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Competitive RSP Season...
December 18, 2017
10:24 pm
Loonie
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First out the gate in my inbox is Meridian, which wants to make sure I don't invest before seeing their offer - in January:

"Dear (my first name)

It's that time of year! We're talking, of course, about RRSP season. The deadline for contributions is March 1, 2018.

Let's be honest. There are few things more important than saving for the future. Making sure that you end up where you want to be in retirement takes time and planning.

At Meridian, we make the effort to get to know each and every one of our Members through one-on-one conversations with Meridian Advisors. By doing so, our Advisors can craft savings and investment plans that work for you. Together, we'll get you to exactly where you want to be.

Stay tuned for a special offer coming in January!

Speak to a Meridian Advisor about your retirement goals today."

They've figured out how to address me by name, but they haven't figured out how to segment their mailing list. If they had, they would realize that I am living my retirement, not saving for it; and I won't be buying any RSPs.

I hope they will be equally interested in providing attractive deals for their RIF members - but I'm not holding my breath.

December 19, 2017
5:47 am
Nehpets
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Loonie said
They've figured out how to address me by name, but they haven't figured out how to segment their mailing list. If they had, they would realize that I am living my retirement, not saving for it; and I won't be buying any RSPs.

I hope they will be equally interested in providing attractive deals for their RIF members - but I'm not holding my breath.  

I wonder if their marketing strategy might have something to do with increasing DICO limits, in an effort to attract higher deposit limits. Meridian has previously alluded to increased DICO limits in earlier promo emails.

Mass mailings can be tailored using their database, where the effectiveness of the targeting is only as good as how their database is configured.

It sounds like their IT people missed that particular lecture..sf-laugh

December 19, 2017
1:13 pm
Loonie
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DICO RSP coverage has, in the past, been unlimited, and has actually suffered a reduction, to 250K, as a result of the change. It's only unregistered funds that are positively affected. At least that's my understanding.

RSP season, however, seems primarily directed at people making an annual deposit to reduce current taxes, and not likely to be affected by limits unless you already have a larger total in one FI. If anything, people with a large amount might have to consider moving some of it elsewhere. These limits are so ridiculous, when you consider they could just move it to another ON CU!

December 20, 2017
11:03 am
Doug
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Other than for temporary "parking" of RSP contributions, I still fail to understand the logic behind putting RSP contributions into daily interest savings accounts and GICs, other than if GICs are to make up the 20-30% of the fixed income portion portion of your portfolio. Putting all one's "eggs" into savings accounts and GICs just to earn a temporary tax deduction/rebate makes no sense, defies logic and is sheer stupidity because, when it comes time to withdraw it, you will, most likely, be paying a tax rate that is higher than when you put it in (unless you make more than $125,000 currently). 🙂

Cheers,
Doug

December 20, 2017
11:21 am
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Hi -- eligible registered funds (RRSP, TFSA, RESP and RDSP) continue to be 100% insured without any limit. This isn't changing on Jan 1/18.

What is changing, is the cap on eligible unregistered deposits -- it's going up from $100,000 to $250,000.

My understanding and experience with Meridian is that they really have little interest in catering to the HISA/GIC demographic. IMO, they're the most bank-like of all credit unions, and are focusing their resources on mortgages.

They are also (again in my personal experience) oblivious to the lousy optics of offering premium HISA and GIC rates to new members as opposed to new money.

For example, if you aren't a member, you could walk into a Merdian branch with $5000 to invest, and they'll gladly offer you whatever is offered at the time -- like 2.3% for 15 months.

But if you're an existing member and offer to bring in $50,000 of new money, they won't budge. The branch-level people seem friendly enough, but powerless to do anything about Meridian policy.

(And just in case this begs the question: I've worked with at least 4 other Ontario CU's over the years that don't make the distinction between new money and new members -- you simply have to let them know that you're aware of the promo, and you get it.)

With this being said, Meridian does a website that looks like it was created this millennium, which is a refreshing change from a lot of CUs out there -- yikes sf-surprised.

December 20, 2017
2:03 pm
Loonie
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We need some verification on the future limits for registered accounts at DICO. My comment was based on what had earlier been intended, as discussed here: https://www.highinterestsavings.ca/forum/general-financial-discussion/changes-proposed-to-strengthen-ontario-credit-unions/

As for Meridian, I have some of the same criticisms. Their priority seems to be siphoning off some business from the BigBanks. They are putting a lot of money into building new branches, so they probably don't have much left over to give us better rates. People like me are not their priority. I have been disappointed for years in the way most Ontario CUs don't really seem to live up to their blather. Interestingly, some of the best CU rates in Ontario are often available at the smallest CUs - which have no expansion costs.

I think you overstate, Doug, when you assert that it's only stupidity that would induce someone to invest RSP funds in GICs. I hope you'll retract that word. There have been periods when the rate of return on GICs has been extremely high during my adult life, and my RSP GICs certainly benefitted. My long bonds did better though, because they lasted longer. My friend who invested in a motley pick, mostly recommended by his stock broker, did far worse, including some that completely tanked (remember Labour-Sponsored funds? - perhaps they were before your time)
It's really a question of what you compare it to. LOTS of people have lost money making truly bad, possibly even stupid, decisions with their RSPs. Those would be the people who bought high and sold low on a panic move. They would definitely have been better off with GICs. There is no guarantee that avoiding GICs will bring you the best result, or that using them will. What it will do is keep your capital intact.

