Investing

RRSP and Investing help/ideas

  • Last Updated:
  • Dec 12th, 2017 5:21 pm
[OP]
Newbie
Dec 5, 2017
4 posts

RRSP and Investing help/ideas

Hello All,

I need some help as I am not very investment savvy. I am in my late 30's. My annual work income is around $105000. I do not own any property as of yet and rent an apartment with my wife. We have no children yet. My wife makes very little approx $13000 for 2017 and will be going back to school.

The following are my investments.

$60000 TFSA Manulife Ideal Segregated funds Signature 2.0 through a financial advisor (annual contribution to maxxed out)

$41000 Tangerine Equity Growth Portfolio (weekly contributions of $100)

$39000 Tangerine Ballanced Growth Portfolio (weekly contributions of $100)

$15000 Tangerine Dividend Portfolio (weekly contributions of $100)

$6000 Company stocks ($1200 per year contribution)

$28000 Lending Loop (re investing all money made back into it)

$120000 Savings Account ( 2.5 to 3% alternating between Tangerine and Simplii)

$90000 Company/Union Retirement fund through CI Institutional (CI Lifecycle 2045 fund) (mandatory 7.5% of salary contribution matched by company for a total of 15% per year). This is a "defined contribution pension plan, also known as a money purchase plan"

I have been looking at contributing to an RRSP to lower my tax bracket since I have a good amount of cash parked in a regular savings account that I dont need in the near future. I am still at odds if I should and if it would be benificial for me to do so. If I did, how much should I invest to lower my tax bracket? What kind of funds should I invest it in? With the markets so high right now is it worth contributing so much cash at once for a fund?

These are just some of the questions I have on my mind right now. Any wisdom, advice, ideas, experience would be greatly appreciated.

Thanks for reading.
Last edited by User369865 on Dec 7th, 2017 12:00 am, edited 3 times in total.
10 replies
Deal Addict
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May 11, 2014
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User369865 wrote:
Dec 7th, 2017 12:00 am
Hello All,

I need some help as I am not very investment savvy. I am in my late 30's. My annual work income is around $105000. I do not own any property as of yet and rent an apartment with my wife. We have no children yet. My wife makes very little approx $13000 for 2017 and will be going back to school.

The following are my investments.

$60000 TFSA Manulife fund through a financial advisor (annual contrinution to maxxed out)

$41000 Tangerine Equity Growth Portfolio (weekly contributions of $100)

$39000 Tangerine Ballanced Growth Portfolio (weekly contributions of $100)

$15000 Tangerine Dividend Portfolio (weekly contributions of $100)

$6000 Company stocks ($1200 per year contribution)

$28000 Lending Loop (re investing all money made back into it)

$120000 Savings Account ( 2.5 to 3% alternating between Tangerine and Simplii)

$90000 Company/Union Retirement fund (7.5% of salary contribution matched by company)

I have been looking at contributing to an RRSP to lower my tax bracket since I have a good amount of cash parked in a regular savings account that I dont need in the near future. I am still at odds if I should and if it would be benificial for me to do so. If I did, how much should I invest to lower my tax bracket? What kind of funds should I invest it in? With the markets so high right now is it worth contributing so much cash at once for a fund?

These are just some of the questions I have on my mind right now. Any wisdom, advice, ideas, experience would be greatly appreciated.

Thanks for reading.
In terms of RRSP, yes you would benefit and should maximize it. I am assuming your work retirement fund is a DB pension? Since you max your TFSA first, you have already done that, you might as well max your RRSP as well. If you decide to retire early, this will give you the added benefit of being able to draw down your RRSP and likely reduce your taxable income during retirement. Maximize as much as you can on your RRSP. Deduct the top portion of your taxable income so you go to the next income bracket, and carry over remaining RRSP contributions to the following years, assuming you are working. Based on the fact you are asking this question, I am assuming you have a large amount of RRSP contribution room.

