Weekend Reading – Bumble billionaires, best brokerages, RRSP vs. TFSA debates, retirement and more!
Hey Folks!
Welcome to my latest Weekend Reading edition, highlighting some of my favourite articles from the week that was across the personal finance and investing blogosphere.
Just in case you missed last week’s edition I wrote about my recent dividend raises that boosted my income, how some bloggers are managing their cost of living, we discussed a few RRSP myths and much more! Read on!
Weekend Reading – Dividend raises, cost of living, #RRSP myths, market bubbles and more!
This week, I wrote about:
The facts you need to know about tax deferred investing using the RRSP including RRSP contribution room for the 2020 tax year.
My term life insurance decision (instead of buying whole life insurance).
As “RRSP season” ramps up, I thought it would be a great time to remind you that unless you manage the RRSP-generated refund wisely – you are missing out on the true power of the RRSP account for wealth-building purposes. Make sure you understand that linchpin in the RRSP vs. TFSA debate!
Managing the refund well is the linchpin in the RRSP vs. TFSA debate
Enjoy the articles and let me know what more content you’d love to see on the site! I’ll be back next week with my first dividend income update for 2021! Any guess on what happened since December 2020???
Best brokerages
Fans of this site, Ratehub.ca, updated their post on the best online brokerages to consider in 2021.
Questrade, Wealthsimple, TD and BMO come up very high on their list – and rightly so.
I have a strong partnership with a few of these top brokerages and Questrade remains one of the best. In fact, according to this recent release, Questrade was in fact named one of the best customer service experiences amongst all brokerages.
Here are some things I would strongly consider when choosing any online brokerage:
- Buying and trading fees – since not all brokerages are created equal, I would only consider a low-fee or a free-ETF purchase brokerage right now. If you are considering owning some stocks, for your core and explore approach like I do, then an online brokerage with some research tools are also very helpful.
- Account minimums and fees – some brokerages have account minimums for TFSAs, RRSPs, other. Ask about those account fees before you select a brokerage.
I’ve had a partnership with Questrade for some time now and I will continue to support them based on their low-cost or no-cost approaches.
Invest with Canada’s low-cost leader!
Congratulations to Whitney Wolfe Herd, for many firsts this week after dating app Bumble went public. The 31-year-old is the world’s youngest self-made female billionaire to go along with the youngest female CEO to ever take a company public in the U.S., based on the report I read.
Tax system idiocracy
From the Canadian tax system idiocracy file, our Canada Revenue Agency is hiring an additional 2,000 agents from a private firm to support the 2020 tax year. I mean, incredible and insane that our tax system is so complex few taxpayers can answer their own questions; most questions must go an agent; the agents can’t answer questions due to overwhelming demand, and now we need to hire more people with taxpayer dollars to figure it out.
Idiocracy in action.
Sign The Grumpy Accountant’s free petition. I did.
With tax system mismanagement – best love and use the TFSA while you can!
Wow, 3,000+ words about the Tax Free Savings Account and pretty much everything you need to know about that account to build wealth including the TFSA contribution limit for 2020/2021 was shared on Cashflows & Portfolios this week.
This post was a great reminder to me why I always, and I mean always, maximize contributions to my TFSA every single year.
Kari from Money In Your Tea reminds us that while any RRSP is an obvious choice for putting money aside for your senior years, the TFSA can be so much more. Totally agree! See link above!
Finally, on the TFSA subject this week, Bob from Tawcan had to contact the CRA “and plead for forgiveness” when there was an over contribution error for one of their TFSA accounts.
Ecofrugality
Nice post here by Chris Istace on ecofrugality. From the article:
“The single largest ecofrugality choices we have are for our homes and our vehicles. They take huge amounts of resources to create, take ongoing resources to utilize and maintain as well as create waste and some form of environmental impact throughout their life cycle. To tackle this challenge realize that people honestly don’t care what you drive or what kind of house you live in. I personally appreciate people for them, their energy and soul…not their SUV or McMansion.”
Financial Independence – Retirement
I spend a lot of time thinking about financial independence, not so much “retirement”, but either way I know most of my readers do too. That is why you are here!
So, as part of my Weekend Reading roundups going-forward, I’m going to try and list a few articles or case studies on this subject in a dedicated section. This way, you can read some of my older content that remains relevant, you can check out new case studies on this subject, or I can link you to other articles, tools and more to help with your goals. Sharing is caring – right!?
First up, a case study from my site. This woman wants to know if her retirement plan is bulletproof. Absolutely in my book. Read why:
Spend more or retire earlier in this bulletproof retirement plan.
You can always find many other retirement or financial independence essays and case studies on my dedicated Retirement page.
Stay tuned to my site – I’m working on another case study to share in the coming weeks for a millennial couple.
Happy investing folks,
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
Hi Mark,
Big fan of your blog and content. which one page or article I should follow to see your entire strategy that you have followed through these years to grow your income.I get overwhelmed when I see so many articles on your blog and get lost in finding your entire strategy from A to Z I will be thankful if you can point me to it and probably then I will can ask some key questions based on that. Super thanks for creating this blog content is beyond amazing!!! Keep it up!
