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There is a school of thought that believes a line of credit is the best emergency fund and that the money you would have saved for emergencies should absolutely be invested for return. This mitigates some of the risk associated with investing your money (i.e. you will always have access to funds), and getting a return higher than the interest rate you would pay on a LoC (assuming you are a good customer) is possible. The premise is your money should always be working. I am not advocating this, but it is valid and I thought I would mention it.
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Feb 10, 2014 13:28
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Saltin posted:There is a school of thought that believes a line of credit is the best emergency fund and that the money you would have saved for emergencies should absolutely be invested for return. This mitigates some of the risk associated with investing your money (i.e. you will always have access to funds), and getting a return higher than the interest rate you would pay on a LoC (assuming you are a good customer) is possible. The premise is your money should always be working. I mostly view things like this - but it works for me as I have neither kids nor a mortgage. Just liquid assets. I haven't tried this yet, but it is apparently possible to get a secured line of credit using a TFSA's holdings as collateral. That might be the way to go if, like me, you don't intend to liquidate your TFSA for decades to come.
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Feb 10, 2014 15:06
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A few pages back, someone suggested using a high-volume interlisted stock like RY or TD for Norbert's Gambit instead of DLR. I just completed this last week, and can confirm the awesomeness of the approach - very tight bid/ask spreads. For reference, the rate I achieved, net of transaction costs, was: USDCAD = 1.10655. The spot rate at the time was USDCAD = 1.10646. edit: I bought and sold within seconds. Then I phoned Investorline to confirm that the short position would be automatically eliminated - they said it would in a few days. The guy also somewhat grudgingly said "you know, we prefer if people don't do this all the time", which I thought was funny. I only do it once a quarter or whatever, so I don't see them getting too upset about that. Lexicon fucked around with this message at 16:29 on Feb 10, 2014 |
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Feb 10, 2014 15:10
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I was told that I should fill out a T2125 for claiming a home internet connection required for work. Has anyone here filled this out, and can point me in the right direction? I've tried googling it, but the form doesn't look like the right thing. Edit - argh was just told that it is a T2200 - never mind.
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Feb 10, 2014 20:07
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Hi guys, I'm sure this has been covered somewhere, but this thread is huge and I have a couple of basic questions. Thanks for indulging. My wife and I are recent immigrants, been here a couple of years, still on work visas, processing PR applications. We want to set up RRSPs and TFSAs. 1) We want the ability to access to our TFSA in a year. It seems a GIC is the best route for this, correct? What's a good target return on this? What are other options? We won't necessarily need to access it, but we need it to be available in relatively short notice. Is a GIC basically the same thing as a CD in the States? 2) For RRSP, we're planning to follow the couch potato's basic advice and set up a model portfolio with TD online. She makes far more than I do, so she'll make a spousal contribution for me. Is she allowed to go over my personal investment limit, as long as the aggregate doesn't exceed her own limit? It makes sense that she would, just want to be sure. And what do we need to do to specify that she's contributing for me? Is it simply a matter of setting up an account in my name and deducting it from her tax return on the appropriate lines? Thanks a bunch, sorry if this has all been covered. It's a lot to take in for a new immigrant.
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Feb 11, 2014 02:23
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I see no reason to put funds that you need in a year in a TFSA. Just dump it in a high interest savings account. You should think of the TFSA in the same bucket as an RRSP - somewhere to put your long-term retirement investments. Your choice between the two registered accounts should depend on your expectation of current and future tax rates as we've talked about previously.
