RRSP

margrace · January 31, 2007

I have just discover that I have lost virtually all my RRSP's that I worked hard to save and doing without a lot. This is how our government rewards its senior citizens.

http://www.finance.sympatico.msn.ca/rrsp/a...umentid=2703080

How am I expected to feel sorry for those rich enough to have money in the income trusts? I am furious

Who's Doing What? · January 31, 2007

Sorry to hear that.

The link won't work for me. What happened?

jdobbin · January 31, 2007

I have just discover that I have lost virtually all my RRSP's that I worked hard to save and doing without a lot. This is how our government rewards its senior citizens.
http://www.finance.sympatico.msn.ca/rrsp/a...umentid=2703080

How am I expected to feel sorry for those rich enough to have money in the income trusts? I am furious

I can't open that link either.

I know how you feel about losing your retirement savings. I lost part of mine due to lack of oversight by the NDP in Manitoba over their labour funds.

margrace · January 31, 2007

Its on the Sympatico MSN finance page. Is called Clawbacks, taxes make RRSP a poor choice for low income Canadians by Bruce Cheadle

In google try RRSP Centre - Sympatico/MSN Finance

jdobbin · January 31, 2007

Its on the Sympatico MSN finance page. Is called Clawbacks, taxes make RRSP a poor choice for low income Canadians by Bruce Cheadle
In google try RRSP Centre - Sympatico/MSN Finance

I've read the article. I think if you are low income, you have to look at your overall strategy for investments. Most Canadians buy RRSPs for the tax break initially, the retirement savings next. I have an investment adviser but I honestly think that I have reached the point where I have so much at stake that I need to think about what my overall strategy is.

The question is: who does that? An accountant? A lawyer? A banker?

B. Max · January 31, 2007

I quit buying them years ago when I realized what a rip off they are.

geoffrey · January 31, 2007

Buyer beware, it's your choice what to do with your money. RRSP's benefit many people, but not all unforunately.

If your household income before leaving the labour force was over $50k a year, then your doing fine magrace, relax, take a deep breath. If not that's unfortunate that someone gave you shoddy investment advice, possibly the government.

Like any investment, there is an inversely proportion amount of risk to return. If your making the 15+% returns on the income trusts, then ya, they are an ultra high risk investment. I've be a partner in a venture capital deal that loaned at lower rates than some of my income trust investments.

That being said, that risk was based on market, not based on an aggressive government destroying trusts at whim... and along with it investor confidence.

So ya, if you lost huge on trusts, it sucks, vote for someone else. But the RRSP decision was forseeable long before, no one has anyone to blame there but themselves. Income splitting legislation should help you though.

August1991 · January 31, 2007

Here's a link that works.

At age 63 and facing a very modest retirement income, Greta Doucet is cashing out what's left of her meager nest-egg as fast as she can.
"I have a little bit left, but if you don't have a fairly large amount, you're just shooting yourself in the foot," said the part-time nurse and seniors

...

Low-income Canadians - say, below $30,000 annually - get a relatively modest tax break on their initial RRSP purchase because of their low income tax bracket.

When they go to cash in after retirement, their RRSP income counts against their Guaranteed Income Supplement (GIS), which is clawed back 50 cents for every dollar of retirement income.

The pension income is also taxed, meaning the senior sees only 25 cents of each dollar saved.

Not only that, but many seniors programs - think meals on wheels, subsidized retirement homes, prescription drugs and home care - may also be income-based, depending on the province.

So the effective tax rate on RRSP income in some cases is more than 100 per cent, says Shillington.

I wasn't aware of this but I understand it, and it's extremely unfortunate.

I have read various studies about how pernicious our tax/subsidy system is. I once heard a famous economist say that if we pulled random numbers from a hat we would have a fairer tax system.

This problem arises not only with retirees. It happens to people on welfare and people with children. It also happens with people who choose to become self-employed.

A few years ago, a woman explained to me in some detail why, because of her family situation, it made no sense for her to earn above $30,000 because she face an effective tax rate of 100% unless she earned over $60,000.

The Tories, with their various tax deductions, have made this even worse. The $100 monthly child payment is a case in point. Because it is taxable, and because it replaces other child payments, it creates strange distortions and incentives.

This analysis of the Universal Child Care Benefit shows how complex the effects can be.

geoffrey · January 31, 2007

A nice juicy flat tax on income anyone?

Who's Doing What? · January 31, 2007

A nice juicy flat tax on income anyone?

How about a 1.5% income tax reduction on the first $30,000 earned?

B. Max · January 31, 2007

A nice juicy flat tax on income anyone?

You bet. If it's low enough. Coupled with constitutional reform.

geoffrey · January 31, 2007

A nice juicy flat tax on income anyone?

How about a 1.5% income tax reduction on the first $30,000 earned?

Or an overall 20% income tax that has no exceptions, deductions or other bullshit?

Who's Doing What? · January 31, 2007

A nice juicy flat tax on income anyone?

How about a 1.5% income tax reduction on the first $30,000 earned?

Or an overall 20% income tax that has no exceptions, deductions or other bullshit?

So no deductons for popping out more rugrats?

And no $500 sports refund vote purchase?

If we can raise the tax-exempt amount to $15,000 I'm all for it.

