Weekend Reading – Not paying off mortgage, money mottos, spousal RRSPs and more #moneystuff
Hey Everyone!
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.
I’m on vaacaaaation!
Do you have any downtime coming this summer? Got plans?
I see a bit of golf, biking, craft beer exploring and some relaxation over the next few days.
Earlier this week, I shared my latest dividend income update. We’re now about 68% complete towards realizing our financial independence goal.
How are your goals coming along?
I look forward to sharing my next post soon so until then enjoy this Weekend Reading material and have a great weekend!
Mark
Weekend Reading
MoneySense answered a question about borrowing money to invest. Personally, I’m not a huge fan of leverage since I think based on our collective debt burdens in Canada, we’re not exactly doing very well. Same goes with our government. That said, borrowing money to buy appreciating assets when used responsibility can be rather smart especially when there is a long-term plan for said assets along with a disciplined payback strategy.
On a similar theme She Picks Up Pennies is holding off on paying her mortgage. I am too.
This was my definitive answer to paying down your mortgage or investing.
The definitive answer to paying down your mortgage or investing
Million Dollar Journey recently posted his financial freedom update – and he has hit his target. Incredible. Early 40s, earning $60,000 per year from his portfolio. I know he keeps telling me I have a pension to look forward to, to buffer my expected dividend income, but man that’s a pile of cash flow!
Handful of Thoughts reached out to learn about various money mottos from some personal finance bloggers. You can find out mine on her site or check out my blog footer!!
Maria wrote in her post:
“Your money motto could also represent where you are going financially and what you hope to achieve. It may act as a source of inspiration for you as you continue on your money journey.”
Well put.
Just incredible to see the divergence in mutual funds vs. ETF inflows.
“Bond funds dominated mutual fund sales, raking in a total of $1.8 billion. ETFs, meanwhile, saw a net outflow of $56 million from bond funds.
ETF investors pumped $1.9 billion into equity funds — compared to a $297 million equity inflow on the mutual fund side.”
A correlation that investing in ETFs seems to mean equities to many investors now. Your perceptions with ETF investing?
I also shared some recent thoughts here with the guys at Stocktrades.ca.
Reader question of the week (adapted for the site):
Hi Mark,
Since I had no employment income this year, I did my first in kind withdrawal from the spousal RRSP to my unregistered account, not a large amount of money, just to see how this all plays out with 2019 income tax. Thoughts on this topic or could you do some articles on this topic, i.e, starting to move money out of spousal RRSP before required time to ease tax burden?
Thanks for your blog!
Thanks for your readership!
Sounds like you already know the benefits of the RRSP so I won’t bore you there!
A recap that RRSPs have some specific withdrawal rules – including withholding taxes if you decide to withdraw from any RRSP account before you convert it to a RRIF.
Spousal RRSPs have some specific rules. If I was the contributor to my wife’s account for example, I get the tax deduction from any contribution (that I can use to lower my taxable income) even though my wife “owns” the account. My wife is therefore the RRSP annuitant per se so she gets the income at the time of retirement or withdrawal (not me).
With Spousal RRSPs there is an attribution rule you need to mindful of in that if a spousal contribution occurs and funds are withdrawn within 3 years of the contribution being made, the contributor, rather than the annuitant will be taxed.
My understanding is a similar rule also applies to RRIF income for amounts in excess of the RRIF minimum for the year.
The attribution rule was designed in to prevent the short-term use of spousal RRSPs for income-splitting purposes – closing a loophole where withdrawals exceed contributions where income splitting could occur on a massive scale.
I have yet to dive deep into any Spousal RRSP subjects so I could certainly do that over time. For now, here is a link to my Helpful Sites page where you can find a few great taxtips.ca RRSP calculators and more to play with your taxation and income needs.
I know when it comes to our portfolio and our RRSP draw down plans, we intend to work part-time in the coming years and draw down our RRSP portfolio (slowly) before we reach age 71. I highlighted that thought here and I would also suggest you consider a slow draw down of your Spousal RRSP to “smooth out taxes” using any Variable Percentage Withdrawal (VPW) strategy. That approach seems to work very well for other investors that I’ve talked to.
How to draw down a portfolio using Variable Percentage Withdrawal (VPW)
I hope that helps you out!!
Last but not least – golf tips!
Last week I mentioned I would share some of my favourite (and current) golf drills I’m working on when I hit the range. Well, here is my first one this week and I’ll post more over time. I will be using the drill below tomorrow when I plan to go to the range.
