Personal Finance

Tax Planning for Retirement in Canada

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  • Dec 15th, 2013 10:13 am
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[OP]
Newbie
Dec 13, 2013
1 posts

Tax Planning for Retirement in Canada

Hey all, I'm trying to help my mother with an investment strategy. 70 years old. I used to post here, but now work in finance in the US and I know nothing about the Canadian system so I was wondering if anyone could give guidance on the specificities ;)

She has
  • $30k non-indexed annual pension
  • $500k house (which she would like to give to her other, infirm son)
  • $50k in an RRSP
  • $400k in cash
  • New Hyundai
  • Lots of RRSP contribution room
  • No debt

I was going to get her to set up a TFSA at her bank along with a brokerage account. Then I'd get her to invest, something like:
  1. TFSA: $25k in CA Corporate bond ETF
  2. RRSP (soon to be a RRIF): $50k in CA Government bond ETF. The RRSP will be converted to a RRIF and then gradually drained. The bond ETF will be shifted from the RRIF to the TFSA based on annual contribution limits.
  3. Taxable Investment Account: $100k in Canadian equity + $100k in US equity (ideally getting an ETF that avoids banks + resource producers to balance the CA exposure) + $175k in GICs
The plan would be for her to withdraw 2-3% per year early on and possibly more later when inflation starts to eat away at her pension. Asset allocation will stay in the 40-50% in equity range. In the worst case scenario, she could sell the house and move to an apartment or I could give her some money.

Does that sound right? Am I holding anything in the wrong place? I'm right to ignore the unused RRSP room?

Thank you for the help. Please let me know if there is a better forum to ask this type of question.

tl;dr: Bonds in TFSA, equity in taxable account, slowly drain RRIF. Sound good?
3 replies
Newbie
Dec 7, 2013
8 posts
Burlington
Pay to have a professional review her situation and make recommendations.
Deal Addict
User avatar
Sep 1, 2013
4854 posts
273 upvotes
I agree with naysmitj, you and your mother should get a professional. To make the correct decision, a professional investor would need to get more information about your mother's situation . e.g. how is her health? How does she want to spend her retirement? Trips to Florida in the winter? There are also clearly some major estate planning issues - she wants to leave her house to your brother. How about your inheritance? Are their other siblings aside from you? She might need to draw up a new will, so a lawyer would probably be involved.

Your mother appears to have a net worth of about 1 million - for this amount, is worth paying for professional advice.
Deal Addict
User avatar
Dec 20, 2006
1523 posts
982 upvotes
Spend the money frugally ("not too cheap" :o ) and enjoy life instead of worries about investments for high returns.

Personally, these days I do not trust my $$$ with pro financial advisors as they will suck investors high and dry through fees and whatever $ plus there is no guarantees whatsoever.
LIVE LONG and suffer ...


:arrow: PEACE :arrowl:

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