Author Topic: Canadian Late Beginner - RRSP & RESP questions  (Read 3271 times)

Wannabe Mustache

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Canadian Late Beginner - RRSP & RESP questions
« on: March 07, 2014, 06:38:03 AM »
Hi.  I've been reading MMM for about a year.  I've also purchased several books based on recommendations here, most specifically Millionaire Teacher by Andrew Hallam & Wealth Ed - Money Management for Ontario Teachers.  I've also read some other blogs like Canadian Couch Potato. 

Obviously, I am an Ontario teacher so I have my pension plan.  I am almost 44 years old and I have been a money ignoramus until the past year. 

I started teaching at 32 so I can't get full pension until March 2029 when I can retire with a net monthly income of $2917.  I (sadly) have only $4,481 in an RRSP at Standard Life.  This was money my employer gifted me because our local union bargained away the retirement gratuity (exchanged for not using sick days).  In the end, all teachers lost that last year so whatevs.  I chose Standard Life because my employer recommended it.  I had no idea what the costs were until now - each fund (there are 4) has a MER of at least 2.35% (OUCH). 

Since I've been a money ignoramus and my DH is much, much worse than I am (not with spending but with earning & saving - he has absolutely no savings and he turns 60 this month) I have a mortgage of just under $140,000.   No other debt. 

I have twin daughters who are 7 years old.  I have a family RESP that is through Scotiabank (I can't see the costs on the statements) that holds $16,840.  Right now I'm investing $200/month in it but I know I have to up that and I need to maximize the CESG skillfully (I read a post about it on another Canadian site). 

I have learned that I should be investing in ETFs and that my asset allocation for my RRSP should be roughly 60/40 stocks/bonds (for now - I believe it changes as I get older).   

I want to invest my money more intelligently but I still don't feel like I have a really good grasp on investing well so I'm wondering what I should do while I continue to try to educate myself.  I struggle with understanding the advice in module 3 of Wealth-Ed management.  I need a "Dummies" book.   

I'm thinking maybe I should use Vanguard since I'm not ready to handle my own investments.  I've tried to understand Questrade and eSeries at TD but I'm not there yet. 

Should I transfer my RRSP to Vanguard?  I know I need to contribute as much as possible and I am working on my budget to do so.  I know I am starting too late to retire early and I'm OK with that.  I can make it through 14 more years of teaching. 

Should I transfer my daughters' RESP to a self-directed one where I can invest in ETFs?   I do not understand the statement from Scotiabank - it just outlines purchases of Mutual Funds, I can't see any costs or earnings on the statement. 

I'm not sure if I need to include more information here or not.  Any advice/suggestions is much appreciated. 

andru365

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Re: Canadian Late Beginner - RRSP & RESP questions
« Reply #1 on: March 07, 2014, 06:55:48 AM »
Your best bet for a simple, easy to understand investment portfolio is to follow the CCP "Global Couch Potato" model with TD e-Series funds. 

Check it out here: http://canadiancouchpotato.com/model-portfolios/

Though it is a pain to get it setup, it is worth it as the MER for a typical e-Series portfolio will be under 0.5% depending on asset mix.

If I were you, I would set up the following accounts with them:  RRSP, RESP, TFSA and transfer all your current investments over to them.

You still have lots of time to build your retirement nest egg so the sooner you ditch the high cost funds the better you will be in the long run.


aclarridge

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Re: Canadian Late Beginner - RRSP & RESP questions
« Reply #2 on: March 07, 2014, 07:21:02 AM »
Vanguard is only available to Canadians by buying their ETFs as far as I know (as opposed to in the US where you can set up a mutual fund account with them). ETFs are a bit more complicated than e-Series funds to use, and because of transaction fees actually costs more for small portfolios. So I'd also recommend TD e-Series funds - Canadian Couch Potato's Model Portfolios section has a good example of a diversified portfolio there.

I must add that the easiest way to grow your portfolio, especially when your portfolio is still small, is simply by not buying as much stuff - lowering expenses. If you're already doing that then great, I'm just saying you should spend 95% of your effort on that and 5% on investing, at this point IMHO.

jambongris

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Re: Canadian Late Beginner - RRSP & RESP questions
« Reply #3 on: March 07, 2014, 09:38:08 AM »
...

Though it is a pain to get it setup, it is worth it as the MER for a typical e-Series portfolio will be under 0.5% depending on asset mix.

Why do you say that they're difficult to set up? I've opened several TD Waterhouse self directed registered accounts and all they involved were short meetings at a local TD branch and one or two forms each time.

To the OP: I would also recommend the Canadian Couch Potato e-Series set up. Once you get the account open it is fairly trivial to purchase the e-Series funds.

Tai

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Re: Canadian Late Beginner - RRSP & RESP questions
« Reply #4 on: March 07, 2014, 06:27:35 PM »
I read the Investing for Canadians for Dummies book. It is pretty basic information, and much of it didn't apply to me. Have you considered, with a pension down the line, if a TFSA might be a better account for retirement savings? Also I can understand wanting to max out the grant money for the RESP, but that isn't money that you can really use for anything but post secondary for your kids, which is at least 10 years away. A lot of advice I see seems to be to save first for your own retirement then work on the RESP. I'm new at this too, and might be completely wrong about this stuff, there's lots of contradictory information out there. The Ontario Secondary teachers union has a financial services company called Educator's Financial Group, I've gotten advice from them before and they service all Ontario educators and their families. The ones I met didn't push any of their own products or services on me, and I did ask a lot of suspicious questions.

Self-employed-swami

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Re: Canadian Late Beginner - RRSP & RESP questions
« Reply #5 on: March 07, 2014, 06:37:27 PM »
If you are near your RRSP deduction limit, just be aware that you may have a pension adjustment amount, that will lower your next year's RRSP deduction limit.

:)

Wannabe Mustache

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Re: Canadian Late Beginner - RRSP & RESP questions
« Reply #6 on: March 08, 2014, 04:57:58 PM »
Thanks all. 

I don't think I'm anywhere near my RRSP contribution amount as I only have $4000ish in it! 

I made an appointment with TD so we'll see what that brings. 

I am working on my expenses too - slowly changing.  I wasn't ridiculous before but there is room for improvement.