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blah_blah posted:I dunno, maybe I'm projecting but I've definitely heard lots of people complain about missing out on the bull market of the last few years and who are basically hoping for another market crash so that they can get in on the rebound. Yeah those people are gamblers.
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Mar 4, 2014 05:24
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Being I'm just starting to actually plan my savings, and debt free a few months ago, I'm still a bit unsure of how to handle the transition phase. Starting next year (assuming I'm not fired), I'll be eligible for employer matching on my RRSP contribution. based a semi rough budget, I can save enough this year to max out my contribution limit (including matching), and the yearly limit for TFSA. The thing that I'm unsure how to handle, is the above ignores I've yet to Start either. It looks like I'll be able to contribute up to 24k to an RRSP due to carry over. Assuming worst case, matching is 40%, I'll need to save up just over 17k to max out my employer contribution. I should be able to do this if I skip the TFSA, and might have to dip into the emergency fund a little. My big question is, given next years contribution deadline is less than a year away, what should I do with the money I'm saving for the contribution? Do I just put it into a high interest savings account at 1.35%? or should I be opening an RRSP now, and starting to put the money into it each month. The latter assuming my employer would then at some point next Jan/Feb contribute their 40%? GICs would be one year minimum and miss the deadline, and index funds don't seem the best idea, given the short time period. Next year should be no issues maxing both RRSP and TFSA yearly limits, though I'll still have a 31k backlog to fill on the TFSA. Or I buy a new motorcycle and assume I'll die before retirement. blah_blah posted:I dunno, maybe I'm projecting but I've definitely heard lots of people complain about missing out on the bull market of the last few years and who are basically hoping for another market crash so that they can get in on the rebound. I like to think I'm just an optimistic person for thinking a small war in Eastern Europe could bring the markets down just in time for me to start buying next year. Golluk fucked around with this message at 06:34 on Mar 4, 2014 |
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Mar 4, 2014 06:09
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e. The interest on that amount over less than a year is fairly negligible considering the effort that would need to be spent to optimize it, IMO. I'd lean towards keeping it liquid, but if you have any extra throw it in the RRSP. Starting next year, since the employer is matching 40%, max it out since you can always invest the return in your TFSA. So after digging out all my letters of assessment it seems like pension adjustments eat up most of my deduction limit so I haven't been missing out on a whole lot. Napkin math says in the near term it will be roughly equal to a TFSA in terms of contribution size which isn't terrible, I guess. Might still be worth making some contributions to if I have the extra cash, but not before contributing to my wife's TFSA. e. vvv I read the question wrong but my stupid loving internet is making GBS threads itself every 30 loving seconds so I was stuck with my wrong answer. Edited to answer the question 
Guest2553 fucked around with this message at 06:39 on Mar 4, 2014 |
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Mar 4, 2014 06:15
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Guest2553 posted:e. I'd say max out RRSP first if your employer is matching, you can always invest the return in your TFSA since those contribution limits don't go away. Good luck! That's the plan. But do I start an RRSP now and begin contributing, or put the money elsewhere until next February? And if so, is there anywhere better that a high interest savings account for minimal risk over an 11 month period?
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Mar 4, 2014 06:31
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Golluk posted:That's the plan. But do I start an RRSP now and begin contributing, or put the money elsewhere until next February? And if so, is there anywhere better that a high interest savings account for minimal risk over an 11 month period? Why would you wait?
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Mar 4, 2014 06:39
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Because the opportunity cost of a possible 7% return this year is more than overruled by the guaranteed (barring termination) employer matched 40% next year, if I'm reading it right. I also fixed my last post me posted:e. The interest on that amount over less than a year is fairly negligible considering the effort that would need to be spent to optimize it, IMO. I'd lean towards keeping it liquid, but if you have any extra throw it in the RRSP. Starting next year, since the employer is matching 40%, max it out since you can always invest the return in your TFSA.
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Mar 4, 2014 06:43
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Guest2553 posted:Because the opportunity cost of a possible 7% return this year is more than overruled by the guaranteed (barring termination) employer matched 40% next year, if I'm reading it right. Ah. Yeah, that's fair. Just put it in a savings account. No use taking market risk if you need it in a year.
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Mar 4, 2014 16:03
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Here's a dumb TFSA question: I had ~13k in TFSA as of January 1st. I pulled ~2k out in February. Can I contribute up to 29k before the end of 2014, or do I have to wait until 2015 before I can deposit anything into my TFSA again?
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Mar 4, 2014 17:35
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FrozenVent posted:Here's a dumb TFSA question: Was the 13K the amount of you prior contributions? If so, you can contribute 16K more (29 total) before the end of the year. The 2K you pulled out cannot be put back in again until January.