For your investments...what I don't understand however is your choices of funds, in particular your Tangerine funds. These are already portfolios and you have now selected three different ones which is really inefficient. The three tangerine funds pretty much invest in the same thing and you are not really diversifying. The funds themselves are not bad by any means, but you could definitely do better. There are lower cost options such as ETFs, or roboadvisor funds that are cheaper than the Tangerine funds. If you want to stick with Tangerine, I would get rid of either Dividend or Equity Growth and merge them into one or the other. Since this is longer term savings, there is no real need to go with the Dividend fund and earn distributions, so I would side with the Equity fund. However, they are fairly similar, so I don't think it really matters which you go with. The Balanced growth will give you some fixed income. If you were to do ETFs, you could make a much more meaningful way of diversifying while reducing your cost at the same time.

Your Manulife fund, without knowing the specific fund your advisor has set you up with is difficult to assess. It is good that you are utilizing equity investment in your TFSA, so good job going this route. However, if it is from Manulife, I am very much afraid of the possibility your advisor has you invested in an expensive segregated fund. These kinds of funds have built in insurance that protects your investment, but you are paying a pretty penny for this "protection." In other words, not worth your money. If you could reply with the exact fund you are invested in, it would help us to guide you. If you do your own investing with ETFs or cheaper alternatives, you are probably better off transferring this TFSA to do your own. Heck, there is a good chance investing in Tangerine funds for your TFSA would still be better off.

Of course, with your company pension, MAXIMIZE your contribution up to your company's match. This is a no-brainer. Any funds after that, maximize your TFSA (which is easy for you), then RRSP.

Based on the numbers you have presented, you seem to have no problems with saving. Your problem is a combination of specific financial goals and investment knowledge. I think it would be beneficial for you to read about investing and understand all your options out there. It would be beneficial for you to frame what your exact financial goals are. Otherwise, it would be hard for anyone to suggest where your investments should be. House in the future? Early retirement? Kids? etc

Since you spouse is low income and going back to school, it would be beneficial for you to look at the ways to reduce your taxes. Consider transferring her tuition credits to you so you can claim the tax credit and reduce the opportunity costs. Here are some more tax sharing ideas, although some no longer exist anymore...
http://www.taxtips.ca/filing/spousereturn.htm

As well, if your spouse is going to have to pay a larger amount of tuition, consider getting the CT Mastercard, so you can pay the tuition using the bill payment option and earn cashback on this.
pay-your-bills-online-using-canadian-ti ... t-1149989/

Please post more info on your Manulife fund. How open are you to doing your investments etc?
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[OP]
Newbie
Dec 5, 2017
4 posts
Thanks for the reply.

The Manulife Ideal Segregated funds Signature 2.0 divided into(canadian corp. bond, canadian dividend growth, global dividend growth funds). This was started years ago when the TFSA first came out. It was the start of me thinking of investments towards the future. It was reccommended and chosen as a conservative investment. You are right it includes the built in insurances and gaurantees.

My preferance for investments is a passive approach of just buy and hold and not have to do anything other than contribute money. I have done a lot of reading however I think it is beyond me to manage myself with trades and buys and what not.

The reason I bought the Tangerine Dividend fund was just out of curiousity.

My financial goals are to make money. I suppose $100000 of my savings will be used for a downpayment on a shoebox to live in one of these days. Other than that, there are not any other goals except for the dream to retire early. I dont see that being feasible if children come into the equation.
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May 11, 2014
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User369865 wrote:
Dec 7th, 2017 2:30 pm
Thanks for the reply.

The Manulife Ideal Segregated funds Signature 2.0 divided into(canadian corp. bond, canadian dividend growth, global dividend growth funds). This was started years ago when the TFSA first came out. It was the start of me thinking of investments towards the future. It was reccommended and chosen as a conservative investment. You are right it includes the built in insurances and gaurantees.

My preferance for investments is a passive approach of just buy and hold and not have to do anything other than contribute money. I have done a lot of reading however I think it is beyond me to manage myself with trades and buys and what not.

The reason I bought the Tangerine Dividend fund was just out of curiousity.

