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RRSP or Non RRSP?

tmleafs999

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Nov 28, 2002
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Which is the better in the long run to invest in RRSP or Non RRSP?

Assumptions:
- you will retire in 20 years
- average rate of return is 8%
- tax rate now & retirement is 39%
- lump sum one time purchase of $10,000 not inside a TSSF.

What is the better investment to make or keep money in your pocket?
 

Big Sleazy

Active member
Sep 13, 2004
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Precious metals. Tehre's a reason why banks won't accept RRSP's as collateral. Think about it. They know the market is rigged and there not going to get caught holding the bag.

BS
 

TheKing

Member
Jun 13, 2005
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That's incorrect.

You can't use RRSP's as collateral because doing so would contravene the Bank Act. Banks aren't allowed to let you pledge registered savings as collateral for a loan.

Note: there technically is a way around this, but it's tricky and a bit risky too.
 

nottyboi

Well-known member
May 14, 2008
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I only buy RRSPs when my tax rate is 49%. Whenver I have an opportunity to take them out at 15% I do so
 

duang

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Apr 17, 2007
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Which is the better in the long run to invest in RRSP or Non RRSP?

Assumptions:
- you will retire in 20 years
- average rate of return is 8%
- tax rate now & retirement is 39%
- lump sum one time purchase of $10,000 not inside a TSSF.

What is the better investment to make or keep money in your pocket?
$10K into nonRSP account will grow to $46.6K [assuming no taxable distributions along the way] and then tax on gain at capital gains rate will leave a net of $39.5K.

$10K into RSP can be grossed up to $16.4K [borrow $6400 to add to $10K and tax savings will be $6400 to bring net to $10K invested] and this grows to $76.4K which after taxes leaves $46.6K.

NB. Tax leakage [e.g. dividends, realized gains, interest payments, etc.] in taxable account over the 20 years will reduce the net amount at the end for the taxable account.
Also, if your tax rate in retirement is lower than your rate at time of contributing the RSP becomes even more attractive.

Thus, aftertax net worth under these assumptions would be greater using the RSP.

====================

Btw, taxable account investing might merit consideration of corporate class mutual funds that allow you to: reduce [and perhaps eliminate] distributions over the years; switch among different investment pools without triggering gains [allowing opportunistic or defensive moves]; and converts all growth into capital gains [even if some of the underlying growth was from higher taxed interest or dividends].

I will now defer to the imminent screed about scandalous mutual fund fees and the dishonest advisors who promote them solely for their gain... [Hi Hinz].
 

hinz

New member
Nov 27, 2006
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I will now defer to the imminent screed about scandalous mutual fund fees and the dishonest advisors who promote them solely for their gain... [Hi Hinz].
LMAO, like all the actively managed mutual funds could consistently beat whatever the benchmark like those top quartile Dynamic funds. :rolleyes:

http://www.financialpost.com/person.../Gasp+Sometimes+hefty+MERs/3962270/story.html

BTW, you should ask this guy on rip-offs and average return fallacy.

http://www.retirementoptimizer.com/

Never mind, Jim could be just another "pitchman" to solicit annuity products like Prof. Moshe Milevsky.
 

duang

Active member
Apr 17, 2007
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LMAO, like all the actively managed mutual funds could consistently beat whatever the benchmark like those top quartile Dynamic funds. :rolleyes:

http://www.financialpost.com/person.../Gasp+Sometimes+hefty+MERs/3962270/story.html

BTW, you should ask this guy on rip-offs and average return fallacy.

http://www.retirementoptimizer.com/

Never mind, Jim could be just another "pitchman" to solicit annuity products like Prof. Moshe Milevsky.
12 minutes to respond: awesome!

Shouldn't you be out with an SP spending all the money you save on fees?

Good suggestion on the Dynamic funds: they are avaialble in corporate class too.

D.
 

hinz

New member
Nov 27, 2006
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12 minutes to respond: awesome!
Dunno.

Shouldn't you be out with an SP spending all the money you save on fees?
I have second thought after doing some "calculations" below,

http://www.avolites.org.uk/jokes/formula.htm

Only a token of "lady friends" I find worthwhile to splurge on but I could be wrong too.

Good suggestion on the Dynamic funds: they are avaialble in corporate class too. D.
Corporate class is a sham as it tells more about the absurdity on CRA tax codes. This class will not be available in the first place if we do not have tax codes that are unnecessarily complicated.

WRT Dynamic funds, let's see whether Rick Waugh can keep those managers, assuming the stellar performances could be repeated, something that is not a given.

BTW, looking forward to having Vanguard setting up shops in Canada. More price competition is needed in Canada. :)
 

Radio_Shack

Retired Perv
Apr 3, 2007
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I would invest in SPs because your cash will always end up being liquid.
 

duang

Active member
Apr 17, 2007
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I have second thought after doing some "calculations" below,

http://www.avolites.org.uk/jokes/formula.htm



Corporate class is a sham as it tells more about the absurdity on CRA tax codes. This class will not be available in the first place if we do not have tax codes that are unnecessarily complicated.

WRT Dynamic funds, let's see whether Rick Waugh can keep those managers, assuming the stellar performances could be repeated, something that is not a given.

BTW, looking forward to having Vanguard setting up shops in Canada. More price competition is needed in Canada. :)
Good jokes at that link [I especially liked the math calcuation].

You don't have to like WHY corporate class is necessary or why it works but it can be extremely useful in taxable accounts [especially in corporate accounts when converting interest income to deferred capital gains and thus lowering tax rate from 50% to 10%].

No word yet on if the Dynamic managers are committing to staying but BNS will probably let them keep their automony to a large degree so that should help.

If Vanguard comes then I agreee that might very well drive down fees. The more choice the better for consumers.

D.
 

hinz

New member
Nov 27, 2006
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I would invest in SPs because your cash will always end up being liquid.
Not so sure about that since like shorting equities, the liabilities/downside is infinite.

BTW, I would "invest" in a Lady who is an ETF/index fund type. ;)
 
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toguy5252

Well-known member
Jun 22, 2009
15,978
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Put first $5K per year into tax free savings account and then limit into RRSP.
 
Ashley Madison
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