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Feb 11, 2014 02:42
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Old Fart posted:My wife and I are recent immigrants, been here a couple of years, still on work visas, processing PR applications. We want to set up RRSPs and TFSAs. To answer your other, more important question, no. GICs are not the best route in your scenario. Let me explain why. First, look at the interest rates being offered by a TFSA. If you put money into a TFSA and don't even put it into any sort of investment, most banks will pay out about 1% interest. Now, look at what's being offered for most 1-3 year term locked-in GICs: 1.4% to 1.5%. That isn't much of an increase, especially considering that you can't touch your money until the term expires. By the way, I used the 1-3 year term rates because rates are so low now that locking into a longer term given the current market would be a dumb thing to do. If you think you'll need access to the money within a year (or within "relatively short notice" as you said), avoid GICs altogether. Pop the money into a regular 'ole high interest savings account (the rates are similar), or if you really, really want to to- put it into your TFSA Savings Deposit. The interest rate would be very similar to that of a GIC, and the money would (usually) be accessible within 24 business hours. Food for thought: If you really want to reap the benefits of the TFSA, put the money in for the long term. quote:2) For RRSP, we're planning to follow the couch potato's basic advice and set up a model portfolio with TD online. She makes far more than I do, so she'll make a spousal contribution for me. Is she allowed to go over my personal investment limit, as long as the aggregate doesn't exceed her own limit? quote:And what do we need to do to specify that she's contributing for me? Is it simply a matter of setting up an account in my name and deducting it from her tax return on the appropriate lines? In order to specify that she's contributing for you, it's simple. Any $$ she contributes towards the Spousal RRSP goes to your name. And she gets the tax deduction slip. Then she'd file her taxes, like usual, and indicate on the appropriate lines. Key things you need to know: With an RRSP, you contribute $$, you get the tax deduction, and the money's yours With a Spousal RRSP, your spouse contributes, she gets the tax deduction, and the money's yours. An RRSP and a Spousal RRSP will have different account numbers. I really hope I answered your questions. Let me know if I haven't. And welcome to  !
melon cat fucked around with this message at 17:05 on Feb 11, 2014 |
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Feb 11, 2014 02:53
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melon cat posted:If you think you'll need access to the money within a year (or within "relatively short notice" as you said), avoid GICs altogether. Pop the money into a regular 'ole high interest savings account (the rates are similar), or if you really, really want to to- put it into your TFSA Savings Deposit. The interest rate would be very similar to that of a GIC, and the money would (usually) be accessible within 24 business hours. Mrs. Slidebite and I have our emergency account + not insignificant extra sitting in one until I get off my fat rear end and open up our RBC Direct accounts. *=Far less than 24hrs. You need to transfer it to another account for withdrawal, but I've done it at 10PM online and had it at 7AM the next day. slidebite fucked around with this message at 03:05 on Feb 11, 2014 |
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Feb 11, 2014 03:03
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Old Fart posted:My wife and I are recent immigrants, been here a couple of years, still on work visas, processing PR applications. We want to set up RRSPs and TFSAs. [...] the States? Tread carefully, if you're from the US. I'm sure you've heard about it in the news in the last couple of years/months, but just in case... There are crazy tax (filing, at least) implications for American citizens living abroad. If you've got more than (I think) $10k total in any "offshore" (read: Canadian) accounts, there's a US treasury form you need to file every year (on top of filing taxes). In addition to that, at least up until recently, there were very few banks/institutions willing to open a TFSA for an American because of the IRS reporting rules. The recent agreement between the CRA and IRS may have changed this, but I haven't had a chance to follow up on that yet. Also, according to a colleague (I don't have kids), starting an RESP for one's children is (was?) a tax nightmare, because that income's taxable in the US, and you won't have paid taxes on it in Canada.
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Feb 11, 2014 03:09
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Wow, great info, thanks a bunch! Yeah, the $10k thing wasn't an issue for us last year, but it will be this year. Not looking forward to that nightmare. Good info on the GIC. My wife was asking the same thing, why bother if the rate is so low after a year? Part of it was I just wanted to get my feet wet. I'll see about those other options. I probably won't need the money in a year, but I just want to be able to get it within a few weeks if I need it. I'm going into the bank tomorrow to chat with them about it. I'll be sure to specify that I'm a US citizen, see what they say. I have my doubts a random office rep is going to be well-versed on the nuances, so I'll have to do additional research on that. How do I know my RRSP limit? I don't have my T4s yet. Do I just estimate based on pay stubs? Seems odd that a spouse can't set up an RRSP for a stay-at-home parent. Old Fart fucked around with this message at 03:47 on Feb 11, 2014 |
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Feb 11, 2014 03:30
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You should have received your RRSP limit after you filed taxes last year. If you didn't get it, call them. RC is actually pretty helpful and will answer your questions once you jump through the hoops to prove you are who you say you are. Have last years tax forms handy when you call  You probably know this already, but you carry over unused amounts.
