row
• 17% CAN
• 8% Emerging market
• 10% bonds

Any comment on this AA%? I am 31 y.o., in a accumulation phase for the next 4-5 years.

[Le North Dreamer]

My perspective (not the one of your professional financial planner), as I'm exactly your age and with a similar target AA in terms of bonds vs equities (10% bonds 90% equities).

IMO, small percentage differences in your equities AA will not make a huge difference down the road and it is impossible to predict which ones will overperform/underperform. The main point of your Can/US/Int equities % split is to provide you with broad diversification and this objective is completed with the 2 AAs you mentioned above ^^.

One key element of your AA is to stick to your plan and rebalance periodically so you sell your winners and buy more of the losers.

I personally use Canadian Couch potato's ETF model portfolios at the moment (https://canadiancouchpotato.com/model-portfolios/). I currently own multiple ETFs as I've been doing this for a while but am planning to simplify my portfolio and go with a 2-funds solution when rebalancing this year.

E.g. using VEQT as my sole equities fund and VAB as my bonds fund would make my AA look like this:

• 10% bonds
• 41,6 % US Equities
• 29,7 % Can Equities
• 20,5 % Intl Developed Equities
• 8,2 % Emerging markets Equities

Using XEQT instead of VEQT would give you a similar AA with a slightly different repartition.

As FIRE Artist said, the hole point of this buy and hold strategy is to be on "cruise control" so a simple portfolio like this is the way to go for me.

[Retire-Canada]

Wrapper ETFs like VEQT have high relative costs due to higher MERs and withholding tax drag. If you are aware of that and the simplicity is worth it to you no worries, but if not it's worth calculating out the costs and comparing them to holding these securities in a lower cost way. 

[Le North Dreamer]

That's a fair point, Retire-Canada. MERs are indeed higher for VEQT and XEQT as opposed to holding the equivalent ETFs (e.g. VCN, VUN, etc.).

I was not aware re: higher withholding tax drag. I may consider keeping my current multi-funds solution then.

[Retire-Canada]

I was not aware re: higher withholding tax drag. I may consider keeping my current multi-funds solution then.

If you held US stocks in VUN in CAD vs. directly in VTI in USD in your RRSP you'd save something like $500/year on each $100K. If you held your US stocks in VUN or VEQT there would be no difference. You'd just pay the extra $$ either way.

So you'd need to dig into the topic a little bit based on which ETFs you hold in each account. I think there are some articles on the Canadian Couch Potato site about this issue.

[max9505672]

My perspective (not the one of your professional financial planner), as I'm exactly your age and with a similar target AA in terms of bonds vs equities (10% bonds 90% equities).

IMO, small percentage differences in your equities AA will not make a huge difference down the road and it is impossible to predict which ones will overperform/underperform. The main point of your Can/US/Int equities % split is to provide you with broad diversification and this objective is completed with the 2 AAs you mentioned above ^^.

One key element of your AA is to stick to your plan and rebalance periodically so you sell your winners and buy more of the losers.

I personally use Canadian Couch potato's ETF model portfolios at the moment (https://canadiancouchpotato.com/model-portfolios/). I currently own multiple ETFs as I've been doing this for a while but am planning to simplify my portfolio and go with a 2-funds solution when rebalancing this year.

E.g. using VEQT as my sole equities fund and VAB as my bonds fund would make my AA look like this:

• 10% bonds
• 41,6 % US Equities
• 29,7 % Can Equities
• 20,5 % Intl Developed Equities
• 8,2 % Emerging markets Equities

Using XEQT instead of VEQT would give you a similar AA with a slightly different repartition.

As FIRE Artist said, the hole point of this buy and hold strategy is to be on "cruise control" so a simple portfolio like this is the way to go for me.

Thanks for the input!

[max9505672]

Here's my latest update after rebalancing and optimizing my funds in my 3 accounts:





Any comments?

