Weekend Reading – Millionaire habits, personal finance lies, new ETFs, anti-RRSP crowds and more #moneystuff
Welcome to my latest Weekend Reading edition where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
It’s a snowy weekend here in Ottawa. How about you and your part of the world??
Earlier this week I posted this article:
If you’ve got that figured out – make sure you read this article:
More giveaways? You bet!
Don’t forget you can enter to win FREE TurboTax software to help you with your tax needs.
As part of that giveaway, even if you don’t win the free software codes and want to get started on your taxes now, don’t forget just by being a fan of this site you can take advantage of my 15% discount on TurboTax Canada software until April 30, 2020. Awesome right?
Enjoy your Weekend Reading!
Great stuff here from Tom at Dividends Diversify: 46 habits of self-made millionaires. Given where our net worth now is, I can see why he included many of these. Fun stat:
“To put it another way, only 5% of the millionaire population is less than 45 years of age.”
Hummm, interesting…given where I was a few years back with our net worth and goals.
Alrighty then, Nick Maggiulli believes this is the biggest lie in personal finance. He might be right.
Jon Chevreau provided a detailed take on deferred sales mutual funds – do they really help small-time or entry-level investors still? Check out the article to read my thoughts on this subject along with Jon’s. Thanks for the mention Jon!
Dale Roberts told us we can own the world of bonds, if we really wanted to now, with Vanguard’s new all-in-one bond ETF. My thinking on this, for the management fee of 0.30% no less, I’m more of a fan of domestic bonds since you’re probably better off taking your risk (meaning currency risks) with equities. Long-term, solid returns are not really coming from bonds. Bonds are really best used as portfolio stabilizers. Agree with me??
Financial Pilgrimage shared an excellent story about killing off six-figure debt without a budget. Well done.
That reminds of this post where I believe this is a better way to budget.
Dividend Earner believes you should consider low-cost dividend ETF NOBL. I happen to love this ETF for the same reasons he wrote about:
“For investors who prefer to invest in a basket of S&P 500 Dividend Aristocrats all at once, the two major dividend growth ETFs mentioned above (NOBL and SDY) are among the best ETFs in the market today.”
My friends at How To Save Money highlighted no less than 40 stores that offer free shipping in Canada.
Boomer & Echo got tired of the anti-RRSP crowd by reminding Canadians that RRSP contributions should be a key consideration for your financial plan, depending upon your income level of course. As per Robb:
“RRSP contributions are still a key component of my financial plan. I’ve caught up on all of my unused contribution room and so now my goal each year is to max out my contribution limit (which is reduced by my pension contributions).”
Ben Carlson is spot-on when writing home ownership is not for everyone.
If you’re struggling to get your financial house in order, beyond following my blog of course, do I have the podcast for you. Check out Tom Drake’s guest Sandy Young this week on The MapleMoney Show.
Mr. Tako Escapes is killing it with his dividend income. I hope to report my latest dividend income update in the coming weeks – stay tuned! Here is my latest update as I approach a HUGE milestone.
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Reader question of the week (adapted for site):
I am retired now but my wife is still working for most of this year. We can live off her income this year. Most of our monies are tied up in stocks inside our RRSPs but we might still have money leftover after we start withdrawing from our RRSPs later this year.
I have heard of a thing about “’transferring stocks in kind” and any concerns with that approach?
I’m thinking it would be smart to take out some money inside our RRSPs and then transfer any money that is leftover into our TFSAs. Thoughts? Thanks so much!
I can’t offer direct investing advice on what to do nor how much to take out of your RRSP. But, I do really like the idea of putting any unused RRSP withdrawals that you don’t need the cash for into the TFSA!!
Just be careful if you want to transfer assets to the RRSP to the TFSA “in kind” (as in “as-is”), then it’s a two-stage process as I understand it. First, you must withdraw the shares from your RRSP to a non-registered account. Then, the assets can move from the taxable account into the TFSA “as-is”. The challenge with this approach is:
- If any assets appreciate during the “in-kind” transfer time, they you will also need to pay a capital gain (not great).
- If any assets fall in value, you cannot claim a capital loss (still not great).
If you hold stocks showing a loss in a non-registered account and you transfer them in kind to your TFSA (or your RRSP, for that matter), you cannot claim a capital loss.
Other reminders and considerations on this:
- When you make the RRSP withdrawal, whether that’s cash or an “in-kind” two-stage transfer of shares, the amount will be added to your income for that year. As a result, you will have some withholding taxes.
- If you do go down the road of in-kind withdrawal, then you might have some leeway in determining the exact amount recorded for the withdrawal. A small benefit. If you request the withdrawal at the end of a trading day, you can choose a price for the investment, ranging from the lowest price at which the investment traded to the highest price traded during the day. If the investment is traded on the U.S. stock market, then the exchange must be applied to Canadian dollars. The exchange rate will be the rate that the brokerage would have applied if you had sold the stock.
- When making RRSP withdrawals, that is tax-deferred money or investments and therefore: lump sum withholding tax rates will apply as per my article here. For example, if you want to withdraw $10,000, in any province outside of Quebec, the tax amount will be 20% x $10,000, or $2k. The total amount of your withdrawal, which includes the amount of the withholding tax, must be included in your tax return for the year. So, for RRSP withdrawals, just make sure you have sufficient cash inside the account to pay the withholding tax. I actually just helped my parents with their RRSP withdrawal while ensuring their cash balance was enough for their withholding taxes as well…
Personally, I think it’s better to sell the assets inside the RRSP (avoid any two-stage “in-kind” process) and move the cash out of your RRSP as you see fit. Then fund the TFSA from there (assuming you have contribution room).
I would certainly love to hear from any retirees working through or who have recently gone through any RRSP-withdrawals-and-now-excess-funds-to-contribute-to-TFSA process – to clarify their approach. Fill up the comments!
On the subject of filling up your TFSA in general – I love this account and I think there are many great things you can do with your TFSA here.