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Feb 11, 2014 03:33
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I didn't file taxes last year. 2013 is my first working year in Canada. (Well, okay, I filed, but I had no Canadian income; I moved near the end of the year.) My wife did work the year before, we have her RRSP limit information.
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Feb 11, 2014 03:48
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Old Fart posted:I didn't file taxes last year. 2013 is my first working year in Canada. (Well, okay, I filed, but I had no Canadian income; I moved near the end of the year.) You won't have a contribution limit for 2013 tax year then. It's always based on prior year income. You'll need to wait until 2014 tax year to claim anything you contribute now. If you want to guess how much you can contribute for 2014 it's 18% of 2013 income up to a maximum of about $23,000 (specific limit on CRA website) LESS any pension contributions for the year (pension adjustment). If you contributed to a defined benefit plan this amount could be very different from the actual contributions you / your employer made as it's actuarially determined.
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Feb 11, 2014 03:56
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Kalenn Istarion posted:You won't have a contribution limit for 2013 tax year then. It's always based on prior year income. Ahhhh... Okay, that makes more sense. Well, then I guess she gets to have an RRSP all to herself. Thanks! I imagine I'm still entitled to a TFSA, outside of other US/CAN complications? But my work history doesn't affect it?
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Feb 11, 2014 04:01
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You can be unemployed and have a TFSA so that doesn't really matter in that regard... but if you're not a Canadian resident to be honest I'm not so sure. I think you can still get a TFSA but you are actually taxed if you withdraw or deposit in excess of the allowed amount. http://www.cra-arc.gc.ca/E/pbg/tf/rc243-sch-b/rc243-sch-b-13e.pdf
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Feb 11, 2014 04:06
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I'm a resident, just not a Permanent Resident or citizen yet. I have a driver's license and SIN and all that.
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Feb 11, 2014 04:13
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If you're super anal a call might not be a bad idea, but you should be in the clear from what I understand. Only time it seems to be a consideration is if you withdraw or over-contribute so those are easy to avoid either way.
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Feb 11, 2014 04:37
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If you are a resident of Canada and have a SIN, you are eligible to contribute to a TFSA. The TFSA room is $11,000 ($5,500 for each of 13/14) as of right now if you became a resident of Canada in 2013.
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Feb 11, 2014 04:44
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Old Fart posted:Ahhhh... Okay, that makes more sense. Well, then I guess she gets to have an RRSP all to herself. Thanks! You can still set up a spousal RRSP. Anything she contributes will be subtracted from her contribution room and she will get the deduction. It doesn't have any effect on your RRSP contribution room even if it is zero. You will be the annuitant and the income will be taxed in your name upon withdrawal, provided you wait the 3 year vesting period.
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Feb 11, 2014 04:53
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Kal Torak posted:You can still set up a spousal RRSP. Anything she contributes will be subtracted from her contribution room and she will get the deduction. It doesn't have any effect on your RRSP contribution room even if it is zero. You will be the annuitant and the income will be taxed in your name upon withdrawal, provided you wait the 3 year vesting period. This. It was originally put in place as a method of income sharing - if one partner makes significantly less and has less retirement savings in their name, it allows you to push more income into the lower retirement tax bracket. That said, I thought there were some changes made that make this easier to do later on (which would obviate the need to do this), but not 100% sure if it was implemented or how it works.