[daverobev]

Bonds -> unregistered

I'd ditch XAW personally, as much as possible. Then put VTI as 100% of the RRSP, and go from there. Remember to discount the value of your RRSP for taxes vs everything else.

[max9505672]

Bonds -> unregistered

I'd ditch XAW personally, as much as possible. Then put VTI as 100% of the RRSP, and go from there. Remember to discount the value of your RRSP for taxes vs everything else.

1. Bonds -> unregistered : Is this to make as much room as possible for VTI and therefore better tax treatment?

2. Why would you ditch XAW?

3. I find it hard to rebalance by having only one fund in an account. For example, you suggest putting all my bonds in my unregistered, so I’ll have to gradually sell VAB in my RRSP and to buy in my unregistered. Then, with the extra cash in the RRSP, I’d buy VTI but that’ll increase my US exposure if I don’t have any other US to sell anywhere else...

[daverobev]

Bonds -> unregistered

I'd ditch XAW personally, as much as possible. Then put VTI as 100% of the RRSP, and go from there. Remember to discount the value of your RRSP for taxes vs everything else.

1. Bonds -> unregistered : Is this to make as much room as possible for VTI and therefore better tax treatment?

2. Why would you ditch XAW?

3. I find it hard to rebalance by having only one fund in an account. For example, you suggest putting all my bonds in my unregistered, so I’ll have to gradually sell VAB in my RRSP and to buy in my unregistered. Then, with the extra cash in the RRSP, I’d buy VTI but that’ll increase my US exposure if I don’t have any other US to sell anywhere else...

The income on bonds is currently so low that there is little tax to pay, and growth/cap gains likely low as well. Over the longer term stocks grow faster than bonds.

XAW is a wrapper; inside is some other ETFs, it makes tax treatment mucky.

In an RRSP, you don't pay US withholding, so that's the best place - while in a TFSA you do. World-ex-US inside a wrapper in a TFSA just generally drags more dividend withholding than you'd otherwise have to pay. I'd pick ZEA as that holds ROW directly; anything that is US + ROW in a Canadian ETF is generally not optimal.

Obviously you can't make this perfect, it just isn't possible. But at least, sell ~15% of your total amount of XAW in the TFSA, sell the VAB in the RRSP, buy VTI in the RRSP and ZEA in the TFSA, and then bonds unregistered. The only thing with ZEA IIRC is that it doesn't hold emerging but as I said - not possible to get this perfect.

While RRSP room is less than US exposure desired, 100% of RRSP should be VTI.

Look, it's all marginal here. If you don't feel like messing around, you're fine. You might save half a percent if you work at it - which, I mean, it's not nothing. Over time it compounds. Maybe more than half a percent over time with the tax difference between having bonds outside vs inside.

[Retire-Canada]

Remember to discount the value of your RRSP for taxes vs everything else.

I'm curious how many people do this in practice? I'd love to hear the feedback.

Personally I don't try and adjust my portfolio based on future tax implications for a few reasons:

1. The money inside each account is fungible so if I have $1M across RRSP/TFSA/NR I can sell those ETFs and rearrange the AA anytime I wanted. RRSP/TFSA would have no tax implications for this and NR would, but it would be relatively small.

2. Given the relatively large size of my RRSP and the issue of mandatory WRs at 71 I will only be withdrawing from my RRSP initially and if I get lucky with SORR I'll never be touching my TFSA or NR accounts until that money is given away.

3. Comparing the value of $1 inside the RRSP to $1 in the TFSA or $1 inside the NR after tax is meaningless if I am not choosing between those accounts when I WR money for FIRE.