Thanks zasid.
I’ve been thinking about an ebook for that A to Z, just need to find the time but it’s on my to-do list 🙂
I appreciate the follow and sharing with others!
Stay well,
Mark
Pleaseee expedite that plan like the shopify stock 🙂 thanks
Ha, I will do my best with that ebook in 2021. Till then, ask questions and I’m sure I’ll have a few posts to point you to!
Mark
Hmmm, both the Globe and Mail and Moneysense rate Qtrade higher than Questrade on almost all fronts. Interesting.
They do! I have no experience with them but I know many friends and investors have been very happy with Questrade, BMO, TD and RBC in particular.
I recall I was going to start a partnership (a long time ago) with Qtrade but it didn’t come to pass. I should see if they could offer a discount to MOA readers!
Mark
CRA has created a monster with its massive tax legislation which is getting more and more complicated every year. Finance department and its bureaucrats have done a very poor job to streamline and simplify the tax system. To be fair, all governments in the world are not doing a better job than Canada. The top bureaucrats should be replaced if you want a better tax system. The poor CRA officers are working under tremendous pressure trying to enforce the new tax changes which they themselves don’t understand!!!
This is my 2 cent!!!!!
That’s how I feel Ken…. re: “The poor CRA officers are working under tremendous pressure trying to enforce the new tax changes which they themselves don’t understand!!!”
I would never for a second blame the frontline workers – I blame the “higher ups” for creating a totally dysfunctional system.
Hey Mark, good blog, thanks. On the RRSP vs TFSA topic, After my son asked me what is best scenario, I crunched the numbers. When you respond to this, I’ll reply with an attached Excel PDF of those numbers. My conclusion is that you put your money into an RRSP and then put the refund into a TFSA. Together they win over a TFSA alone because of the initial tax you pay on TFSA deposit. You’ll need over 40 years invested to break even with the combination when compared with TFSA alone.
Assuming your tax rate while working vs. retirement is a dead heat – i.e., doesn’t change – then the RRSP and TFSA are essentially equivalent.
They were designed that way but of course mirror opposites. RRSP contributions are never taxed. TFSA contributions are taxed first, then deposited.
So, as long as you always optimize the RRSP-generated refund, then RRSP will always be = to TFSA assuming your tax rate never changes.
Of course, your tax rate is likely to change over time whether that’s in your working years or retirement years.
So, contributing to your RRSP makes the most sense when income is higher than withdrawal years but if you spend the RRSP-generated refund or use it to pay down debt, fund your TFSA, while very good things – you will not realize the true benefits of the account.
I’ve been writing about this premise for 10 years on the blog but you don’t have to take my word for it Paul 🙂
Ha.
See below:
https://www.cibc.com/content/dam/personal_banking/advice_centre/tax-savings/rrsp-versus-tfsa-report-en.pdf
All that said, you’re savvy it seems and anything you can do to max out contributions to one, or both, are GREAT 🙂
Thanks for being a fan.
Mark
Hi Mark,
That is an excellent article & the illustrations are well laid out, easy to understand. Getting ready to do an RRSP purchase for my Husband, even though we would prefer not, as I have started in-kind withdrawals the past 2 years from my Spousal RRSP to Unregistered to TFSA, paying the tax at a much lower rate. With retirement for my Husband in the near future (a couple of years) along with a pension & income splitting, we hope that our past RRSP contribution decisions continue to reap us the benefits of paying a lower tax rate going forward. Fingers crossed!
Seems very smart Sandra to start winding down the RRSP in your lower income years. I plan to do the very same thing!
I’m regards to the tax system and CRA I would be curious to know how many audits are initiated for the 2020 tax year as compared to others years. Not sure if this info is publicly available though.
Ya, I’m not sure actually on the audits. I would say it’s a small %. I wouldn’t think CRA has time to audit well with all the other things they have to deal with. Certainly some major simplification would be an enabler and I don’t blame the frontline staff – they are just trying to do their job.
I blame the politicians and bureaucrats to developing a system that is totally unmanageable and getting worse.
On that happy note – have a great weekend!
From everything I read, while you think out taxes are complex, the US annual tax returns are a nightmare. Myself, have never had an issue with CRA. I keep perspective on the bigger things in society we should be concerned with rather than a few extra steps in doing taxes or having to wait a little longer for an answer on something. Focus our energy on where it is best suited is the path I choose for myself.
Going to check out the FIRE case study now as I really enjoy those.
Thanks again for sharing my EcoFrugal blog post ~ Cheers
Yes, but when CRA has the necessary T-slips for 50-60% of Canadians (RRSPs, T4, T5, etc.) then there is no added value in having any Canadian file a return. It should be a done deal with a few simple questions.
Only for small business owners, corporations and other should tax filing occur and even then, there is no reason to have 3,000+ pages of tax information to wade through 🙂 Just me maybe!
Yes, I will have more case studies on the site Chris so stay tuned!!
Happy to share your content, have a great Family Day weekend.
