Saving Contributions 2014

So this week I should have finished maxing out one of our TFSA already.  If you recall in December’s net worth update I pointed out I put some of that money aside.  Then by Feb we should finish off the other TFSA account contribution for the other account.  So where do I put the money for the other 10 months of the year?

Well you see that is actually turning into a small issue as I’m running out contribution room on where to put it.  We made an effort last year to finish off as much as my RRSP contribution room as possible into my wife’s spousal RRSP.  Now the only tax sheltered account contribution room we will have left is about $20,000 in my wife’s name.  So I have to play around with the tax implications of her buying RRSP in her name as she doesn’t make much money per year so I’m not sure if the tax savings are really worth it.  After all if we drive her income to zero with RRSP contributions, I don’t know if her basic income deduction will transfer to me…I’ve literally never tried that before.  So if anyone knows, I would appreciate some advice.

So we will be back to non-registered investment accounts at some point in the year, which is just fine. Overall I expect by age 40 we should have approximately $100,000 in non-registered savings (give or take a bit). The longer term plan for the non-registered money is fairly simple, after I stop working at my day job I will drawing down the non-registered accounts first and also move what we can over to our TFSA accounts for anything that produces taxable income (like a GIC).  The idea is to keep our income tax bill as low as possible so we will likely keep dividend paying companies in the taxable accounts and any cash savings will eventually end up the TFSA (even if they don’t start there).

Perhaps the only thing I’m debating in my head is where do I open up the non-registered accounts?  On the one hand I like to keep our fees low and the other hand there is a certain ease of access if I put the accounts with our existing bank.  So I’m curious what other people have done and why did you pick that option?

10 thoughts on “Saving Contributions 2014”

  1. I have all three account (RRSP, TSFA and margin) with Questrade. I’ve been quite satisfied with them since I switched over from BMO. I find their fee structure to be very good (especially if you follow an ETF/Couch Potato strategy), with the only exception being Foreign Currency trading, but in such a case I always do Norbert’s Gambit.

  2. We have non-registered accounts open with Questrade and TD. With TD because it’s one of our banks too, transferring fund in and out is easy. With Questrade transferring fund into the account is easy but I haven’t looked into transferring fund out yet. I really like Questrade.

  3. All of my accounts (and all of my son’s registered accounts) are with my primary bank because it’s just easier. Instant transfers etc. (which is important for me because I make some quick (day – yes, literally 1+ day) trades in and out of the HISA), I’ve never DRIP-d and it made the payout of the dividends to my chequing account super easy. And of course, I pay no fees but that was a minor selling point. I’m not going to complicate my financial life to save in the order of $50 or so a year.

    Besides the fact that I’m not married and don’t have spousal contributions and haven’t done personal tax returns other than my own and a few friends/family for quite a long time… but am an accountant… I don’t think it’s wise to direct so much to your spouse that it makes their income below the personal threshold. I wouldn’t assume that this will never happen to you that you don’t need the room – like don’t you want to make $ from your writing?? In the 25+ years between 40 and 65+? Honestly haven’t encountered that scenario so would suggest that you run a mock return when you do your taxes this year to see what the impact is.

    Same with drawing from sheltered vs. non-sheltered – Your RSP / (what will be) LIRA is pretty minor so this isn’t a big deal – but RMD’s and the tax on them can be huge for under-spenders/draw-ers in their later years. I wouldn’t just make the assumption that it’s all taxable draw early on or not. Sometimes it makes sense to draw down the RSP earlier. Just play it by ear the best you can and laissez les bons temps roulez!

  4. I have the exactly same question. I use TDWaterhouse which is awesome and convenient however the fee that they charge is higher than what Questrade charges. TDwaterhouse also charges annual admin fees for registered accounts if they are below 25k (I got it waived though by using one of my network at TD)

  5. I use TD (main bank) and Scotia iTrade – both work well – primary reason for 2 accounts is I don’t like all my eggs in 1 basket. Cash transfers between the two can take up to 2 days which is annoying – the back office in both banks is rather antiquated.

    I would be leery of putting funds into a RRSP at low tax (marginal) rates – when you go to draw down the RRSP later you’re liable to be in a higher tax bracket – happening to me – arguably this a good thing.

    Agree with Jacq that early RRSP draw down should be investigated – leave your non-registered stuff alone as long as possible as control of taxable events is much better/easier – capital gains @ 50% and dividend tax credit etc. – vs. straight income from RRSP.

    Once the TFSA route has been satisfied, I’d find a good dividend paying stock(s) with a DRIP in a non-registered account – fire and forget.

    Personal example: I was given 5 shares of BCE as a child ( a few years ago :0 ) – between splits and DRIP this account has over 200 shares in it – only pay tax on the dividends (at a discounted rate) at your lower marginal rate and adjust ACB. IRR on this example, after tax, is > 8% (unrealized capital capital not included)

  6. I have all three account types with TD self-directed as well. I just have E-series index funds similar to the Couch Potato strategy. Putting money in is as easy as paying a bill with my online banking – BMO chequing account. Taking money out – I just called them and they mailed me a cheque. I also have some GICs with a credit union as they have the best rates around here.

  7. If TFSAs , RESPs and your RRSP is all maxed out and caught up it seems like a no brainer to get your wife’s RRSP all maxed out and caught up to take advantage of tax sheltered growth going forward. Then start funelling money into non registered accts. TD Waterhouse is great discount brokerage and all transactions can be made online once cash is put into the acct. Also gives access to the TD e series of funds which are great for a couch potaoe strategy. We hold two of these for our TFSAs and our RSPs are with RBCDS as well as our corp investment acct which is our primary non reg acct.

  8. Your wife can contribute the $20,000 to her RRSP to keep earnings tax sheltered, and strategically claim as much of the contribution as is needed to get her into a tax bracket that makes sense given the likelihood of her taxable retirement income being taxed higher or lower than now. The unused RRSP deductions can then be carried forward to manipulate tax margins in the future! This way you get the biggest tax savings from the contribution and take early advantage of that sheltered investment growth.

  9. @Patricia – That is a good idea…I forgot we don’t have to claim it all in the same year we deposit it. Thanks for the reminder!

  10. Another thing to consider is the Child Tax Benefit increase you will receive from having a lower family income by contributing to your wife’s RRSPs even if it takes her into the zero territory for tax savings.

    And yes, you can use more as a credit from your wife for your tax return as well. It is always calculated by net income.

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