Canadian High Interest Savings Bank Accounts

How much money do you really need in your RRSP's? Some people say around $100,000.00, others say sky's the limit!!! I say keep as close to zero!!!Here's why:

First of all being a senior citizen has its perks!!! You get discounts on bus passes, property taxes, rent, food, clothes….you name it you'll get a discount!!! Heck they even have one day a month reserved just for seniors called "Senior's Tuesday" at most department and drug stores!!!

Here's the problem with having too much money in RRSP's, when you have a pension, OAS, CPP, GIS, it means the government starts to cut the money that is owed to you since you have withdrawn from your RRSP(Since your income is too high!!). So in turn the government starts to cut back your CPP, OAS, GIS, etc. because now you have income coming in from a pension from work and RRSP's!!!!

My parents are both senior citizens and I do their income tax returns every year and they ask me: "Son when are you gonna finally move out???" Just kidding!!!! They are really asking me: "Son why does the government keep cutting my pension every year??" The answer is simple: Because you made too much money from your work pension and RRSP withdrawals!!!

Solution: What the government doesn't know won't hurt em'….Slowly cash out all of your RRSP's starting now until you have a "0.00″ balance. Then put the money in a good heavy duty fire proof safe in your basement and just take out money as you need it. This way you don't get your pensions cut from the government and you have security knowing that you have over $200,000.00 sitting in your basement. As an added bonus when relatives comes over for a visit, you can open the safe and count the money right in front of them!! It makes for a fun evening on a Friday Night!!!

Roc

RRSPs are far from perfect, but for the average Canadian without a company pension there is no better way to save for retirement. The thing about RRSPs is that you have to have discipline in order to maximize their effectiveness. You know that big tax refund you get in the winter? That's "supposed" to be the government's contribution towards your retirement fund. You're "supposed" to put that refund money into your RRSP and let it compound year-over-year (or grow, in the case of stocks) like the rest of your RRSP portfolio. The problem of course is that too many people take their tax refund and spend it on other things and lose out on all that tax-free compounding they could have gotten. That's the great thing about employer pensions; you can't spend your employer's contribution because according to Canadian pension laws it's "locked in" until you retire (RRSP refunds should also be "locked in" in my opinion, but that's another story). Anyway, once the funds are inside the RRSP, they grow tax-free. Tax free growth is HUGE, especially over a 30-year retirement savings period. As an illustration, if you manage to save up $100,000 in your RRSP by the time you're 40, you'll have well over $730,000 by the time you're 65 assuming an average RRSP growth rate of 8%. If the same $100,000 is invested at 40 outside of an RRSP, you'll only have $450,000 assuming the same 8% growth. These figures assume that you stop contributing at 40; you can boost your portfolio a lot higher if you keep making modest contributions past age 40 (say $200 per month). In that case, you'd have well over $1,000,000 in your RRSP by the time you hit 65 (or about $600,000 outside an RRSP). Also, what many young (say under 40) people don't realize is that once you hit retirement age, you can convert your RRSP into a RRIF (basically an RRSP in reverse), from which you draw funds for your retirement, BUT THE FUNDS REMAIN 100% TAX-SHELTERED. This is huge. Without an RRSP, you can still start a RIFF, but you're starting with hundreds of thousands of dollars less than if you would have saved through an RRSP. Anyway, I'll get off the soap box now, but basically the take-home message is that unless you have a defined-benefit pension plan (e.g. you're a teacher or government employee), or you're 100% sure you're getting a massive inheritance or are the becificiary of a trust-fund, you're best way to pile up the most cash in the shorted amount of time is probably by starting an RRSP and investing from within it.

The average return for a 30-year period in the world capital markets is 8% since WW2. There will be years of huge growth, huge decline, and no growth during a typical 30-year period, but the overall trend is up. As for teachers, government workers and their pension plans, they form gigantic unions and use their power to extort wage and benefit concessions from their only employer. Politicians who try to interfere get slapped down by union law firms who charge taxpayers big bucks. When lawyers get involved, it makes more sense to just give in to the unions than spend millions of taxpayer dollars on legal fees and have to deal with years of public sector labour unrest. It sucks, but that's just the way it is.

I think it is important to keep in mind that teachers contribute astronomical amounts to their pensions. On average for a beginning teacher close to $500 a month that come directly out of their pay.

’m maxing out both TFSA and RRSP though like i said, there's no telling what the value of the CAD will be decades from now when i draw the money. where does one get 8% returns these days anyway? you gotta be a crack dealer like Roc to get those kinds of returns. and how is it teachers get guranteed returns for their pension plans while private sector slaves who have job insecurity get the shaft?

I won't be putting my money in real estate any time soon, whether it's directly through property ownership (principal residence excluded) or indirectly through a corporation like this one. There's way too much risk on the horizon with the commercial real-estate bubble not to mention the coming dramatic rise in variable-rate mortgage payments for residential property mortgages once the Bank of Canada turns off the money-spigot and starts raising the bank rate (expected as early as this summer). I don't know anything about this particular company, but a quick look at their website reveals that their investment properties are all located in Alberta and BC. The health of Alberta real-estate is tied to the price of oil (and to a lesser extent natural gas), and BC real estate in the greater Vancouver area is grossly-overvalued to begin with and overdue for a plunge. Also, the website says that investment returns from the company are treated as interest income, which basically means you'll be paying tax on this investment at your marginal tax rate. That's big bucks. A quick search on redflagdeals.com suggests that this company makes their money by offering a form of bridge financing to property developers which certainly raises red flags for me. Anyway, others might disagree with my reasoning but I'll be taking a pass on this.

Peter said:

Hi There,

As far as RRSP's a concerned, I believe they are a complete rip-off. There are a couple reasons.

I asked a number of seniors who are already retired a very simple question. I ask them, without wanting to know any specific numbers, "Have they ever earned more money in their working career, then they are currently claiming on their current tax return. The answer was always the same. They all had higher incomes in retirement, than any other period in their life. So, what they were doing, was making contributions in lower tax brackets, then their current tax brackets. The, as mentioned here before, they end up paying much more tax, as well as getting claw backs on OAS.

Yep, my mother has the same problem. She put way too much money into RRSPs and has a higher yearly income now than when she was working, and can't even get any GIS (Guaranteed Income Supplement) money as a result, which is half of what makes up the government pension! So she's paid high taxes all her life only to not qualify for one of the two income plans the government offers seniors in retirement, income plans funded by her tax dollars all her life!!! Wealthy people get no government pension at ALL despite having paid the most taxes their whole life! Talk about robbing from the rich.

Both her and a financial friend of mine say always max out your TFSAs during your twenties and any other years you have a lower income, or if you are a low income earner in general, before putting any money in RRSPs. TFSA should always be filled with money before RRSPs are *ever* touched.

99% of the time there's no need for any retired person to be drawing more than $30,000 a year from all sources during their retirement, and most can live comfortably on $20,000. Plan accordingly, especially if you have no or few kids to inherit what'll be left when you die. Make sure you don't plan to draw so much that you won't even qualify to get your tax dollars back from the GIS!

Look at this from the government's website, outlining their scam: "Note – Pensioners with an individual net income above $66,733 must repay part or all of the maximum Old Age Security pension amount. The repayment amounts are normally deducted from their monthly payments before they are issued. The full OAS pension is eliminated when a pensioner's net income is $108,090 or above."

Here's the full page with a table of OAS and GIS rates: http://www.servicecanada.gc.ca…..ates.shtml