Mark
Just did my daughters on TurboTax and took all of 10 minutes, extremely simple to me. The extra staff this year will clearly be to help the many Canadians who have questions on CEWS, CERB, EI and countless other supports offered due to the pandemic. Of course though simplicity and efficiency would be great to pursue and would never complain about that effort 🙂
Cheers
Yes, always more simplicity over time is good!
Thanks for the link to the tax petition, Mark, which I signed. The complexity of the system is ridiculous, but unfortunately there are a lot of vested interests who have been successful for years at fighting reforms. Think of all the people who benefit from the complexity (tax filing software companies, accountants, politicians with their favourite causes and others). But even if all we get is some simplification, that’s a start.
Absolutely Soymilk and only happy to support a petition.
My understanding if these things can get 500 signatures, they have a chance to be tabled. Spread the word!!
Thanks for your readership.
Mark
Yes the tax system is way too complicated. I received my T4 OAS paper copy in the mail this week. An insert stated that I could get my tax slip on-line. So trying to save paper waste, I went to the My Service Canada site and tried to figure out where I could change the delivery of my T slip to on-line delivery. There was so much stuff on the site I could not see where I could make the change. It was not intuitive at all. So I left a message regarding my problem on the site with my SIN with Service Canada for them to contact me via phone. The next day my phone rang but I did not answer it since it said Private Caller and these tend to be robo scam calls. It turns out it was Service Canada which left a message that they would call again tomorrow. I got another Private Caller call the next day and it was Service Canada when I answered. The agent identified me and after explaining my problem said she would call me back in 5 minutes since she did not know the answer. She called back after she had opened her own My Service Canada account and figured out how to change to on-line delivery. In the meantime I opened my Account on-line and she was able to walk me through the process when she called back.
I am fairly computer literate and had problems doing this simple task. I am disappointed that the Government website is so difficult to navigate. Yes CRA is going to need to hire many more agents since the tax system is so complicated, even more so given the new Covid-19 payments and credits.
Sorry to hear about your troubles Roger but sadly you’re not alone. The tax system and the infrastructure around it is totally flawed IMO.
The only thing we can do is largely raise this as a major voting issue and hope it is slowly addressed.
Our government does not seem to care about the high level of bureaucracy nor waste related to this system on their own accord.
Hang in and let’s make sure it bubbles to the top of the voting priorities for a future government.
Hello Mark,
I recently purchased all 5 ARK ETF funds in equal increments for my RRSP. Just wondering if you had any thoughts on the ARK ETF funds.
Thanks, Joe
Wow, you go Joe! My thoughts are, that’s pretty aggressive but who knows? Cathie Wood seems to be the most popular fund manager on the planet these days!
I’m tempted to own a bit myself inside the RRSP 🙂
I’m sure I will write about it/them at some point.
Mark
Joe: did you invest in the 5 ARK ETFs directly with the ARK company itself (i.e. in US$ via a US exchange), or via the Canadian company Emerge Canada Inc., which is ARK’s Canadian partner/distributor, and its Emerge ARK ETFs?
Brenden, I use CIBC Investors Edge. I invested directly with the ARK company itself. The funds are shown in US dollars so you have to use one of the internet exchange rate calculators to get the conversion rate. After you purchase the number of shares you want in US dollars Investors Edge converts the shares back to Canadian dollars. You get a prompt before you purchase the shares to make sure the dollar amount is correct. Hope this makes sense.
I looked at the Emerge ARK ETFs MERS were 1.7 % vs ARK 0.75% That’s why I went with ARK directly.
Totally agree that the Canadian tax system is too complicated, but for the majority their taxes are fairly straight forward. It’s the wealthy and corporations where difficulties exist. Too bad they could not find a simple route to make taxes fairer, but still collect from those who find and use loop-holes to avoid taxes. As you mentioned, what they’d save in manpower would also help.
Regardless, at some point everyone is going to be hit with much higher taxes, in order for gov’ts to pay it’s debt.
“Regardless, at some point everyone is going to be hit with much higher taxes, in order for gov’ts to pay it’s debt.”
Yup. Those days are very much on the way!
I signed too and helped spread the word! Sorely needed tax system overhaul.
Just pathetic. I feel for those frontline CRA folks. I really do. What a mess. Thanks RBull.
Yes, CRA employees now are no doubt stressed. That CRA extra hiring and contracting externally to private company that was “needed” is just crazy. More clear information should have been provided at the start of issuing Covid benefits to AVOID problems, PLUS the whole tax system needs to be radically simplified.
It could take a miracle for that. Maybe Neal has started the process!
Yes, we are due for a radical set of tax system changes. I would welcome that. The biggest change would be – don’t have any Canadian who has a TFSA, RRSP, T4 or T5 do any tax filing. Makes some sense. The data is already with CRA.
What a colossal mess we live in. I could go on and on and on….
Off today. Might have a beer this afternoon!
Cheers to all that. We’re doing our usual Friday happy hour tonight (and sometimes more!) at our neighbours garage (community hall) in 3 hours or so. LOL.
But first I’m headed out for a run now that its warmed to -3, so I can do it in shorts. Only resorted to light nylon long run pants twice this winter. LOL
I joined your twitter crowd!