The real problem is not what you invest in with your RSP, as I see it. It's whether or not RSPs are a good idea for the "average" person. It really depends on your circumstances. For those who have very well paying jobs right after they get out of school, and keep them, and who have enough money that they can begin investing in RSPs right away, non-GIC RSPs are probably a very good idea, although there are no guarantees going forward. For everyone else, it's going to be questionable in the long run. These things were vastly oversold to people with moderate incomes, who were given doom-and-gloom stories about how there wasn't going to be any money for them in retirement, how CPP was going to go broke etc etc. For those of us who are now in their 60s, this was the wisdom that prevailed in our younger years. Some of us, perhaps a lot of us, who are doing the math, are now seeing that we might have been better off never to have put a penny into an RSP. At this stage of life, GICs are the only thing that makes any sense for the most part, because we are nearing the end of our lives. With an average life expectancy for us somewhere around 83 years, I think, that means half of us will be dead before then, so a long horizon is a huge gamble.

December 20, 2017
2:57 pm
Bill
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Registered accounts continue to have unlimited coverage. Here's notice on the Kawartha Credit Union site:

"Deposit Insurance Corporation of Ontario (DICO) recently announced an increase in deposit insurance coverage up to $250,000 on eligible insured non-registered deposits effective January 1, 2018. Registered deposits will continue to have unlimited insurance. Learn more here: http://www.dico.com/design/0_0_Eng.html".

December 20, 2017
3:11 pm
--- deleted ---
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The verification is in this suitably impenetrable government document:

https://www.ontario.ca/laws/regulation/r17068

If you scroll down to "Deposit Insurance Amount," it reads:

104. For the purposes of paragraph 2 of subsection 270 (2) of the Act and subsection 271 (3) of the Act, the Corporation shall,

(a) for an insurable deposit under paragraphs 1 to 6 of subsection 103 (2) of this Regulation, not insure the amount of the insurable deposit that exceeds $250,000;

(b) for an insurable deposit under paragraphs 7 to 16 of subsection 103 (2) of this Regulation, insure the full amount of the insurable deposit.

And then for even more fun, you can refer to the original Act from 1994, and head to paragraphs 7-16 of subsection 103 (2), which reads:

7. A deposit with the credit union, not in trust for a named beneficiary, to any of a person’s registered retirement savings plans within the meaning of the Income Tax Act (Canada).

8. A deposit with the credit union, in trust for a named beneficiary, to any of a person’s registered retirement savings plans within the meaning of the Income Tax Act (Canada).

9. A deposit with the credit union, not in trust for a named beneficiary, to any of a person’s registered retirement income funds within the meaning of the Income Tax Act (Canada).

10. A deposit with the credit union, in trust for a named beneficiary, to any of a person’s registered retirement income funds within the meaning of the Income Tax Act (Canada).

11. A deposit with the credit union, not in trust for a named beneficiary, to any of a person’s tax-free savings accounts within the meaning of section 146.2 of the Income Tax Act (Canada).

12. A deposit with the credit union, in trust for a named beneficiary, to any of a person’s tax-free savings accounts within the meaning of section 146.2 of the Income Tax Act (Canada).

13. A deposit with the credit union, not in trust for a named beneficiary, to any of a person’s registered disability savings plans within the meaning of the Income Tax Act (Canada).

14. A deposit with the credit union, in trust for a named beneficiary, to any of a person’s registered disability savings plans within the meaning of the Income Tax Act (Canada).

15. A deposit with the credit union, not in trust for a named beneficiary, to any of a person’s registered education savings plans within the meaning of the Income Tax Act (Canada).

16. A deposit with the credit union, in trust for a named beneficiary, to any of a person’s registered education savings plans within the meaning of the Income Tax Act (Canada). O. Reg. 68/17, s. 31.

December 20, 2017
3:41 pm
Loonie
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thanks, Bill.
It wold be interesting to know why the "moral hazard" of unlimited accounts, previously cited as a danger, suddenly became inconsequential. I wonder if a change to registered accounts may still be in the offing?

December 21, 2017
5:36 am
2of3aintbad
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Doug said
...because, when it comes time to withdraw it, you will, most likely, be paying a tax rate that is higher than when you put it in (unless you make more than $125,000 currently). 🙂

Cheers,
Doug  

What is the significance of the $125,000 figure?

December 21, 2017
9:35 am
AltaRed
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2of3aintbad said
What is the significance of the $125,000 figure?  

I suspect Doug is referring to marginal income tax brackets. If one currently makes more than about $125k taxable income, chances are today's MTR will be the same or higher than the MTR upon withdrawal....which is good. The opposite is not so good other than it is a 'better' problem to have than some others...when you get there!

Added: It comes down to your confidence level in how well your financial position will be at retirement time. It actually makes little sense for someone in the 15% federal tax bracket to take RRSP contributions (and deductions) today in return for paying 32% when you start withdrawals.

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