Debt free Canadian with no savings! How do I invest?

[canadiansaver]

Hi everybody (and Mr. Frugal Toque, if you're reading),

Tomorrow we will be debt free. Thanks to this blog for keeping me going- $95 000 in thirty five months!  We will own our home, which will require extensive repairs -roof, sill, staircase - in the coming years.  We own two cars which will need at least one replacement in the next couple of years.  We have three kids under age twelve.  I just got a job close to home, so I will be biking to work! 

Now what?  We live in Canada.  I have a job with a government pension that will pay 70% of my salary, likely with no indexing (no keeping up with inflation) - I will probably do this job until I qualify for that pension, 19 years in, 15 to go.  We also get Old Age Security and Canada Pension Plan (reduced due to my pension).

My partner has no savings and no pension plan with their job.

I want to invest on my own, but I'm afraid.  I want to  invest the kids' RESPs in something that earns interest, rather than GICs.  I want to start a TFSA. How?  Where do I start?

Is this worth it:  http://canadiancouchpotato.com/diy-investor-service/  ??

Thanks!

[Thespoof]

I have the couch potato portfolio in my RRSP except for the REIT portion. I use my TFSA for my real estate holdings.

[jambongris]

...  I have a job with a government pension that will pay 70% of my salary, likely with no indexing (no keeping up with inflation) ...

Could you elaborate on why you think there will be no indexing of your pension benefits? According to the PWGSC website, pension benefits for federal government employees are currently indexed to the CPI.

[Ziggurat]

I want to invest on my own, but I'm afraid.  I want to  invest the kids' RESPs in something that earns interest, rather than GICs.  I want to start a TFSA. How?  Where do I start?

Is this worth it:  http://canadiancouchpotato.com/diy-investor-service/  ??

Thanks!

I don't think that service is worth it in your situation; it's a fairly high expense you don't need.  TD bank is an easy way to start, with their e-series mutual funds.  Go to TD bank and ask to open a TFSA and RESP account, and set up automatic monthly purchases of e-series (TD) funds (good for their low fees). Choose a couch potato portfolio (http://canadiancouchpotato.com/model-portfolios/) which tells you the e-series funds to buy and in what ratios.

Later, when you have large amounts in your accounts, you may want to add trading ability to the accounts, and buy ETFs etc. for the lower management fees, but then you will pay trading fees, so to start the mutual funds are probably easier and cheaper.

[TrMama]

Get SIN #s for each of your kids. You need these to open RESPs.

Open an account with either TD or Questrade for RSPs (for you and your spouse), RESP (choose family RESPs rather than individual so you can have one large pot of money to pull from rather than smaller accounts that can only be used by a specific child) and TFSAs for you and your spouse.

Find your and your spouse's 2013 notices of assessment. Figure out how much RSP contribution room you have. Figure out how much you can put into RSP's and how it should be split between the accounts (you vs spouse) in order to minimize your income tax burden.

If you're able to send a lot of money to your RSPs, file form T1213 with CRA to have less tax deducted by your employer. Send this extra money to RSP/TFSA/RESP/whatever. You have to refile this for every year and if you end up owing tax next spring, CRA has the right to deny your request next year. Get as close to $0 owing as you dare.

[daverobev]

I personally would go the Questrade route over eSeries, though I can see the latter is... simpler, in many ways.

But yeah. Open an account, put money in, buy stuff.

IMHO very few people need real advice from a really good advisor. Most people just need to follow the diversified, broad index based approach. IE, 20-35% home country, 20-35% international developed, 20-35% developing, and the rest in bonds.

Put the US$ stuff in the RRSP, bonds in TFSA, and everything else (especially Canadian) in unregistered - for a Canadian, obviously.

Job done.

[rocketpj]

Get SIN #s for each of your kids. You need these to open RESPs.

Open an account with either TD or Questrade for RSPs (for you and your spouse), RESP (choose family RESPs rather than individual so you can have one large pot of money to pull from rather than smaller accounts that can only be used by a specific child) and TFSAs for you and your spouse.

Find your and your spouse's 2013 notices of assessment. Figure out how much RSP contribution room you have. Figure out how much you can put into RSP's and how it should be split between the accounts (you vs spouse) in order to minimize your income tax burden.

