Feds should eliminate mandatory minimum annual RRIF withdrawals: C.D. Howe Institute report | Page 6 | General financial discussion | Discussion forum

savemoresaveoften said
Lastly, one should always put money into both TFSA and RRSP, if they can afford it. Not doing it with the intention of maximizing govt handout down the road is just wrong.  

Ordinarily, my old thinking, which I've gone back and forth, would've been inclined to agree; however, I'm not so sure. Unless you're making $150,000+ per year and expect to have $50,000 or less in retirement, there's probably little benefit to you to having an RRSP. Most likely, it's probably going to negative impact you.

Non-registered savings is not some kind of 'boogeyman'. There are many advantages to it, the federal dividend income tax credit from Canadian corporations, 50% capital gains inclusion rate, etc.

The downside to it is tracking one's adjusted cost base. That's not the worst of it; the worst of it is the taxable phantom distributions in ETFs and mutual funds.

What we really need is a broad-based overhaul of the income tax system to eliminate those unfairnesses.

Cheers,
Doug

Bill said
There's always increasing support for lower-income people, plus CPP has been enhanced, there's OAS and GIS and other deductions/credits for seniors, there's TFSAs to load up on, so if you're working for 35 years or so (i.e. max CPP) why not blow your RRSP or retirement money on a tropical vacay every year? Then you don't have to worry about RRIFs, etc. Assuming you have no debts (and assuming the world is like it is now in the future) and that your needs and wants are modest you'll likely be just fine in retirement, especially if your long-term spouse has done the same.  

Completely agree with this. Why is it as society we tend to think we're supposed to back end our vacations and holidays into our later years, when we're more prone to health conditions, backs that won't let us get out of bed some days, feet conditions, and all of that?

cgouimet said
With fewer people with reasonable benefits and pensions nowadays, eliminating the tax deferral incentive of RSP's might result in a very difficult retirement for future generations. Without an immediate incentive to save, most people just spend what they make deferring savings until they realize they want or are forced to retire and have inadequate funding to support themselves.

While I would like to see the RRSPs phased out, I would like to see the pooled registered pension plans (PRPPs) retained, but instead of using available contribution room, they are subject to annual pension adjustment limit. IMHO, the Conservatives were on to something with the PRPP idea, but the trouble was, they came at a time of the TFSA and with RRSPs/group RRSPs already a major retirement savings vehicle, they just too much competition. I would rather see the government require federal banks and trust companies to set up a reformed multi-employer defined contribution pension plans and then mandate employers be opted in to such a plan, which they could opt into without payment of annual or initial set up administration fees. They wouldn't be mandated to contribute, though we could offer added refundable tax credits to corporates that, say, contribute a minimum of 2% of an employee's gross earnings, for example. Funds are then locked in to retirement, though we should still create something akin to the Home Buyers Plan and Lifelong Learning Plan that allows people to temporarily withdraw from their pension plans, provided they agree to recontribute those funds over their pre-retirement lifetime.

Cheers,
Doug

COIN said

There used to be an estate tax (death duties) but that was dropped when they introduced the capital gains tax. Please don't say we might get both.  

Ooh, really? We used to have zero capital gains tax?

I think I'd much prefer an estate tax to a capital gains tax.

savemoresaveoften said

In my mind, there is nothing wrong with capital gain exemption for principal residence, as it’s typically a very long term holding before sale back in the days. The problem is excessive house flipping. As I have proposed in the past, it should be a minimum 10 year holding period to qualify for tax exemption, or if sale triggered due to death.  

I disagree. Why should one's residence be advantaged for tax purposes over someone who, say, prefers to rent and prudently save in other asset classes outside of tax-sheltered and/or tax-deferred investment vehicles?

I think it would make more sense to eliminate the capital gains tax entirely, not discriminate against or advantage certain asset classes, and re-introduce a 5-10% estate tax (perhaps on estates over $500,000) when one dies (married couples could/should be able to have a one-time rollover of their deceased spouse's estate into their assets, if they so choose).

Cheers,
Doug

Bill said
You're right, probably best just to leave it all alone and just let the market decide what prices should be.

Houses are not expensive, they might even be cheap. These days in the mid-size city area I have my principal residence a house for sale sits for a week at the most, and they go pretty much for asking from what I'm told, tells me prices are very affordable. I remember times years ago when it took 30 days or more on average.  

Depending on the market and type of dwelling, I would agree with you on this, Bill. You can still buy condos in the Okanagan for $250,000-300,000. Interest rates on mortgages have gone up, sure, but even still, with the rents landlords are asking in the Okanagan, it seems to be cheaper to buy rather than rent. If one is not financing their purchase, it's definitely cheaper.

For me, that's the way I look at home ownership...what's cheaper? If it's significantly cheaper to rent rather than own, why buy? If it's cheaper to buy rather than rent, why rent? Treat it like an investment, look at your after tax return on invested capital, remembering that interest income is taxed at one's highest marginal rate.

Cheers,
Doug