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Feb 11, 2014 06:01
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Kalenn Istarion posted:This. I have no clue what changes you are talking about, unless you are thinking about Harper's plan to eventually introduce income splitting among spouses allowing them to transfer up to $50,000 in income to their spouse. I'd like to see this happen as it makes no sense that a couple making 50K each will pay less in tax than a couple where one person makes 100K and the other zero. Though I suppose I am biased because the latter situation applies to me more than the former.
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Feb 11, 2014 06:21
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Kal Torak posted:I have no clue what changes you are talking about, unless you are thinking about Harper's plan to eventually introduce income splitting among spouses allowing them to transfer up to $50,000 in income to their spouse. I'd like to see this happen as it makes no sense that a couple making 50K each will pay less in tax than a couple where one person makes 100K and the other zero. Though I suppose I am biased because the latter situation applies to me more than the former. This exactly. It was introduced in a budget or something but I can't remember whether it was made law or not because it happened around an election.
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Feb 11, 2014 08:39
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Kalenn Istarion posted:This exactly. It was introduced in a budget or something but I can't remember whether it was made law or not because it happened around an election. No, not law. Not yet, anyway. Harper has said there are two things he wants to implement once the budget is balanced in 2015 - income splitting and 10K TFSA contribution room.
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Feb 11, 2014 16:15
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Kal Torak posted:No, not law. Not yet, anyway. Harper has said there are two things he wants to implement once the budget is balanced in 2015 - income splitting and 10K TFSA contribution room. They will be saving these big ticket items for the election year budget next year, I imagine.
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Feb 12, 2014 18:09
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Lexicon posted:They will be saving these big ticket items for the election year budget next year, I imagine. As long as it's implemented sometime in the next 30 or so years...
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Feb 12, 2014 20:39
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Kalenn Istarion posted:As long as it's implemented sometime in the next 30 or so years... I was actually persuaded by the Ottawa Citizen article that it's a bad idea: http://www.ottawacitizen.com/touch/story.html?id=9499237
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Feb 12, 2014 21:04
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Lexicon posted:I was actually persuaded by the Ottawa Citizen article that it's a bad idea: http://www.ottawacitizen.com/touch/story.html?id=9499237 That article doesn't really convince me. Yes, it benefits asymmetric high-income families more, but there aren't many tax changes that don't benefit higher-income people more unless they're structured like OAS and phase out with higher income. Speaking of OAS, if you're declaring income on your lower-income spouse's return, they could recapture some of the loss by having that transfer impact OAS clawback calculation, but then they would have to deal with the fallout of being seen to attack old people (it's not one, but that would be the headline). The point about favouring one type of family over another is also stupid, because the current tax structure favours one type of family (symmetric income) over another. In the US there's a family filing option which has clear savings over filing individually in many cases and it's been there for years. The more pertinent social argument is that having a parent home with the kids is beneficial for them, and this makes that significantly more affordable for every family, tax bracket be damned. The at-home partner would need to make the tax savings + childcare and employment costs + some margin before it makes sense, where right now it's just childcare and employment costs.
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Feb 12, 2014 22:22
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^ All of that is secondary, in my view, to the notion that taxation is a relationship between the individual and the state, not the household and the state. Many people, perhaps including you, disagree with that - but for me it's basically axiomatic, irrespective of what currently exists in say, the USA. If you want to incentivize things around childcare and what not, there's nothing stopping the creation of a particular program/tax credit for that.
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Feb 12, 2014 22:41
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Lexicon posted:^ All of that is secondary, in my view, to the notion that taxation is a relationship between the individual and the state, not the household and the state. Many people, perhaps including you, disagree with that - but for me it's basically axiomatic, irrespective of what currently exists in say, the USA. Then I assume you disagree with pension splitting? And the transfer of the spousal credit should be disallowed? And the fact the GST refund can only be claimed by one spouse? And I guess spousal RRSP contributions should be removed as well.
