Opinions expressed in articles published on this site are solely those of the contributing authors and do not necessarily represent the views or opinions of The Fund Library, its staff or affiliates.
Q I've finally convinced my two daughters (22 and 25 years of age) to open TFSA investment accounts. Are they allowed to invest $10,000 (including the missed 2009 contribution) or just $5,000 for the 2010 year? John A.
Q We have an investment portfolio worth $429,000, with $69,000. We currently have a $27,000 balance on a PLC (we have no other debt) which is secured at 3.25%. My question is should we pay off our debt on the PLC out of our cash account? Roger S.
Q My portfolio consists of mutual funds and GICs. I would like to decrease my costs by also using ETFs (exchange-traded funds). I have read some of your suggestions in the Mutual Funds/ETFs Update newsletter and would like to gradually transfer some of my more expensive mutual funds into ETFs. Do it gradually or all at once? Am I correct in assuming that the cost of ETFs varies through the day (unlike mutual funds) so is timing in the day important or should I just place an order based on my longer-term goals? Are commissions/fees tax deductible? My broker charges me a fee for mutual fund; is that deducible? Ross P.
Q My spouse and I are both retired and receive pensions. We also both work part-time. We live in Quebec and have a marginal tax rate of 38% each. We have unused RRSP contribution room of about $40,000. My question is whether we should use that room to make RRSP contributions. If we do, what will be the impact on our taxes? Ginette L. (translated from French)
Q I invested $20,000 in the Great-West Life Real Estate Fund with the understanding that it was "cashable" at any time. Now the company has locked up my money and this means that I've lost approximately $3,000. What is your advice? Assuming the company is now ready to let go of my money, should I cash in or transfer right away? I'm 66 years old and this was what I considered my available funds. Kathleen H.
Q - I have been told that at age 71 I will have to convert my RRSPs to a RRIF. But I have also read, and been told unofficially, that I will not have to start making withdrawals from my RRIF until my much-younger wife (who also has RRSPs) reaches age 71. Can you confirm this? I have asked two accountants who did not know about this, though J. L. Reynolds, in his book The Skeptical Investor, states it on page 66. Larry M.
Q When it comes to RRSPs, how much is enough? When should you start looking to invest outside of RRSPs? I am 52 have about $110,000 in RRSPs now. My wife is 50 and has $160,000. We each contribute about $5,000 a year. Neither of us has a pension through work. We have no outstanding bills and are debt free with home and cottage.
I am not sure if I should worry about the OAS clawback and this is why I am asking your opinion. Is there a time when you should not invest as much in RRSPs and am I even near it or are you of the camp that says put as much in RRSPs as possible.
I love The Income Investor and also read Sleep-Easy Investing. Hans M.
Q - I no longer wish to hold any investments other than GICs, so I really have no need for a self-directed RRSP and don't wish to pay the annual trustee fee. I currently have a self-directed RRSP which holds mostly mutual funds. Once I sell those funds within the plan can I simply direct the bank of my choice to transfer the funds? Or is it more complicated than that? Kate S-A.
Q I had been keeping the cash portion of my RRSP in the Altamira Cash Performer fund however as this fund has lost its luster and youve recommended to sell it, I am at a loss as to where to put that money. What would you recommend for the cash component of an RRSP? Phil W.
Q I will be receiving a $44,000 retiring allowance. What would you recommend to do with it? My house is paid for and I will be receiving a great OMERS pension. My wife does not have a pension when she retires. I can take the whole amount and pay taxes on it or roll it into a RRSP. What would you do? Brad H., Ontario
Q I currently have a RRIF and would like to cash out and put the money into my savings. Can I do this and also does it affect pension income? Susan J., British Columbia
Q In June 2009 I received £5000 as a legacy from the estate of an aunt that had passed away in England. I was wondering if I will have to claim this on my Canadian income tax return. John B., Ontario
Q We are a couple, both age 61 both in good shape financially and health-wise. Our pensions (indexed) together are about $80,000 gross and we both have taken CPP early.
What is your opinion about cashing in weak RRSP investments to invest in our TFSAs at $5,000 per year? Is there an advantage of doing this yearly for ten years before having to convert the RRSP at age 71? (This would exhaust the RRSPs.) James S.