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Mar 4, 2014 17:37
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FrozenVent posted:Here's a dumb TFSA question: It doesn't matter what the value of your TFSA is or was. It matters how much you contributed. If you contributed 13k in cash, then pulled out 2k in cash, you still have 31000-13000-2000 = $16000 worth of room to contribute this year. If, however, you contributed 31k and bought a stock with it that subsequently plunged to 13k, that room is lost forever. I'm guessing the former is more likely to be the case, and if so, you can add 16k still this year. You have to wait until next year to replenish the remaining 2k. As a general rule, if you can at all avoid it, I would advise against pulling money in and out of TFSAs. The math gets annoying to track pretty fast. edit: this is all another point in support of "Tax Free Savings Account" being a poor choice of name for the vehicle. No other savings account that I'm aware of has the property that you must wait until the next calendar year to replenish withdrawn money. Not that the bad name excuses the ignorance that most Canadians have about it, of course. Lexicon fucked around with this message at 17:45 on Mar 4, 2014 |
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Mar 4, 2014 17:42
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Correcting some math: Total contribution limit assuming you were at age of majority when TFSA's were introduced: $31,000 Balance start of 2014 (and any contributions prior to date of withdrawal): $13,000 Assuming your balance was entirely composed of contributions, your available contribution limit at the start of 2014: $31,000 - $13,000 = $18,000 Withdrawal: $2,000 Withdrawal doesn't impact your contribution limit in the year of withdrawal, so your available contributions remaining in 2014 are $18,000, not $16,000 or $29,000. However, what you really need to do to find out your available 2014 contribution room is call CRA or access My Taxes on their website and get your actual available 2014 contribution limit. This will take into account the Portion of the $13,000 that was contributions in years prior to 2014 vs earnings (or losses) to make sure you aren't over- or under-contributing. For example, let's say you had actually contributed $12,000 in prior years on which you had made $1,000 in profits. Your available room would then be $19,000 not $18,000, so you would be under-contributing. Conversely, if you had contributed $14,000 but lost some money and were left with $13,000, your actual contribution room available in 2014 would be $17,000, not $18,000 and you would need to pay penalty tax. Short version: don't guess, call the CRA to confirm your limits or use My Taxes.
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Mar 4, 2014 18:41
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Kalenn Istarion posted:Correcting some math: This is correct. What a dumb error for me to make. 
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Mar 4, 2014 18:46
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Kal Torak posted:This is correct. What a dumb error for me to make. The meta point about calling the CRA is the right one of course, but I don't think it is correct. Withdrawals count against contributions if they happen in the same year. http://business.financialpost.com/2014/01/17/10-things-you-should-know-about-tfsas/?__lsa=93ee-fb64 quote:You can withdraw money at any time without penalty or tax consequences. However, you can’t re-contribute that amount in the same calendar year. (If you only need the funds for a short time and plan to replace them quickly, the best strategy is to make the withdrawal late in the calendar year so you can re-contribute Jan. 1 of the following year.)
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Mar 4, 2014 20:57
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Lexicon posted:The meta point about calling the CRA is the right one of course, but I don't think it is correct. Withdrawals count against contributions if they happen in the same year. Maybe you aren't thinking about it in the right way. Think about this. Let's say he contributed 13K before this year. His contribution room coming into the year is 31-13 which is 18K. Now, he withdraws 2K. Technically, his contribution room is now 20K except that the 2K doesn't come into effect until next year. He can still contribute the 18K that he was eligible to contribute in 2014.
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Mar 4, 2014 21:14
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To phrase it simply; excluding returns on previous contributions, I can't end the year with more than 29k of TFSA if I understand correctly. (Yeah that's gonna happen)
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Mar 4, 2014 21:17
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Kal Torak posted:Maybe you aren't thinking about it in the right way. Think about this. Let's say he contributed 13K before this year. His contribution room coming into the year is 31-13 which is 18K. Now, he withdraws 2K. Technically, his contribution room is now 20K except that the 2K doesn't come into effect until next year. He can still contribute the 18K that he was eligible to contribute in 2014. Ah, yes, I see. That's helpful. Cheers.
