Author Topic: Canadians: RESP and RRSP advice please!  (Read 1293 times)

downbytheriver

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Canadians: RESP and RRSP advice please!
« on: August 15, 2018, 02:11:42 PM »
Long time lurker, first time posting. I need some advice regarding registered accounts in Canada. I just had my first child in June and I am looking to start an RESP for her. A coworker recommended Canadian Scholarship Foundation but I don't think this is the best option due to fees/account restrictions etc.

I am thinking of opening a brokerage account and investing in ETFs. Questrade, Qtrade? What are the options in Canada? We do plan to have one more child, I have read there is individual RESP as well as "family RESPs". What is the best option? If I do open an RESP through a brokerage account, is there any restrictions on how the funds can be used? I have read that some accounts only have approved schools/programs which can be quite limiting. Is this only with group RESPs through places like Canadian Scholarship foundation or does that apply to self directed accounts as well? I understand it is best to invest in higher risk investments initially when the timeline for growth is larger then over time transition to safer stuff like GICs/cash as the time to use the funds approaches. Is is best to invest one lump sum of $2500 yearly or do monthly payments? Does it make a difference in terms of fees? Also, if using a self directed account I assume I would have to apply for the actual grant myself (I assume this is the draw to the big group RESPs is not having to do the extra work). Is this correct and if so how do I do that?

Also, I have a small RRSP of around $27,000 currently in Tangerine Balanced Portfolio. It is there as I was too lazy/scared to open a brokerage account initially and figured with such a small balance fees wouldn't make that much difference in the beginning. This is based on my reading of Canadian Couch Potato. Anyways, I would be interested in transferring this over to a brokerage account which was always my plan but I still don't really know what I am doing. It could probably stand to be more aggressively invested as my timeline for retirement is likely at least 20 years. I think I saw on the Questrade website that they will cover a certain amount of transfer fees if the account is at least $25,000...

Any advice on how to execute these two things would be greatly appreciated. As you can see I have a vague idea of what I would like to do but I just don't know how to actually do it. Bonus points for example portfolios and rationale for choosing certain funds etc. Thanks!

thriftycanuck

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Re: Canadians: RESP and RRSP advice please!
« Reply #1 on: August 15, 2018, 04:39:10 PM »
Forget about Canadian Scholarship Foundation, or similar. Too costly with no real benefit.

I suggest starting a family RESP with a TD E - SERIES funds through TD discount brokerage until your accounts grow larger (70k plus) then start switching to ETF's - which at that point you can stay with TD or easily transfer in kind to Questrade.

TD E-Series are low cost and easy to buy and sell - with no buying and selling fees and are great to learn on.

Canadian Couch Potato is a great resource for anything you need to know - including info about asset allocation.
https://canadiancouchpotato.com

Also, read the book: "Millionaire Teacher" by Andrew Hallam - it will fill in all your knowledge gaps and get you off to a great start.
« Last Edit: August 15, 2018, 04:49:29 PM by thriftycanadian »

elaine amj

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Re: Canadians: RESP and RRSP advice please!
« Reply #2 on: August 15, 2018, 06:00:46 PM »
Yeah don't do the Canadian Scholarship Foundation and the like. When I looked into it, it's basically a rip off. And my SIL used to sell one of them.

Our brokerage took care of applying for the grant. I am with TD and I basically follow the Canadian Couch Potato, using e-series for smaller monthly investments and Vanguard for lump sum amounts. I have mine set to invest automatically every month.

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Blissful Biker

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Re: Canadians: RESP and RRSP advice please!
« Reply #3 on: August 15, 2018, 06:32:19 PM »
Our RESP is with BMO Investorline following a Canadian Couch Potato ETF portfolio.  BMO obtains the grant from the government and deposits it automatically.  I just do an annual deposit of $2500/kid to limit fees for purchasing ETFs and also make is easy to confirm that we have received the grant every year.

We are 40% bonds and 60% equity which is on the high risk side for the age of the kids (13 and 14) but we are OK with it.

Good luck and congratulations.  Kids are a joy (most days).

downbytheriver

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Re: Canadians: RESP and RRSP advice please!
« Reply #4 on: August 20, 2018, 05:34:33 PM »
Thank you everybody for the advice and suggestions. Is there any reason/advantage to go with a big bank owned brokerage as suggested over Questrade? I do my regular banking with Scotiabank and have a Tangerine account and would prefer not to open an account with another bank, trying to streamline things.