Let me know your thoughts and your own golf tips in a comment below!
Tip #1 – Golf glove under left arm pit drill
- Place glove under left arm pit.
- Swing at 50%-75% capacity.
- Ensure the glove never falls to the ground when you swing.
Why do it?
It will help your arms including your left arm specifically stay “connected” to your chest. Poor golf shots and lack of consistency can come from your arms and chest not working in-sync. I use this drill with 7-irons at the range for about 30-40 balls and I’ve started to really get after that drill this year vs. blindly beating balls. It’s helping me over time.
I figure if this drill is good enough for world #1 golfer Rory McIlroy then it’s good enough for me.
Happy Investing and golfing!
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.
Thank you, Mark, for helping me understand better..I get it now, You are sharing your contribution limit with your spouse so you can do income splitting much later!! Good to know about RRIF splitting too.
No problem and FWIW, we intend to max out both RRSPs now for the coming years, so we can have such income splitting options in our senior years.
Mark
Mark, I’m a bit confused about the spousal RRSP..
If my husband had contribution room and I didn’t, can I contribute to spousal RRSP to use up his room? And I can get the tax benefit?
Thanks for your question Kay. Basically, your RRSP contribution limit is 18% of earned income you reported on your tax return in the previous year, up to a maximum value of your earned income set by CRA.
Recall a spousal RRSP is an account. Just like a personal RRSP is as well when you set it up.
So, if you’re a higher income earner and your husband is not, you can utilize a spousal RRSP this way:
a) You have a personal RRSP where you make the contribution, own the account, and when any $$ is withdrawn you’re taxed on it.
b) You could set up a spousal RRSP where you make the contribution, but your husband owns the account, and therefore when any $$ is withdrawn he is taxed since he’s the annuitant.
The sum of a) and b) cannot be greater than your own RRSP contribution limit – you only have that “room” to contribute to either personal or spousal based on your earned income.
By doing this, you can grow both RRSPs over time and therefore take advantage of any income splitting in your 60s.
Pension splitting rules allow for RRIF income to be split with spouse/partner after age 65. So, $$ from RRSPs and RRIFs can be split as I understand it up to 50% at and after age 65 which is great to move money around for tax savings.
Hope that helps a bit!
Have a great vacation Mark.
I would subscribe to your YouTube channel
Ha, good to know 🙂
Have a great vacation Mark!
I’m planning on using the down time this summer to hopefully get and travel more within the country ?
And continue working on my side projects of building my Blog and Financial Literacy YouTube channel.
Cheers!
Nice. I’ve thought about a YouTube channel but haven’t pulled the trigger yet. Is there a lot to do to set that up??
All the best and thanks for being a fan of the site!
Mark
It is quite a bit of work in terms of getting yourself set up, writing a script / producing an idea of how you want your video to turn out, editing. I didn’t realize how much work goes into putting up a 5 min video until I started myself.
Perhaps we can collaborate, and I can host a video about your Financial Journey?
That’s possible, I can look into that with you!
Mark
You state that you are now 68% towards your retirement goal. Are you noticing that your investments/savings are growing on their own now? Are your investments large enough to cause an avalanche of growth? Could you stop saving now and reach your goal because of the dividends and growth that is occurring?
Is there a tipping point when things start to grow on their own? I really hope so.
That’s correct, 68% of the way there as of today.
Who knows what tomorrow brings!?
Yes, savings/investments are largely on autopilot and not touching anything right now. Just saving for 2021 TFSA room ($12K needed).
Q: Are your investments large enough to cause an avalanche of growth?
A: Not really an avalanche although the money keeps making money as long as dividends don’t get cut again!
https://www.myownadvisor.ca/may-2020-dividend-income-update/
Q: Could you stop saving now and reach your goal because of the dividends and growth that is occurring?
A: Probably, it would just take longer without any new capital added – but essentially yes. Instead of 5-10 years being semi-retired it would be more like age 60 (15 years or so).
Q: Is there a tipping point when things start to grow on their own? I really hope so.
A: Me too! Stay tuned for most posts on this very subject. I have some ideas for next week to explain my current thinking/state.
Great questions Beth.
Mark
My money moto is: “If a company continues to pay and grow your dividend, never sell”.
Getting lots of ads on your page!
Ha. Gotta pay some bills from this minimum wage blog job 🙂
I like your motto.
Mark
Cannew I like your money motto. Have not heard that one before.