My financial goals are to make money. I suppose $100000 of my savings will be used for a downpayment on a shoebox to live in one of these days. Other than that, there are not any other goals except for the dream to retire early. I dont see that being feasible if children come into the equation.
Yeah, so you are in a terrible product for no reason. You don't really need an insured investment considering your abundance of savings. It would be another thing if you were let's say have dependents or had large debts that you want to make sure are covered so your spouse or dependents have something to live on. But your situation does not require this and simple life/disability insurance is a better option. Assuming that you are in a defined benefit plan (based on your original post), you already should have death benefits, and LTD built into your plan. Wasting further with segregated funds is a terribly expensive option. Mind you, your advisor probably sold this to you with your lack of knowledge. "Safety" or "conservative" can easily be used to say you need insurance needs on your investments as a way of saying what your needs are and your advisor then likely used that to sell you this expensive product.
https://repsourcepublic.manulife.com/wp ... 9c-lJYqK28

Looking through this product, you are paying at least 2.20% on the Canadian Corp Bond (on bonds which are already a cushion portion of a portfolio), 2.80% on Canadian Dividend growth, and Global Dividend Growth funds (assuming you are with the minimum 75% insurance). These funds also have a back load fee meaning you have to pay a percentage when you sell if the funds are not held for at least 7 years.

At this point, I would recommend you find the cost of selling immediately and see whether you want to go through this option. If this is too expensive, cancel further contributions, and open a new TFSA with a lower cost investment option (Tangerine is fine but I recommend others). Contribute toward the new TFSA only until you have met the 7 year mark of the funds and then at this point transfer in-cash to your new TFSA.

When a new fund such as Tangerine Dividend fund comes out, you need to look at what you are exactly investing in. If you look in it, you'll notice that it is almost identical with the Tangerine Equity Growth (in terms of equity allocation, and many holdings). There isn't any wrong in adding another fund that is similar, but it just complicates your finances. If you want to keep the set up that way, there is nothing wrong in doing so. Look up Canadian Couch Potato to learn more about doing your own ETF investing. You can set up your own purchases and at the level of funds you currently have, the savings will be significant. There are some other low-cost investing alternatives as well such as
TD e-Series
Mawer Mutual funds
WealthSimple, Nest Wealth other roboadvisors
Saskatchewan Pension Plan

But before you proceed with that, i think you need to think of what you actually want to do in life. by the sounds of it, you are more just stationary. You suggest of possibly buying a shoebox (Toronto/Southern Ontario or Vancouver(?) ), kids might happen.... "Making money" isn't really a goal per say. You get money to do things in life. This is something people tend to forget. Getting money to have financial security on the other hand could be a goal. Then you have to ask yourself, well how much do I need to do that? The problem with framing yourself with getting as much money as possible means you might stand to lose out with enjoying your money. You seem very conservative in how you conduct yourself. Are you actually going and enjoying yourself while you are still young? There is nothing wrong with not knowing, but that means you need to think about these things so you can plan accordingly.

For example, you said you want to retire early. What do you want to do to during retirement? What age would be a good year to retire? How much do you need to retire somewhat comfortably? How much pension would be paid to me if I retire that age (hint: Ask your benefits officer)? How much more would I need to save personally to make it happen with the pension I receive?
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[OP]
Newbie
Dec 5, 2017
4 posts
Thanks again for the response. Some good info I would have not come across myself.
So in reality the first thing I should do is get rid of the Manulife account since as you mentioned I dont need the security because I have added security through my work regarding life insurance, LTD and pension.
So opening up a TFSA say with a robo advisor such as Wealthsimple seems to be a good idea. I can just leave it and let it work for me and the fees seem way less than my Manulife account. Then once I learn more about self investing I can do more of a do it yourself approach.

Thinking about it. Saving for financial security is my main concern. I am scared of becoming poor or living pay check to pay check. Having a large cushion for back up would put me at ease. I am in the midst of a life style change. I work 6 months a year with the other 6 months off . The past 10 years I have had a good life traveling the world with lots of freedom. Now that I am married, things are changing. Becoming a regular adult so to say! So priorities are changing and it is just not me I have to look after any more. The dream is to save enough to retire early and continue on with my world travels.

How would I go about telling my advisor that I want to cash out because I feel I am being over charged for a product I dont need. Pretty much tell him that I suppose.

Thanks again
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May 11, 2014
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User369865 wrote:
Dec 9th, 2017 6:02 pm
Thanks again for the response. Some good info I would have not come across myself.
So in reality the first thing I should do is get rid of the Manulife account since as you mentioned I dont need the security because I have added security through my work regarding life insurance, LTD and pension.
So opening up a TFSA say with a robo advisor such as Wealthsimple seems to be a good idea. I can just leave it and let it work for me and the fees seem way less than my Manulife account. Then once I learn more about self investing I can do more of a do it yourself approach.