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Mar 4, 2014 21:18
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FrozenVent posted:Now you've done it. You've summoned the FI spergs. x-post from FI thread because Kal Torak summoned the demons Re: retire at 45 given the following conservative assumptions: -My career bottoms out, I never get promoted, and can only ever save half my net salary (2000/month for a total of 432K plus 65K I will have by year's end) -TFSAs (  ) are maxed out yearly for both myself and my wife, with the contribution limit increasing by 500 every 4 years-My defined benefit pension disappears and my superannuation contributions evaporate -No tax shelters or other registered accounts are used -Investments compound at 4%, which is a bit less than the worst 15-year S&P 500 index minus MER and transaction fees -My evil twin steals any inheritance I may have Given all of these things, I'd have $673,331.63 - $238,165.82 in each TFSA and $197,000 cash. Not a huge amount, sure, but enough to live off interest for decades. With 7% interest (still significantly less than the 100-year average of 9.4% or the worst 25-year average of 8%), it jumps to $886,102.91 - $344.551.45 in each TFSA and the same 197k in cash. Enough to live on for longer, maybe even buy a house It is more realistic to assume that I have another promotion or two left in me and could pull in a 50k pension, and there is no way I'd hang on to 200k in cash. There's no way to account for market volatility but in the long term it should be a sufficient wag, especially given my very conservative estimates. I think.
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Mar 5, 2014 05:08
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How old are you? You'd have to live pretty frugally (is that a word?) to make 600 or even 800K last for two people for 50 years I think. Kal Torak fucked around with this message at 06:58 on Mar 5, 2014 |
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Mar 5, 2014 06:56
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Kal Torak posted:How old are you? Not only that, you are going to work you rear end off until 45 saving up and being frugal, just to not work and live frugal.
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Mar 5, 2014 07:00
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Kal Torak posted:How old are you? Yeah, seriously. Madness.
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Mar 5, 2014 07:06
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Not really, I think. My wife and I are quite comfortable, we just don't spend a whole lot of money to begin with. There's still a few thousand in our budget each year for discretionary stuff like travel/gadgets/whatever. Saving 24k on 80k salary (gross, ~60k after tax) salary really isn't all that hard. Most of what didn't spend up til now was used to pay off things like student loans/two vehicles/baby stuff/etc, so we have zero debt. Now we can actually use the money we save to make more money until we completely avoid the trap of needing to work altogether. Interest on the amount saved will range from about 27k (4% of 673k) to 62k (7% of 886k). Most if it would come from untaxed growth in a TFSA, and dividends on the remainder wouldn't make enough to pay taxes on. And this is all before even considering promotion potential/superannuation/pension or any of the other things I was ignoring. I don't know how hard of a challenge it will be living the way I normally do :?: e. also yeah, frugally is totes a word. e2. Also not having to work full time doesn't mean my wife and I become allergic to making money altogether and can't use skills we already have for extra pay if/when we feel like it And don't forget this is just a thought exercise for now, if the literal worst case happens and I only have 600 K, I'm not going to walk away from what will probably be a low six figure job by then on principle. Even if I had two million dollars, I might want to stay anyways because I like my job. Having options is not a bad thing. Guest2553 fucked around with this message at 08:04 on Mar 5, 2014 |
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Mar 5, 2014 07:28
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FrozenVent posted:To phrase it simply; excluding returns on previous contributions, I can't end the year with more than 29k of TFSA if I understand correctly. Correct, assuming you make no further withdrawals. This equals 13,000 - 2,000 + 18,000 (orig balance - withdrawals + 2014 contribution allowance)
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Mar 5, 2014 08:04
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DariusLikewise posted:Not only that, you are going to work you rear end off until 45 saving up and being frugal, just to not work and live frugal. You could do a lot of awesome stuff on 24-32k/year as long as you don't define "awesome stuff" as "constantly buying new poo poo".
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Mar 5, 2014 13:44
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Guest2553 you mention you had expenses like "baby stuff" but I don't see anywhere in your figuring for saving for your kid(s) education. Are you figuring on letting them incur piles of student debt or just going straight to flipping burgers?tuyop posted:You could do a lot of awesome stuff on 24-32k/year as long as you don't define "awesome stuff" as "constantly buying new poo poo". Like what sort of things? That's barely a living wage in Toronto. Maybe it's fine in small towns.