Q My CIBC advisor has recommended moving my RRSP from the 16 CIBC funds (a few you recommend highly, most not so) it is in now to CIBC Personal Portfolio Services, choosing their Balanced Growth Portfolio to most closely match my current mix. She claims it has changed significantly from its early years with some non-CIBC investment managers. You gave it a somewhat unenthusiastic review a few years ago. Would you say it is a better bet now? Judy R.
Q I made a contribution of $5,000 to a TFSA in 2009 and will make another one in 2010 (total $10,000). If I withdraw any money from the account this year (say $3,000) can I contribute $8,000 in 2011? Carl
Q I'm looking to find the best Canadian dividend income funds measured by total annual distributions (dividends + capital gains). I am currently using the AGF Dividend Income Fund that uses a capital gains strategy to generate additional income each year over and above conventional dividends. Mike L.
Q Should I borrow bank money (credit line or mortgage) to invest in rental property or use cash (bank savings) to finance the purchase? I like the idea of having money in the bank but want to invest in property. Doug W.
Q Is it possible to trade a mutual fund that is held outside of an RRSP with a mutual fund that is held inside an RRSP? This may sound like a strange question, but heres my reason. We have labour-sponsored funds (VenGrowth II and VenGrowth Life Sciences) that have been frozen. Weve been told that there will be distributions paid annually but we have received nothing to date. I have the sick feeling that these funds are dead! Since they are held inside an RRSP, we cant even claim capital losses. If we could transfer mutual funds of equal value from outside our RRSP, we could hopefully get our RRSP actually making money again and claim a capital loss. Donna and John S. (Burned investors)
Q My 13-year old son has had a paper route for the past year and is thrilled to be receiving regular income. He is not a big spender and has managed to save a couple of thousand dollars. Right now, he has all his money in a childrens savings account which is making minimal interest. Id like to start teaching him about investing, but Im not sure where to begin. Do you have any recommendations as what types of investments are suitable for youth (i.e. that are not risky but would still teach him to look beyond savings accounts as he accumulates more money)? Many thanks. Kristine A.
Q My wife and I each opened a TFSA with ING Direct on Jan. 1, 2009 and contributed again this year. During a recent interview that you gave on Canada A.M. I thought I heard you mention something about making sure that your account had a beneficiary listed. Since we have other accounts with ING, the two TFSA were opened over the phone. Could you please advise me (and others who may be interested) if there is any paperwork that should be completed when opening a TFSA? George B.
Q With interest rates on fixed-income investments at rock bottom I am looking for best way to manage my taxation situation.
I am 78 years old, widowed in 1991. I have no children, no mortgage, and no private pension. I have about $300,000 in RRIFs. I accept the fairness of paying tax on the withdrawals but resent not only the yearly loss of various tax credits but also the knowledge that as things stand remaining RRIF investments will be taxed in highest bracket on my death.
For a few years now I have taken an additional amount over the annual minimum, aiming at just below the OAS clawback. By doing this, I have lost the age benefit, the municipal tax deduction (provincial), the benefit for a person living alone, some medical expense claims because my income is too high, etc.
My income for 2009 was approximately $62,500 gross. All my investments are in GICs. What would be my best approach in 2010? Anne S.
Q If I have an RRSP, a TFSA, and an investment account would it be best to put fixed-income investments (GIC, money market funds, and bonds) in the RRSP and TFSA with equities in the investment account? This allows you to take any capital losses in the investment account and any capital gains and dividends will be taxed at a lower rate. Meanwhile, I will be sheltering interest income, which is taxed at a higher rate, in the TFSA. Ross P.
Q I have been subscribing to your newsletter and others for some time, the Kiplinger's being a favourite, and read the financial press, etc.
Portfolio re-balancing is stressed by most of the above. But none deal with my problem: How do you re-balance a portfolio that is deep in the red? Yes, there might have been an improvement with the "recovery", but most of the stocks I am taking about are still down 20% to 70% and I already have accumulated a substantial capital loss, so that option is out.
Some of those stocks were and are "high flyers", but others are "conservative" such as John & Johnson (down 12%), Loblaw (down 50%), etc. What should I do? Alain J.
Q - In the equity component of my portfolio I have slightly more global content than Canadian. Do you feel this mix makes sense? I am particularly concerned that global investments may underperform over the next few years due to a strengthening Canadian dollar. Vernon C.
Q I am starting to wonder if RRSPs are the best vehicle for saving, when taxes are considered (when one withdraws the money and when one dies).