Ricki Bobbi · January 31, 2007

Buyer beware, it's your choice what to do with your money. RRSP's benefit many people, but not all unforunately.
If your household income before leaving the labour force was over $50k a year, then your doing fine magrace, relax, take a deep breath. If not that's unfortunate that someone gave you shoddy investment advice, possibly the government.

So ya, if you lost huge on trusts, it sucks, vote for someone else. But the RRSP decision was forseeable long before, no one has anyone to blame there but themselves. Income splitting legislation should help you though.

It is very interesting that Margrace *just* found this out.

The principles of investing in RRSPs have remained the same since they were introduced. I won't be buying any for 2006 because I didn't make any money. I am setting money aside, but hopefully my income this year will be worth it.

The issues Margrce described with respect to his RRSP purchase decision have no relation to the Income Trust decision or any fundamental changes that have occured with RRSPs. The fundamentals/rationale for buying RRSPs have always remained the same.

B. Max · January 31, 2007

A nice juicy flat tax on income anyone?

How about a 1.5% income tax reduction on the first $30,000 earned?

Or an overall 20% income tax that has no exceptions, deductions or other bullshit?

I was thinking more like 8 or 9 %.

Ricki Bobbi · January 31, 2007

I was thinking more like 8 or 9 %.

An 8 or 9% flat tax rate?

woo, to stay in balance at least $50 billion would have to be cut out of the Federal budget with those rates?

Where do the cuts start?

B. Max · January 31, 2007

I was thinking more like 8 or 9 %.

An 8 or 9% flat tax rate?

woo, to stay in balance at least $50 billion would have to be cut out of the Federal budget with those rates?

Where do the cuts start?

Simple Watson. We start with eliminating non productive government jobs, stop the funding of all special treatment and whine groups. Remove the federal government from all areas of provincial respsonsibility.

Who's Doing What? · January 31, 2007

Simple Watson. We start with eliminating non productive government jobs, stop the funding of all special treatment and whine groups. Remove the federal government from all areas of provincial respsonsibility.

I don't think the govt is going to pass a bill that would eliminate 90% of the govt work force.

geoffrey · January 31, 2007

B.Max has a good point. A massive reduction in the Federal tax burden would be a huge plus in the long run for Canadians. Give tax room to the provinces so they have to be accountable for their spending, and not just demand more from Ottawa (also killing the equalisation demon that haunts us).

scribblet · January 31, 2007

It is very interesting that Margrace *just* found this out.
The principles of investing in RRSPs have remained the same since they were introduced. I won't be buying any for 2006 because I didn't make any money. I am setting money aside, but hopefully my income this year will be worth it.

The issues Margrce described with respect to his RRSP purchase decision have no relation to the Income Trust decision or any fundamental changes that have occured with RRSPs. The fundamentals/rationale for buying RRSPs have always remained the same.

That's what is puzzling me, RRSP rules have been in place for eons, and how can anyone 'lose' their RSPs. I sometimes think people don't realize that all they are doing is delaying the tax, and over the years income generally goes up not down.

August1991 · January 31, 2007

That's what is puzzling me, RRSP rules have been in place for eons, and how can anyone 'lose' their RSPs. I sometimes think people don't realize that all they are doing is delaying the tax, and over the years income generally goes up not down.

This has nothing to do with RRSPs or the rules about RRSPs. Indeed, it has little to do with taxes either - despite Geoffrey's desire to cut them.

Instead, it concerns how we provide income support to pensioners (and others).

Aside from the CPP, there are other payments (eg. GAINS) made to retired people based on their own incomes or savings. Unless you can be certain of, say, an annual retirement income over $60,000 (I just made that number up), it makes no sense to save in RRSPs because you will just use them to make up the shortfall as other payments fall.

For people under 50 now, it is difficult to imagine what the tax/subsidy regime will be like in 15 years.

jdobbin · January 31, 2007

That's what is puzzling me, RRSP rules have been in place for eons, and how can anyone 'lose' their RSPs. I sometimes think people don't realize that all they are doing is delaying the tax, and over the years income generally goes up not down.

So you don't put any money into RRSPs? I'm just curious as to what provisions people make for retirement or to avoid having to pay a whack of tax at the end of the year.

jdobbin · January 31, 2007

Aside from the CPP, there are other payments (eg. GAINS) made to retired people based on their own incomes or savings. Unless you can be certain of, say, an annual retirement income over $60,000 (I just made that number up), it makes no sense to save in RRSPs because you will just use them to make up the shortfall as other payments fall.

So you don't put any money into a tax protected account for the tax savings and retirement?

I know that if I didn't put money into an RRSP, I'd be hit for thousands this year even after trying to find every tax break I could get.

Hydraboss · January 31, 2007

A nice juicy flat tax on income anyone?

How about a 1.5% income tax reduction on the first $30,000 earned?

Or an overall 20% income tax that has no exceptions, deductions or other bullshit?

So no deductons for popping out more rugrats?

And no $500 sports refund vote purchase?

If we can raise the tax-exempt amount to $15,000 I'm all for it.

Careful now, or you'll be labelled anti-Canadian or seperatist or low-income-hating. I suggested this same structure and was shot to hell not that long ago. The experts should be out soon screaming the reasons why flat tax doesn't work.