Retire-Canada

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Re: Canadians: RESP and RRSP advice please!
« Reply #5 on: August 20, 2018, 07:36:20 PM »
Thank you everybody for the advice and suggestions. Is there any reason/advantage to go with a big bank owned brokerage as suggested over Questrade? I do my regular banking with Scotiabank and have a Tangerine account and would prefer not to open an account with another bank, trying to streamline things.

No. I would ditch the bank and do Questrade as soon as possible. Lower fees/no fees and more choice. It's not hard to learn the QT interface. If you want to streamline things move all your investments to QT and pick either SB or Tangerine and close the other one.

Prairie Stash

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Re: Canadians: RESP and RRSP advice please!
« Reply #6 on: August 22, 2018, 09:11:39 AM »
RESP - National Bank is theplace. It is better then Quest, RBC, BMO, Tangerine etc.
https://www.nbc.ca/personal/savings-investments/resp.html
There is a small catch, they require at least 100 units to be bought at a time. This can be achieved by selling 100 and purchasing 150, its a dumb rule. 

National has the lowest fees. It will take care of CESG, CLB and most importantly for you, the BC grant.

I hold my current RESP with RBC, due to a matching grant program problem, and I haven't finalized the switch over to National (just haven't sent in the paperwork). I invest long term primarily in a mutual fund similiar to the couch potato strategy (2 ETF; one American, one Canadian, Bonds starting at age the childs age 12). I have 2 children, I'm you in 5 years.

My plan, for each child, is to do 12 years of $2500/year contributions, then I will stop. At age 16 my children will be expected to contribute to their own RESP and recieve the renaining grant room, I believe in having children contribute to their own education and think it will be a valuable life lesson.

K-ice

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Re: Canadians: RESP and RRSP advice please!
« Reply #7 on: August 25, 2018, 09:30:23 AM »
My RBC direct investing account was very happy to help move RRSPs over from other institutions. I am buying Vanguard ETFs.

RBC direct investing has a way better fee structure than CIBC. $15K in all accounts to wave fees. CIBC is $25K in RRSP, $15K in unregistired and something for TFSA not combined. So you could have over $50K with them in three different accounts and your fees would still be $300/year.

So moving your Tangerine stuff should be relatively easy if you feel ready for your own direct investing.

I'm not sure why I haven't moved my RESP over as well. Maybe bank loyalty.
My child's RESP is 9 years old and I opened it with another banks balanced mutual funds. It has an annual return of 8.7% since inception so I feel they are doing a good job managing it.
I have been lucky to be able to contribute the max every year. By 14 all the grants should be paid.

Family vs individual. We only have one kid so I'm not sure what type we opened & I am no help on that advice. I think if we had a second (almost immaculate conception kid) I would open a second individual since there is such an age gap between them. All the money needs to be used by 35y from starting date so the second kid would only be 25.

I know I have read somewhere that to actually optimize the compound interest you should deposit about $3500 per year.  (~$50,000/14).  Or even dump $15000 in at year 1 then $2500 a year until age 14. 
If you can get $2500 per year that is better than most, but if you have extra cash to invest look into the option of paying more into it.  I might try to get caught up and hit our $50K max by age 14.

Lastly, if I were to start again, with what I know today, I would probably open my RESP in my direct investing account and buy VGRO. 

I hope this was helpful.   
 


downbytheriver

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Re: Canadians: RESP and RRSP advice please!
« Reply #8 on: August 25, 2018, 04:28:27 PM »
Thanks again for all the answers. I have been looking into VGRO after coming across it being mentioned in a few other threads, seems like a good easy option that covers all the bases. May use for both RESP as well as RRSP since the timeline for both is similar.
Does anybody know if Questrade takes care of the grant applications for RESPs and automatically deposits it or I would have to do this myself? Thanks!

daverobev

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Re: Canadians: RESP and RRSP advice please!
« Reply #9 on: August 25, 2018, 05:33:39 PM »
Thanks again for all the answers. I have been looking into VGRO after coming across it being mentioned in a few other threads, seems like a good easy option that covers all the bases. May use for both RESP as well as RRSP since the timeline for both is similar.
Does anybody know if Questrade takes care of the grant applications for RESPs and automatically deposits it or I would have to do this myself? Thanks!