I know it depends on income but my question is: Is it better to contribute to an RRSP, take the tax deduction, pay income taxes on withdrawals when the RRSP is converted to a RRIF, pay income taxes on the balance when one dies, or is it better to use a non-registered account, pay taxes on income along the way, pay capital gains when one withdraws money, and pay capital gains on the balance when one dies? Brent F.
Q - I hold shares of a mortgage investment corporation (MIC) in my self-directed RRIF with a large discount broker. My annual RRIF withdrawal is scheduled for Jan. 30. The broker has not contacted the MIC to obtain the market value of my shares on Dec. 31, 2009. They have calculated my minimum RRIF withdrawal on the assumption that the MIC shares have zero market value, whereas the MIC management states that the market value is the same as the book value and that their auditors can confirm this. When I contacted the discount broker, I was told that it is too late to correct the MIC value and update the minimum annual withdrawal for this year. As a result, the withholding tax will be less than it should be.
I am concerned that CRA will hold me responsible for the incorrect minimum withdrawal and tax payment, exposing me to potential interest and penalties. What should I do? Alistair T.
Q When paying the quarterly fees on my registered investments is it better to have them deducted from the registered account or should I pay them with non-registered funds, thereby leaving more money to grow in the registered plan? Sharon R.
Q I invested our TFSAs at Ally.ca at 3.6% over five years. We can cash it out any time at a lower rate. So if rates go up soon we get the higher rate. Is this a safe idea for the TFSA? In 2009, we got 4.25% compounded in a five-year GIC. Sure like the safety! Calvin B.
Q I am looking into purchasing a five-year non-registered GIC for long-term savings. I was looking at PC Financial's GIC with a rate of 3% but was wondering if it is a good time to lock in since interest rates seem to be close to rising? Additionally I have seen laddered GICs such as Scotiabank's but was wondering what the advantages and disadvantages are? I am looking for something to move my Canada Savings Bonds into as I accumulate them from my automatic payroll since CSB rates are 0.4%. Is there a better option than GICs? Carlo C.
Q I recall reading about brokers who refund the trailer fee to the investor and make their living by charging, I believe but I am not sure, on a per-transaction basis. As I recall, the arrangements is beneficial to investors with some substantial money only. Could you provide me with some names? Leo K.
Q My wife has recently started investing in ETFs. She's bought three, all through PowerShares, and we were wondering if it is risky to invest in multiple funds through one company, whether they are ETFs or traditional mutual funds or other. The actual ETF holdings are diversified in both company size and country of ownership.
If something happens to PowerShares, are my wife's investments safe? What about mutual funds we buy through a management company, are they safe if the management company disappears? Thanks for any information you can share. Dwayne C.
Q I have read repeated advice to buy stocks that pay dividends and that such dividends are regularly increased. Are there mutual funds that adhere to this philosophy? Leo K.
Q Last year I invested $5,000 in a GIC TFSA. This year I would like to buy dividend-paying stocks in a TFSA. Is it possible to have two different accounts? Gary
Q I was a healthy solo parent at the age of 40. I owned my home, designer clothes, a mink coat, and carried a small credit debt. At 42, I was on permanent LTD (long-term disability). Unlike the readers benefiting from your financial expertise, eventually I had to sell my home and anything else I would no longer need in my new lifestyle. My new car was leased and to satisfy GMC I was forced into bankruptcy.
My income now consists of CPP Disability and pension from a HOOPP (Hospitals of Ontario Pension Plan). I rent an apartment and my housing and utility costs are just under 50% of my income. Monthly, $200 goes towards my son's RESP. I have a pathetic $2,000 in a locked-in RRSP. I'm still fortunate with a zero bank balance at the end of each month and no credit debt. I rent a car occasionally and enjoy July and August in our old but dry and clean 25-foot trailer and in 2008, after saving for three years, my son and I were fortunate to visit Japan for three weeks without the use of single yen on credit.
Today, the thought of surviving on canned food in 14 years from now really worries me. How would you address readers such as me? Thanks. Lise D., Ontario
Q I am a working man who turns 61 in April 2010. I have worked for the same company for 16 years and can retire early on a reduced pension. I wish to supplement my income in two ways.
1. Continue working for another four years.
2. Set up a RRIF and draw out money while continuing to work. I currently have three RRSPs.
My question: Is one allowed to convert a self-directed RRSP into a RRIF or annuity, draw income from such, but continue to work and contribute to another self-directed RRSP? Barrie M.
