Comments on: Book Giveaway #4: RRSPs by Yours Truly

By: Preet

Preet — Tue, 02 Feb 2010 03:39:07 +0000

@Rob – If he has a nice pension, then his RRSP contribution room will be reduced, but your point is valid. The best solution is to retire earlier than 71!

If he uses the tax refund for something productive (paying down the mortgage, or re-investing), then it will offset the higher tax burden down the road (in terms of overall net worth comparisons).

The problem is more of a psychological one as you have pointed out. It is hard to equate sacrificing the tax refund now for a payoff that may not be realized for many, many decades.

Realistically, if he can focus on using the refund for something productive, I wouldn’t worry too much about it.

By: Rob

Rob — Mon, 01 Feb 2010 18:52:49 +0000

My son started a career 2 years ago which will provide him with a very generous pension when he retires. I have tried to explain the downside of having too much money in an RRSP at retirement, having to pay more tax on the withdrawls than he receives at tax time during his lower income years. He plans on maxing out his TFSA and wants to max out his RRSP, but I’m thinking it could be a nice refund now, but heftier tax owing at 71. Comments?

By: Irene Scott

Irene Scott — Thu, 14 Jan 2010 02:10:34 +0000

Could you do a discussion on the tax implications of selling and buying options?

By: JK

JK — Thu, 05 Feb 2009 14:51:40 +0000

RDSPs

By: Dan G

Dan G — Sun, 01 Feb 2009 00:26:59 +0000

Could you do a article about the cheapest and easiest way to buy shares to start a DRIP for your children. Thanks

By: Linkstuff For Jan 30, 2009

Linkstuff For Jan 30, 2009 — Sat, 31 Jan 2009 01:26:55 +0000

[...] Preet has a book giveaway. [...]

By: linda

linda — Fri, 30 Jan 2009 18:21:18 +0000

Hi Preet, Not sure if it’s covered. I’d be interested in learning about how to compare DB pension and RRSP for younger professionals. thanks.

By: EconStudent

EconStudent — Fri, 30 Jan 2009 16:32:35 +0000

I am interested too.

By: Matthew Adie

Matthew Adie — Fri, 30 Jan 2009 16:20:11 +0000

I’d be interested in learning more about how a small investor can best make use of DRIPs.

By: Returns Reaper

Returns Reaper — Fri, 30 Jan 2009 14:09:02 +0000

Preet,

I’m interested in a bit of portfolio theory analysis that considers the mortgage as part of the portfolio.

It seems to me that putting extra money down on your mortgage provides a fixed rate of return, in that you’ve decreased a negative cash flow obligation, which would seem to be equivalent to providing an increased positive cash flow (as purchasing a fixed income instrument would).

So suppose your mortgage is large relative to the size of your portfolio, as would often be the case for relatively young investors. And suppose the desired allocation is 80/20% equiteies/bonds. Would it make sense to put 20% of your contributions towards higher mortgage payments, and not purchase bonds until the size of your portfolio starts to be much larger than your mortgage?

It seems to make some sense intuitively, but the analysis gets a bit complicated when you consider RRSP contributions with pre-tax dollars and mortgage payments with after tax dollars.

Perhaps this is covered in your book, but I think it could also make a great blog post.