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Feb 12, 2014 22:57
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Kal Torak posted:Then I assume you disagree with pension splitting? And the transfer of the spousal credit should be disallowed? And the fact the GST refund can only be claimed by one spouse? And I guess spousal RRSP contributions should be removed as well. Yeah, pretty much. I mean, I'm no scholar of tax policy by any stretch of the imagination, and I'll sure as hell take advantage of these things personally if and when they make sense, but from a Rawlsian, 'design the system irrespective of your position within it' point of view, I'd personally design a system that keeps taxation individualized, expands the use of an RRSP-like device to permit income smoothing, leaves households alone to manage their own affairs (partners in a couple own the assets jointly, after all), and come up with specialized, highly targeted programs/incentives where it's deemed socially useful (childcare, etc). There's no danger of me being in a place to recommend this to anyone who matters, so it's really just a thought experiment. But the mere fact that you can list off half a dozen ways to split income typifies what I dislike about the tax system - it exists pretty much to enrich accountants and lawyers, and those smart/rich enough to afford them.
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Feb 12, 2014 23:25
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A great piece on the TFSA vs RRSP decision: http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/02/the-basic-arithmetic-of-rrsps-and-tfsas.html
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Feb 13, 2014 18:30
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Lexicon posted:A great piece on the TFSA vs RRSP decision: http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/02/the-basic-arithmetic-of-rrsps-and-tfsas.html Yep, that's about the long and short of it and the inclusion of the impact of OAS / GIS for low-income participants is additional information to what we've discussed. This makes the TFSA significantly more attractive for people in lower tax brackets.
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Feb 13, 2014 22:30
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I'm a young student who is (hopefully) about to receive about $4,500 as a severance buyout from the government in the next month or two. I believe my income last year was around $22,000 tops. When asked by those processing my severance, I had to declare my intention to put it into an RRSP, which I did because at the time I thought that my best option, since I am going to school and could use the money for tuition and living costs, that I could put it into my RRSP and then take it out using the Adult Life long learner plan, and pay it back within 10 years, thus maximizing my ability to use it for school. If I just take it as income, it will be taxed basically 20% correct? Is there anything I'm missing in my plan? I realize that being in a low tax bracket right now, but expecting to be in a higher one in 2-5 years or so, would mean a TFSA is a better option. But my reasoning is, in order to avoid student loans and the interest in that, and since my biggest need is cash for tuition/school, it makes sense to do this via RRSP simply because of the Adult LLP. However, I have read articles that because my income is so low, the taxation on it being so low to begin with that I might as well keep it as income and not tie it into an RRSP anyways (I believe a globe and mail article on that is what I had read). My goal is to avoid student loans as much as possible for obvious reasons. What should I do?
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Feb 15, 2014 23:51
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I really don't see the upside in putting it into a RRSP. You would have paid such a small amount of tax on that income anyway. There's no real advantage to the LLP. I'd keep it as cash myself, especially as it sounds like you need it in the near term.
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Feb 16, 2014 00:00
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swagger like us posted:I'm a young student who is (hopefully) about to receive about $4,500 as a severance buyout from the government in the next month or two. I believe my income last year was around $22,000 tops. When asked by those processing my severance, I had to declare my intention to put it into an RRSP, which I did because at the time I thought that my best option, since I am going to school and could use the money for tuition and living costs, that I could put it into my RRSP and then take it out using the Adult Life long learner plan, and pay it back within 10 years, thus maximizing my ability to use it for school. If I just take it as income, it will be taxed basically 20% correct? I did the severance into RRSP for a potential LLP thing recently. In my case it was a very simple decision. The LLP would allow me to use the money if I need to without paying taxes because I was going to go to school anyway. If I don't use it, it's money I would have saved anyway and this way I get a nice tax refund. If I took it as cash I would only lose the taxes paid and gain no advantage since the LLP keeps the money accessible. In other words: take as cash option: Pros - money is instantly accessible - no worries about repayment if money is spent Cons - pay 30% withholding tax (20%?) Put in RRSP option: Pros - money is accessible through LLP - nice refund for saving or whatever - no withholding tax Cons - potential repayment obligation if used - hassle of LLP and brokerage account transfer which makes it unattractive as emergency money I found the substantial cost to not be worth the tiny benefits of taking it as cash. An RRSP also makes more sense for my case than lexicon's because I'm thinking FI in the next ten years or so, meaning my income is much higher than my expenses. In your case, your income (and tax rate) is quite low so your RRSP contribution room is much more valuable to future-you who earns a higher income and can benefit from the tax deferral. It's complicated. You should crunch the numbers on your expected, post-education salary's tax rate, the cost of taking the cash or not, and your future contribution room (18% of income IIRC) and retirement plans.