Part of the application for the account is, IIRC, a tick box that says 'you give Questrade the authority to apply for CESG on your behalf...' or something. They deal with it; the money shows up in your account a few weeks after each contribution.

IMHO you can't really beat Questrade until companies start paying you to hold investments with them. VGRO is great, though it is heavy on Canada, as well as holding hedged foreign bonds, which is odd. As a one stop solution it is the best out there. For three stops, VAB + XAW + VCN (with much less VCN, say 10-15%) is 'better'.

Prairie Stash

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Re: Canadians: RESP and RRSP advice please!
« Reply #10 on: August 27, 2018, 10:08:59 AM »
Thanks again for all the answers. I have been looking into VGRO after coming across it being mentioned in a few other threads, seems like a good easy option that covers all the bases. May use for both RESP as well as RRSP since the timeline for both is similar.
Does anybody know if Questrade takes care of the grant applications for RESPs and automatically deposits it or I would have to do this myself? Thanks!
CESG - Yes
BCTESG - NO
https://www.canada.ca/en/employment-social-development/services/student-financial-aid/education-savings/resp/resp-promoters-list.html

The link is a list of RESP promoters, not every institution does all the grants.

Using Questrade will not attract the $1200 BCTESG.
"If the bank or financial institution used for the RESP also supports the BCTESG, any family can simply fill in a straightforward application to receive the grant. If the bank or financial institution used for the RESP does not support the BCTESG, parents are encouraged to open an additional RESP for their child at a partner institution that offers the grant."

There are ways around it, basically you need to open up two accounts then.

The Questrade mantra is strong, unfortunately its not always right for RESP.

downbytheriver

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Re: Canadians: RESP and RRSP advice please!
« Reply #11 on: August 29, 2018, 12:39:16 PM »
Thank you Prairie Stash, that is not something I had thought about (I see now you mentioned the BCTESG in your original post about National. I assumed if the institution did the grants that meant they would have the ability to do all that were available.) That is really great information.

Prairie Stash

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Re: Canadians: RESP and RRSP advice please!
« Reply #12 on: August 29, 2018, 04:02:56 PM »
Thank you Prairie Stash, that is not something I had thought about (I see now you mentioned the BCTESG in your original post about National. I assumed if the institution did the grants that meant they would have the ability to do all that were available.) That is really great information.
Yeah, I learned the hard way about provincial matching. Luckily for me I was able to move my account and claim retroactive matching. It only took 3 bank meetings and 6+ phone calls to sort out the mess. It took about 9 months of phoning and waiting.

I was suppose to receive annual provincial matches and they missed one in the middle when getting the retroactive matches. I received 4 years of 5, it was weird, the RESP system might be worse then the student loan system, its not a well oiled machine.

On the plus side, I spent a lot of time reading RESP rules. You can't transfer the grant to Questrade after receiving it either. If you attempt to you may lose it forever, thats the case with my grants, there's no second chances.

K-ice

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Re: Canadians: RESP and RRSP advice please!
« Reply #13 on: August 29, 2018, 04:09:46 PM »
Just a quick question to double check.

A 15 year old who has never contributed could contribute:

$5000 year 15
$5000 year 16
$5000 year 17

and get

$1000
$1000
$1000

for a total of 1500 in grants?

Thanks



Prairie Stash

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Re: Canadians: RESP and RRSP advice please!
« Reply #14 on: August 30, 2018, 10:18:54 AM »
Just a quick question to double check.

A 15 year old who has never contributed could contribute:

$5000 year 15
$5000 year 16
$5000 year 17

and get

$1000
$1000
$1000

for a total of 1500 in grants?