Thinking about it. Saving for financial security is my main concern. I am scared of becoming poor or living pay check to pay check. Having a large cushion for back up would put me at ease. I am in the midst of a life style change. I work 6 months a year with the other 6 months off . The past 10 years I have had a good life traveling the world with lots of freedom. Now that I am married, things are changing. Becoming a regular adult so to say! So priorities are changing and it is just not me I have to look after any more. The dream is to save enough to retire early and continue on with my world travels.

How would I go about telling my advisor that I want to cash out because I feel I am being over charged for a product I dont need. Pretty much tell him that I suppose.

Thanks again
Pretty much, yeah. You have to tell them you don't want to continue with the plan. Why feel guilty for not wanting something they are providing? Tell them you wan to transfer your TFSA to your new TFSA in-cash and go from there. Ask them to provide you the exact cost of doing so, so you re aware of the cost. Because of the Back-load cost, you may want to consider waiting a few years first before going ahead. After 7 years, the funds will be free from this fee. It is the job of companies to provide better products. If Manulife would care about having you as a customer, they would bring about more competitive products. That's capitalism for you.

If your advisor says: "What happens when you need cash and the funds are down that year?" Answer you have ample cash savings (which you do!).
If he/she says "how about insurance protection?" You have a defined benefit plan which gives you death benefits, long term disability and your accumulated sick time. Also, you don't have substantial debts and no dependents.
They may suggest other products such as life insurance etc. but i think you really don't require this even for this. Until your RRSP and TFSA is maxed, and you have your financial plan set, do not purchase any Whole Life/Universal Life plan.

While increasing your financial resources in order to achieve financial security is wise, more importantly, I think you need to set more concrete goals in order to actually feel like you achieve it. What exact;y is financial security for you? Having $200k, $1 million in cash? Having a paid off place to call home? Having an actual plan you follow will give you a better sense of satisfaction and feeling of financial security
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Jr. Member
Feb 4, 2017
198 posts
139 upvotes
I am actually in a similar situation as you. (minus being married). I am in mid 30s, make about the same money as you, and love to travel every year (still do). Like you, I am also big on saving money but I still go out and enjoy life. 6 years ago I bought my shoe box condo in downtown toronto and paid it off about 2 yrs ago. I have maxed out my RSP and TFSA and I am about to open a regular non-registered account for my equity portfolio soon.

I think xgbsss has really given you some great advice. First thing you should do is put your money in RSP. I see you have $120K worth in your savings account and I am sure you are either saving that for emergency funds or looking to buy property with it so don't bother putting that in RSP. Instead, you can try moving your Tangerine funds into RSP. Since you do not feel comfortable trading equities, I recommend consolidating those 3 Tangerine funds into one (ie. Tangerine Balanced Growth). I think it's always good to mix a bit of Bonds in there in case of a market downtown. If you have never contributed to RSP before, you should get a big pay check from the government with your contribution.

Another advice is to buy property instead of rent. I have never believed in renting property. When you own property, a portion of your money you use to pay off your mortgage is invested. When you rent, all that money goes to someone else. The only time I recommend people to rent is if they can't afford it or they have to move around frequently. However, you look like you are in a stable stage of your life and you make good money so I am sure you can pay off a mortgage.

My last advice is to not worry too much about how much money you will have left in retirement. You look like you are doing very well already and have a good amount of savings. Be sure to go out and enjoy the money you have earned with your wife while you are still young and healthy because you never know what will happen in the future.
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Mar 8, 2013
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OP, you should start with a spousal RRSP. You get the tax deduction, but after 3 years, any withdrawals will be taxed at your spouse's rate. You could think of that as an emergency fund. The simplest thing to do would be divide into 3 year, 4 year, and 5 year GICs. Since the 3 year minimum is based on calendar year, you should consider making the contribution before the end of this year. You can claim the deduction for 2017 or defer until future years.
[OP]
Newbie
Dec 5, 2017
4 posts
Good day,

Thanks again to you guys taking the time to respond.