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Feb 16, 2014 00:34
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I took mine as a full cash payout as well. Kinda hoped it would arrive this year for tax reasons (happened last week in Dec of course), but it's not a huge difference either way. Bagged something like 10K after tax which went straight to TFSA. Speaking of which, my funds finally got transferred to questrade just over a month after they got the paperwork. The market's gone nowhere but down anyways so maybe I'll be able to afford an extra tenth of a share, yay! Guest2553 fucked around with this message at 11:34 on Feb 16, 2014 |
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Feb 16, 2014 07:37
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If you're a student, you're going to have tuition deductions that will eliminate a large part of your $22,000 in taxable income. I'm with Lexicon - save the RRSP room for when you've got a proper job. Don't put in a TFSA either if you think you'll need the money. Just get a high interest savings account. To do the numbers, let's say you might pay ~$1,000 or so in tax on your severance. If you instead borrowed that amount (to have the same available funds without using your RRSP room), you'd get a loan for $1,000 at interest of something like 5% or less - student loan rates are usually pretty good. So that's $50 a year in interest. Let's say 5 years from now, you are in a 30% tax bracket instead of 20%. So you now use your $5,000 in contribution room, which gives you a tax return of $1500. In the meantime, you've paid $250 in interest on your loan. I'm on a phone so can't so the time value calc easily, but simplistically, you're $250 further ahead by waiting (1500-50x5 interest-1000 loan repayment). With time value it's a bit less beneficial but the conclusion should be the same. Kalenn Istarion fucked around with this message at 10:23 on Feb 16, 2014 |
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Feb 16, 2014 10:21
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Here's our situation. My wife is the primary breadwinner by a long shot, and also contributes to the Municipal Pension Plan in BC, with employer matching. These contributions count against RRSP limits. Using some retirement calculators, even putting the same amount away in a mutual fund won't pay out as much as the pension promises. I make crap money, and will be the primary at-home caregiver for a child in the hopefully near future. We're saving up to offset salary reduction during maternity leave, which has been put in a simple TFSA in my name. I will reach retirement age seven years before she will, and I will be under-employed for the foreseeable future. We're just now starting to put into RRSP (we're recent immigrants), and we're using her contribution room to split between one in her name, and a spousal RRSP for me. But I'm wondering, considering both her pension and my retiring almost a decade sooner, does it make sense for her to dump most of it into my name? Am I right in thinking that this will be the most tax-advantageous result for all involved? At the same time, it seems kind of rude to leave her high and dry. My thinking is to set up the both of us for the time being, and do a disproportionate share for me in the future, then if that seems to be sorting out okay, we can transfer some of hers to the education funds later. Is that a viable plan? How reliable is the MPP? Will it be around in 35 years?
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Feb 16, 2014 18:59
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Old Fart posted:Here's our situation. Why not just contribute to your RRSP with most or all of your income and live off of hers? Pension plans have demographic shift problems. It behooves you to provide for your own retirement as if the pension won't happen, because your benefits probably won't be the same in the future as they are for beneficiaries now.
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Feb 16, 2014 19:10
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tuyop posted:Why not just contribute to your RRSP with most or all of your income and live off of hers? Because he doesn't have a high income so it doesn't make sense from a tax perspective. A spousal RRSP makes a lot more sense for their situation.
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Feb 16, 2014 19:18
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