Thanks
"Never" that changes things. Make sure you start at age 15, by age 16 you get screwed (theres a rule about the age you have to start a plan). Total contribution is $15k, total grant is $3000 (20%). Best savings plan in the world for a HS student wanting to attend University.  I could have used my Student loan to fund this when I started University at 17 (didn't exist back then), I would have received $1000 back for my 2nd term Even poor students can benefit if done right, its highly unlikely they will though, not many people have their life figured out that well at 17.

if starting in 2018 (age 15), this is what it looks like:
2015 $2500 - grant $500 catch up from 2020
2016 $2500 - grant $500 catch up from 2019
2017 $2500 - grant $500 catch up from 2018
2018 $2500 - grant $500
2019 $2500 - grant $500
2020 $2500 - grant $500

http://www.moneysmartsblog.com/resp-contribution-rules-15-16-17-year-olds/
"RESP contributions made for beneficiaries in the year they turn 16 or 17 are eligible for a grant only if at least one of the following conditions is met:

At least $2,000 must have been contributed to, and not withdrawn from, an RESP for the beneficiary before the end of the calendar year the beneficiary turned 15 OR
At least $100 must have been contributed to, and not withdrawn from, an RESP for the beneficiary in each of any four years before the end of the calendar year in which the beneficiary turned 15."

Saskatchewstachian

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Re: Canadians: RESP and RRSP advice please!
« Reply #15 on: August 30, 2018, 01:53:37 PM »
Thank you everybody for the advice and suggestions. Is there any reason/advantage to go with a big bank owned brokerage as suggested over Questrade? I do my regular banking with Scotiabank and have a Tangerine account and would prefer not to open an account with another bank, trying to streamline things.

I am currently going through the exact same thing as we had a kid in July, for DW and I we will be using Scotia iTrade (NOT Scotia mutual funds though an advisor).

You can download all of the forms you need online and mail them in then they will set up the account. You don't have to worry much about fees as it's treated like a regular investment account and can still follow Couch Potato within the account, the only cost is the $9.99/trade. If you are doing one single $2500/year deposit then it may be worth the $10 to keep all your accounts with the same institution.

Goldielocks

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Re: Canadians: RESP and RRSP advice please!
« Reply #16 on: August 30, 2018, 06:34:48 PM »
Thank you everybody for the advice and suggestions. Is there any reason/advantage to go with a big bank owned brokerage as suggested over Questrade? I do my regular banking with Scotiabank and have a Tangerine account and would prefer not to open an account with another bank, trying to streamline things.

Ask Questrade if they manage the Canada Learning Bonds (low income grants) and / or BC Provincial savings grants (e.g., for kids born between certain years).  The answer will tell you if you may have challenges in future.  some banks don't do the paperwork for these extra types of grants, some do.  Questrade might and not TD, for example.


To your original question:

1.  Do not do the Scholarship foundation route.  There are 50 reasons why getting your money out is much, much more restrictive (penalties) than with a self-directed RESP.   I could write a long time, but just don't.

2.  I recommend investing in your RRSP until your kid is about 13 years old.  Once they are 13, THEN set up the RESP and contribute $5k/year (the max when you have top up contribution room) for ages 13-17... or about $25k total out of your pocket.  The government will match this with at least 20% and you get your $5k grant, plus any income.   Now you have over $30k ready for first year college and you can cash flow the rest.

Why do I prefer the RRSP over the RESP until your kid is a teenager?  It is so much more important for your RRSP, with 30+ years to grow, to have money in it early, versus the RESP that only has 5-15 years to grow.  The RESP can be funded at the last moment.   The RESP should not be invested as aggressively because if you only have 10 years until you withdraw it, you will want to be more conservative anyway.  Meanwhile that money in the RRSP could be earning higher rates of return because you don't need it for decades.

Just start before the year your kid is 16!! That is very important to getting any grant money.

Right now, a 4 year degree, without room and board, costs $24k to $26k in Vancouver area.  To get this, you would contribute $5k a year when your kid is 14-17.  Tuition is increasing at only 2% a year, and  the increase is controlled by the BC Government, typically tied to CPI somewhat.

So, unless you intend to fund a huge masters degree or ship your kid out of province, you don't need a ton of education money saved.

ETA -- I see Prairie Stash answered the Questrade question - no to the BC grants at Questrade. Prairie Stash is an excellent resource on here! I was (almost) caught by this with a big national bank, too, for another province.   I assumed all banks would do all grants.  Nope!
« Last Edit: August 30, 2018, 06:42:04 PM by Goldielocks »