So I have updated my original post to include my pension plan being a contribution pension plan(money purchase plan). I just found this out, I was hoping I had a defined pension. At least I have one!

I have informed my advisor I want to transfer my Manulife TFSA fund to my banks savings account(TFSA). This account is just a stop gap until I decide where to reinvest. I am leaning towards Wealthsimple.

I have also set up a RRSP with Wealthsimple. I will contribute $20000 into it as that should bring me down to a better tax bracket for this years tax purposes.

Next I will move my Tangerine Dividend fund and add it to Tangerine Equity Growth fund.

This should give me:

TFSA Wealthsimple
RRSP Wealthsimple
Tangerine Ballanced Growth
Tangerine Equity Growth
Cash in Regular Savings account
Lendingloop play money

I will max out my TFSA every January. I will dollar cost average $200 per week into each Tangerine fund and RRSP fund.

I think this is a good start at reorginizing my portfolio for now until I become more investment savvy. My excess cash savings will go to a goal of buying a place. I find it hard paying someone elses mortgage! That will be my first goal. Next goal will be to have $1 million saved combined at age 45. $2 million at 55 and $ 4 million at 65.

AKA Manny. That Spousal rrsp sounds interesting since my wife will be in school for the next 2 to 6 years with no income.

Once afain thanks for all the advice and knowledge to help me get on track.
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User369865 wrote:
Dec 11th, 2017 7:16 pm
I have informed my advisor I want to transfer my Manulife TFSA fund to my banks savings account(TFSA). This account is just a stop gap until I decide where to reinvest. I am leaning towards Wealthsimple.
If this is just a stop-gap transfer, I would advise against transferring it to your bank account TFSA. You will likely have to pay Manulife a fee (generally $100-$150) to transfer and your bank accounts TFSA likely will not cover this fee. Then once you figure out what you want to do with it, you then have to pay another transfer fee. you might as well figure out where you are going to put it first, then transfer. Doing two transfers just complicates it. While the investments themselves are not ideal, they still have a good chance of outperforming your savings account interest anyways. Again, make sure you confirmed the back-load fees Manulife will charge you before proceeding. Consider only transferring immediately if it ends up being very little. Just because MERs are higher than ideal, doesn't mean you will necessarily lose money if you just leave the funds already invested there.
User369865 wrote:
Dec 11th, 2017 7:16 pm
I think this is a good start at reorginizing my portfolio for now until I become more investment savvy. My excess cash savings will go to a goal of buying a place. I find it hard paying someone elses mortgage! That will be my first goal. Next goal will be to have $1 million saved combined at age 45. $2 million at 55 and $ 4 million at 65.
If you are planning to live long-term where you are and the property will not overburden you, this is fine, but just because mortgage payment will end up going toward equity in a home does not necessarily mean that it is worth purchasing a home. Remember, rent also goes towards paying for costs of home ownership such as property taxes, renovations, and maintenance. The cost of ownership is not simply paying the mortgage. if you are in a area where property is very expensive, keep in mind the risks of taking on a multi hundred thousand dollar mortgage especially if you are the only income earner for the next few years when your wife is at University. While the ultimate goal of obtaining your own place is ideal (trust me, I am doing the same), just ensure you are in a position to do so and you are not left over-leveraged. The adage that home ownership is a guarantee of wealth accumulation is incorrect.

If you decide to purchase a home, that Canadian Tire MC can also be used to pay property taxes for many cities and towns so this will be another place to earn cashback.

I think your plan is fairly good. I would highly recommend you continue to read in doing your own investments and move toward doing so. Purchasing your own ETFs is easy and will ultimately be cheaper than paying that 0.50% surcharge to Wealthsimple. If you want to try it, open a Questrade account for $1K and buy a few etfs to try it out. If you don't like it, then just keep that account as is. It is still worth $1K and invested in ETFs. If you find that it is easy enough to use, then move your assets to Questrade. With a high enough transfer value, they will generally cover your transfer fees. Alternatively, they have a free practice account too!
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Jr. Member
May 1, 2012
106 posts
7 upvotes
Markham
Wow, u have lots of cash sitting out side for nothing, u will buy house and have kids,,,,
If I was you, I would take some investment courses and be aggressive on investment later, ,,
2 millions for retired early and 300k for one kid. Long way to go

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