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Mar 5, 2014 14:51
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Saltin posted:Are you figuring on letting them incur piles of student debt or just going straight to flipping burgers? It's a bit disingenuous to suggest I'll be all 'gently caress you got mine' with my own son. Why the assumption that I don't plan to help my kid out? If an extra 30-50 grand (adjusted for inflation blah blah) was gonna break my plan, it was probably a lovely plan to begin with. Also, Guest2553 posted:given the following conservative assumptions: I assumed a minimum constant rate of savings and some other extremely unrealistic unfavourable circumstances. There's nothing saying that I can't (or won't) throw a couple grand a year into an RESP. And if a quarter million of superannuation deductions just vanishes overnight then civilization is probably about to end and the only useful currency will be tinned food and medicine. I would also be done with full time work by the time he's starting high school (as long as he's not Dougie Houser, but I don't have to worry about that with my genes ) and being around to do poo poo with him is valuable to me.Saltin posted:Like what sort of things? Going on a week long kayak/camping trip or mountain biking for a day is really awesome and doesn't cost much more than the food it takes to live and the gas money it takes to get there. Hobby gardening or woodworking projects fill time and can reduce the amount of stuff you need to buy to begin with. Shooting the poo poo with neighbors drinking homebrew in the driveway is a fun passtime in many locales. Or just plain old shooting with a .22, some paper targets and a bulk box of ammo. I also have negative interest in living anywhere near Toronto so the exorbitant cost of living there isn't an excuse to not save. Guest2553 fucked around with this message at 00:32 on Mar 6, 2014 |
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Mar 6, 2014 00:16
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Saltin posted:Guest2553 you mention you had expenses like "baby stuff" but I don't see anywhere in your figuring for saving for your kid(s) education. Are you figuring on letting them incur piles of student debt or just going straight to flipping burgers? You could write, volunteer, tutor or teach to people who can't afford your services otherwise. You could experiment with gardening or carpentry or soap making. You could buy a motorcycle and take two years traveling across SE Asia. I plan on going on huge epic trips in a camper or boat (or on bicycle, which I think about all the time) with your spouse and children while the kids do distance learning. Basically you can do anything with your time that doesn't incur additional costs like most consumption activities that are probably all the rage in TO. Also lol at the implication that you give your kids a full ride or you're a selfish rear end in a top hat. 
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Mar 6, 2014 00:40
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tuyop posted:You could experiment with gardening or carpentry or soap making. Guest2553 posted:Hobby gardening or woodworking projects  Wanna go on a camping date in 20 years?
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Mar 6, 2014 00:47
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Guest2553 posted:
Look, it's cool if you like working and spending most of your income on whatever in your free time and retiring when you're old someday. There are just other options that are perfectly reasonable. If someone told me they were giving me 30k/year for the rest of my life when I turned 35 or 40 there's absolutely no way I would continue to work full time at that point unless I was very passionate about my job and it was really strict about its time commitment. What would you do?
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Mar 6, 2014 01:00
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tuyop posted:
The same thing...? I think we got a wire crossed somewhere.
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Mar 6, 2014 01:08
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Guest2553 posted:The same thing...? I think we got a wire crossed somewhere. Oh, hahaha, I mixed you up with saltin. Sorry, bro  I will attend your FI Kool-aid retreat in 2034!
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Mar 6, 2014 01:12
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tuyop posted:You could write, volunteer, tutor or teach to people who can't afford your services otherwise. You could experiment with gardening or carpentry or soap making. You could buy a motorcycle and take two years traveling across SE Asia. Look, fair enough with the volunteering and stuff, I asked honestly, not sarcastically. I'm not sure I implied a full ride, you're probably projecting a bit. What I implied is that people who have kids and obviously have financial discipline, like Guest2553 appears to have, should be putting something away for their education. If you can't afford to do that you're not a selfish rear end in a top hat. If you can and you don't you definitely are. I mostly put it out there to see if anyone wanted to discuss that, because I am pretty well versed in the RESP and it's the best vehicles for getting free government money to help. Saltin fucked around with this message at 14:33 on Mar 6, 2014 |
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Mar 6, 2014 14:31
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Saltin posted:Look, fair enough with the volunteering and stuff, I asked honestly, not sarcastically. Many people reflect on the hardship of not having their parents pay for their education or having to save for their own down payment on a house as one of the more formative experiences of adulthood. Would it work to use an RESP as a post-college debt present of sorts? Like if you hide it from your kids until they're 30 or have a kid and give it to them at that point?
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Mar 6, 2014 14:39
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tuyop posted:Many people reflect on the hardship of not having their parents pay for their education or having to save for their own down payment on a house as one of the more formative experiences of adulthood. I know. I did all that myself too. I also know people in their 40's that still have student debt and are financially stunted for life, so there's that perspective too. That said, I can afford to set some money aside for my young daughter, and I feel obligated to do it as part of my financial planning regimen. If you can afford to save for it, you should. In fact, it only takes $2500 a year to get the full benefit of the 20% contribution matching the government does. No it would not work well to use an RESP that way - if the money isn't used for school you lose all the grant money the government has contributed. You can withdraw your own contributions tax free, but any growth your contributions accumulated (interest/cap gains/dividends, etc) is taxed at your marginal rate plus about 20%. You can avoid that by moving that portion into your RRSP, if you have the room, but then it's pretty untouchable. So essentially it's bad to use an RESP that way. An RESP is actually 3 seperate accounts that are presented to you as one logical account. There is the account for your contributions, the account for the government's contributions and the account for the accumulated interest (growth). The bank/brokerage manages all that under the hood.