If you're able to send a lot of money to your RSPs, file form T1213 with CRA to have less tax deducted by your employer. Send this extra money to RSP/TFSA/RESP/whatever. You have to refile this for every year and if you end up owing tax next spring, CRA has the right to deny your request next year. Get as close to $0 owing as you dare.

All of this.  RESPs give a nice bonus of a few hundred dollars to savings each year if you keep them up - very helpful if your kids decide to go to school.

Balance your RSPS as best you can - likely your spouse will need to put more than you since you have a pension plan.  Make sure you set aside cash over the course of the year for things like property taxes and car insurance.  I am shocked how many of my friends start their summer in a panic as they 'suddenly' have to come up with a couple thousand for property tax.

You might want to do some reading about the balance between RRSPs and TFSAs.  With your pension and 'too much' RRSPs you might find yourself paying avoidable taxes in retirement - I'm not an accountant but Cdn. couch potato has some stuff on that, and a few others.  If that is a risk you should put more into TFSAs.  Your spouse should prioritize RRSPs though.

[daverobev]

Get SIN #s for each of your kids. You need these to open RESPs.

Open an account with either TD or Questrade for RSPs (for you and your spouse), RESP (choose family RESPs rather than individual so you can have one large pot of money to pull from rather than smaller accounts that can only be used by a specific child) and TFSAs for you and your spouse.

Find your and your spouse's 2013 notices of assessment. Figure out how much RSP contribution room you have. Figure out how much you can put into RSP's and how it should be split between the accounts (you vs spouse) in order to minimize your income tax burden.

If you're able to send a lot of money to your RSPs, file form T1213 with CRA to have less tax deducted by your employer. Send this extra money to RSP/TFSA/RESP/whatever. You have to refile this for every year and if you end up owing tax next spring, CRA has the right to deny your request next year. Get as close to $0 owing as you dare.

All of this.  RESPs give a nice bonus of a few hundred dollars to savings each year if you keep them up - very helpful if your kids decide to go to school.

Balance your RSPS as best you can - likely your spouse will need to put more than you since you have a pension plan.  Make sure you set aside cash over the course of the year for things like property taxes and car insurance.  I am shocked how many of my friends start their summer in a panic as they 'suddenly' have to come up with a couple thousand for property tax.

You might want to do some reading about the balance between RRSPs and TFSAs.  With your pension and 'too much' RRSPs you might find yourself paying avoidable taxes in retirement - I'm not an accountant but Cdn. couch potato has some stuff on that, and a few others.  If that is a risk you should put more into TFSAs.  Your spouse should prioritize RRSPs though.

If you are in a low or middle tax bracket, max your TFSA *first*, then move on to RRSPs.

TFSA you are locking in paying your current marginal rate on that money. RRSP you will pay an unknown future marginal rate on withdrawals. If you're a big earner now and will live a modest life in retirement, RRSP all the way.

[canadiansaver]

...  I have a job with a government pension that will pay 70% of my salary, likely with no indexing (no keeping up with inflation) ...

Could you elaborate on why you think there will be no indexing of your pension benefits? According to the PWGSC website, pension benefits for federal government employees are currently indexed to the CPI.

My pension is not federal, and it only indexes if the investment gets a high enough return.  Lately this has not been happening.  I am in Nova Scotia, and with a shrinking population, there are more retirees drawing from the  pension than are still working and contributing.

[canadiansaver]

I want to invest on my own, but I'm afraid.  I want to  invest the kids' RESPs in something that earns interest, rather than GICs.  I want to start a TFSA. How?  Where do I start?

Is this worth it:  http://canadiancouchpotato.com/diy-investor-service/  ??

Thanks!

I don't think that service is worth it in your situation; it's a fairly high expense you don't need.  TD bank is an easy way to start, with their e-series mutual funds.  Go to TD bank and ask to open a TFSA and RESP account, and set up automatic monthly purchases of e-series (TD) funds (good for their low fees). Choose a couch potato portfolio (http://canadiancouchpotato.com/model-portfolios/) which tells you the e-series funds to buy and in what ratios.

Later, when you have large amounts in your accounts, you may want to add trading ability to the accounts, and buy ETFs etc. for the lower management fees, but then you will pay trading fees, so to start the mutual funds are probably easier and cheaper.