4. My WR plan includes expected taxes from the RRSP so I have calculated my FIRE target with taxes in the mix.

5. As I WR from my RRSP my planned FIRE spending I'll adjust my AA to stay within my planned allocation overall.

6. It adds an extra level of complication that doesn't add any value...at least that I can see in my case.

The one way I could see adjusting FIRE plans due to tax implications is that $$ withdrawn each year for spending could be adjusted based on where the money came from. For example:

- 100% from RRSP = $46K needed...$40K + $6K taxes
- 100% from TFSA = $40K needed...$40K + $0 taxes
- 100% from NR = $42K needed......$40K + $2K taxes

That would change your FIRE $ target if say you were using the 4% Rule. $46K = $1,150K while $40K = $1,000K. However, I still wouldn't adjust my AA in each account due taxes.

[daverobev]

It depends doesn't it, the more you have in the RRSP and the closer you are to traditional retirement the more it matters.

For me personally I don't discount it - when I was in Canada because I wasn't expecting to pay much in the way of taxes (ie I could stay below personal allowance), and now in France because everything is taxed at some level and it really does become complex.

But for a more 'normal' Canadian with a plan on taking a chunk each year from the RRSP? You're going to pay 20% on anything over the allowance - and once you get to proper retirement age you have the CPP using up some of that.

If you're already accounting for the tax per your #4 then yeah, but if your marginal rate is 20% then the value of what you hold in the RRSP - the entirety of it - should be discounted by that much (or at least the average of what you expect to pay on solely the RRSP withdrawal).

So if you have 100k US in your RRSP, expect to pay 20% on RRSP withdrawals, I'd say the RRSP is only 'worth' 80k in terms of AA.

I'm not at all suggesting doing an in depth calculation, just some rough number. I think for a while I was assuming the average I'd pay would be 10% - it wouldn't be the full 20%, and it wouldn't be nothing.

[Retire-Canada]

So if you have 100k US in your RRSP, expect to pay 20% on RRSP withdrawals, I'd say the RRSP is only 'worth' 80k in terms of AA.

That ^^^ is exactly the argument that I don't agree with when reading about the topic. Why would $100K of stocks be worth less in the RRSP vs. say the TFSA unless you were realistically going to sell them all and withdraw them all from those accounts? Inside the accounts there are no tax implications and unless you are actually making some choice with regards to where you'll take your money from than there is no point comparing them in that way. And when you WR $1 from the RRSP regardless of how much tax you pay you'll re-balance the AA within all those accounts to get back to the planned AA.

If you are not realistically going to sell all those investments and remove them than worrying about some theoretical tax implications on the AA is meaningless.

You do have to account for taxes when planning FIRE, but I don't see how it makes sense to complicate your AA in this way. You just need to adjust the amount of your withdrawals to have sufficient to pay taxes.

[daverobev]

So if you have 100k US in your RRSP, expect to pay 20% on RRSP withdrawals, I'd say the RRSP is only 'worth' 80k in terms of AA.

That ^^^ is exactly the argument that I don't agree with when reading about the topic. Why would $100K of stocks be worth less in the RRSP vs. say the TFSA unless you were realistically going to sell them all and withdraw them all from those accounts? Inside the accounts there are no tax implications and unless you are actually making some choice with regards to where you'll take your money from than there is no point comparing them in that way. And when you WR $1 from the RRSP regardless of how much tax you pay you'll re-balance the AA within all those accounts to get back to the planned AA.

If you are not realistically going to sell all those investments and remove them than worrying about some theoretical tax implications on the AA is meaningless.

You do have to account for taxes when planning FIRE, but I don't see how it makes sense to complicate your AA in this way. You just need to adjust the amount of your withdrawals to have sufficient to pay taxes.

Eh, what's the point of the AA if it's guaranteed to be wrong, though?

For example, let's say:

400k - RRSP - US

100k - TFSA - ROW

300k - unreg - mix Canada, bonds, ROW

If you want 50% US in your AA, in the above you don't really have it. That 400k in the RRSP of US is not worth the same as the 400k outside. This isn't about tax on taking the money out (directly); it's that if you want half of your after-tax pot amount in US, you do not have that in the allocation above.