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Mar 6, 2014 15:05
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Saltin posted:I know. I did all that myself too. I also know people in their 40's that still have student debt and are financially stunted for life, so there's that perspective too. That said, I can afford to set some money aside for my young daughter, and I feel obligated to do it as part of my financial planning regimen. If you can afford to save for it, you should. In fact, it only takes $2500 a year to get the full benefit of the 20% contribution matching the government does. How do they define "used for school"? Could I withdraw it and put it into a registered account while my kid is in school and say it's for living expenses but just let it sit until I think the time is right? Does it basically serve as an RRSP but the penalty-free withdrawal criteria is just "have a child in school"?
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Mar 6, 2014 15:37
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tuyop posted:How do they define "used for school"? Could I withdraw it and put it into a registered account while my kid is in school and say it's for living expenses but just let it sit until I think the time is right? You've got to show proof of enrolment in a qualifying education program. Essentially it's a college/university/trade school or other institutions certified by the Ministry. It can be foreign. There are two types of payments a student can recieve from an RESP - an EAP (Education Assistance Payment), which comes from the grants and accumulated interest portion of the RESP only (the AIP). You are limited to $5000 for the first 13 weeks of school, thereafter there is no limit, and you can apply for an exception if required. The other type is a withdrawal of the contributions made, a Post Secondary Education Payment (PSE), on which there is no limit. They say be prepared to prove the expenses are for education (tuition/room/board/books/etc) but the truth is all you need to show is proof of enrolment to get at the money. Also, the kid is taxed on any EAP payments, but only at their marginal rate, which with the tax breaks given to students should be close to zero anyhow. There is no tax on the PSE withdrawls. Saltin fucked around with this message at 16:33 on Mar 6, 2014 |
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Mar 6, 2014 16:20
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Other option is to provide the RESP as an interest free loan. My parents didn't pay for my education, but they did subsidize it with providing housing, and interest free loans if required. Some kids might abuse it, but personally I appreciate it. Debt to my parents, or debt to a bank feels the same to me. And I like being debt free. Edit: I'd probably knock off any amounts the government granted from what they owe back. Golluk fucked around with this message at 16:36 on Mar 6, 2014 |
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Mar 6, 2014 16:32
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Golluk posted:Other option is to provide the RESP as an interest free loan. My parents didn't pay for my education, but they did subsidize it with providing housing, and interest free loans if required. Some kids might abuse it, but personally I appreciate it. Debt to my parents, or debt to a bank feels the same to me. And I like being debt free. Can you explain what you mean a little more? Did your parents utilize an RESP or just subsidize you out of pocket as required/when possible?
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Mar 6, 2014 16:35
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Saltin posted:Can you explain what you mean a little more? Did your parents utilize an RESP or just subsidize you out of pocket as required/when possible? In my case it was just out of pocket essentially. I worked part time, so most months I was fine. But come tuition time/books, I might be a bit short. So rather than pay huge interest on a credit card, I'd borrow from my parents to cover the difference. Paying down the debt as I could in the months between.
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Mar 6, 2014 16:39
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Golluk posted:In my case it was just out of pocket essentially. I worked part time, so most months I was fine. But come tuition time/books, I might be a bit short. So rather than pay huge interest on a credit card, I'd borrow from my parents to cover the difference. Paying down the debt as I could in the months between. Ok, that's a strategy, but it's not an RESP. The benefit to you and your parents that was missed in this case is the government matching your parents contribution to an RESP by 20% to a limit of $2500 per year (so they give you $500) and tax free accumulation of interest, dividends, etc. There's nothing wrong with what you guys did and it's a model I am sure many people follow. My Dad often put a few twenties in my hand when we'd meet for dinner during my University years. Saltin fucked around with this message at 16:50 on Mar 6, 2014 |
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Mar 6, 2014 16:47
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Saltin posted:Ok, that's a strategy, but it's not an RESP. The benefit to you and your parents that was missed in this case is the government matching your parents contribution to an RESP by 20% to a limit of $2500 per year, and tax free accumulation of interest, dividends, etc. Yes, I agree that should be used. What My parents did should also qualify for the 20% match (assuming they opened the RESP and 2500 a year contribution). Is there time requirements on an RESP? Like could you open one with in August with 5k, get the 1k match, and then start receiving payments in September?
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Mar 6, 2014 16:52
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