So, I opened a family RESP and a TFSA in Questrade.  I am buying the four ETFs suggested by the couch potato.  The MERs are low.  So far I have lost many thousands- around 4-5%.  I'll stick with it for many years!

[canadiansaver]

Get SIN #s for each of your kids. You need these to open RESPs.

Open an account with either TD or Questrade for RSPs (for you and your spouse), RESP (choose family RESPs rather than individual so you can have one large pot of money to pull from rather than smaller accounts that can only be used by a specific child) and TFSAs for you and your spouse.

Find your and your spouse's 2013 notices of assessment. Figure out how much RSP contribution room you have. Figure out how much you can put into RSP's and how it should be split between the accounts (you vs spouse) in order to minimize your income tax burden.

If you're able to send a lot of money to your RSPs, file form T1213 with CRA to have less tax deducted by your employer. Send this extra money to RSP/TFSA/RESP/whatever. You have to refile this for every year and if you end up owing tax next spring, CRA has the right to deny your request next year. Get as close to $0 owing as you dare.

Hi,

My kids have had SIN's since birth, as they have small RESPs with Concentra, which I will transfer to Questrade this March as soon as the GICs are all mature.

I don't think an RRSP is worth it for me.  I take part in a deferred salary program, so regularly receive 80% pay.  This, combined with a ~$10 000 contribution to our pension plan, means that my salary will actually be higher when I am retired.  Because I plan to split income with my spouse, it may be worth it to have some RRSPs, but I have started by getting our TFSAs up and running.

[canadiansaver]

I personally would go the Questrade route over eSeries, though I can see the latter is... simpler, in many ways.

But yeah. Open an account, put money in, buy stuff.

IMHO very few people need real advice from a really good advisor. Most people just need to follow the diversified, broad index based approach. IE, 20-35% home country, 20-35% international developed, 20-35% developing, and the rest in bonds.

Put the US$ stuff in the RRSP, bonds in TFSA, and everything else (especially Canadian) in unregistered - for a Canadian, obviously.

Job done.

Thanks- my confidence is growing.  Although I don't understand why the USD would be RRSP, bonds in TFSA?

[canadiansaver]

Get SIN #s for each of your kids. You need these to open RESPs.

Open an account with either TD or Questrade for RSPs (for you and your spouse), RESP (choose family RESPs rather than individual so you can have one large pot of money to pull from rather than smaller accounts that can only be used by a specific child) and TFSAs for you and your spouse.

Find your and your spouse's 2013 notices of assessment. Figure out how much RSP contribution room you have. Figure out how much you can put into RSP's and how it should be split between the accounts (you vs spouse) in order to minimize your income tax burden.

If you're able to send a lot of money to your RSPs, file form T1213 with CRA to have less tax deducted by your employer. Send this extra money to RSP/TFSA/RESP/whatever. You have to refile this for every year and if you end up owing tax next spring, CRA has the right to deny your request next year. Get as close to $0 owing as you dare.

All of this.  RESPs give a nice bonus of a few hundred dollars to savings each year if you keep them up - very helpful if your kids decide to go to school.

Balance your RSPS as best you can - likely your spouse will need to put more than you since you have a pension plan.  Make sure you set aside cash over the course of the year for things like property taxes and car insurance.  I am shocked how many of my friends start their summer in a panic as they 'suddenly' have to come up with a couple thousand for property tax.

You might want to do some reading about the balance between RRSPs and TFSAs.  With your pension and 'too much' RRSPs you might find yourself paying avoidable taxes in retirement - I'm not an accountant but Cdn. couch potato has some stuff on that, and a few others.  If that is a risk you should put more into TFSAs.  Your spouse should prioritize RRSPs though.

Thanks- I hadn't thought of searching "balance between" RRSPs and TFSAs.  I wish I could find a calculator that could handle different scenarios for RRSP, TFSA, CPP, OAS, and defined benefit pension plans.

[RichMoose]

Wow! Thread super-bump here. Good to see someone checking back in though.

Based on your scenario you should not invest in RRSPs. Start with TFSA and once that is full then invest in a cash investment account. How are you doing with your savings goals? Are you sticking with the Couch Potato plan?

What type of scenarios are you looking for re:

I wish I could find a calculator that could handle different scenarios for RRSP, TFSA, CPP, OAS, and defined benefit pension plans.