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Email this6:23 pm
November 4, 2014
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Kanaka, just to give you an idea about GIC rates and the expectation that interest were supposed to rise, I remember my wife invested in a 5 year RRSP GIC on February-27-2010 at 3.75% and now it is coming due soon, February-27-2015 and Duca Credit Union has 2.65%, 5 year RRSP rates.
For us to get anything with a 3.00% in front of it, we have to go 7 years now and will still be short a 0.75% percentage point less annually.
This is a whole, 1.10% less annual interest rate and rates will not rise much if they do in a few months. I believe the Bank of Canada was supposed to raise interest rates for 4.25 years now and still has not changed them at currently 1.00%.
We are getting a little off topic here but these interest rates and interest rates expectations impact what we will ultimately get on our higher interest savings accounts, GIC's and other interest based investments in and out of our RRSP's and other money we invest.
Hopefully, 2015 will be a better year for all of us than the last 4 years to say the least.
6:34 pm
November 4, 2014
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Kanaka, we could transfer our RRSP's to another financial institution that pays 3.00% for 5 years like the ones I did mention in my prior posts today but that will cost transfer fees of at least $56.50 or more per transfer and lost interest for the time to transfer our RRSP's.
Also, we will not get more than 3.00%, either stay at 3.00% for 7 years or go somewhere else for 3.00% for 5 years.
We could use Duca's 2.75% Flex40 cashable term deposit after 6 months at 1.75% and take a chance at seeing higher rates but this will make us lose another 0.25% per year if it is not worth it to cash it in if rates are lower or the not much higher.
6:45 pm
December 23, 2011
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Greg Franklin said
Kanaka, we could transfer our RRSP's to another financial institution that pays 3.00% for 5 years like the ones I did mention in my prior posts today but that will cost transfer fees of at least $56.50 or more per transfer and lost interest for the time to transfer our RRSP's.
Also, we will not get more than 3.00%, either stay at 3.00% for 7 years or go somewhere else for 3.00% for 5 years.
We could use Duca's 2.75% Flex40 cashable term deposit after 6 months at 1.75% and take a chance at seeing higher rates but this will make us lose another 0.25% per year if it is not worth it to cash it in if rates are lower or the not much higher.
I wouldn't do 7 years. It's the good old coin flip. If less than 3% then go for the most competitive 1, 2, 3, or 4 year rate?. $56.50 and 3 weeks of lost interest still can be more than recouped if you get a better rate than where you are. And will the transfer too financial institution pick up your transfer fee.....but some only do it for you once?!
I have a great Excel program that computes interest if you would like.
9:18 am
November 4, 2014
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Kanaka, it is a $56.50 per RRSP transfer. So there are at least 6 different RRSP GIC's coming due. If you wait to consolidate them all together, it would take years.
Also, Duca's RRSP transfer fee was $25+G.S.T now H.S.T just about 4 or 5 years ago. I could easily see them adding on another $25 to $50+H.S.T again in coming years.
The lost interest is another decent amount when comparing say 3.00% annual interest divided by 365 days and multiplying it per day lost and by our experience most transfers take anywhere from 20 to 30 days.
In our case, our RRSP's are on average between $13,000 to $19,000 so take the middle there, $16,000, it is around $26 to $40 in lost interest each.
Rates are already so low that this is just more money lost that can add to anywhere from $450 to $500 in less money in our pocket.
I am not working anymore as my income is around $14,000-$14,500 a year from C.P.P. disability because of my back injury and now I am almost 56 years old.
I was making at least 3.5 to 3.75 times that even when things were so so and not so busy. I don't want to keep off topic here but with all the financial hits that all of us are taking, I don't see much improvement on the rate side for us.
These fees and other costs is more money gone for good.
11:57 am
December 23, 2011
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Greg Franklin said
Kanaka, it is a $56.50 per RRSP transfer. So there are at least 6 different RRSP GIC's coming due. If you wait to consolidate them all together, it would take years.
Also, Duca's RRSP transfer fee was $25+G.S.T now H.S.T just about 4 or 5 years ago. I could easily see them adding on another $25 to $50+H.S.T again in coming years.
The lost interest is another decent amount when comparing say 3.00% annual interest divided by 365 days and multiplying it per day lost and by our experience most transfers take anywhere from 20 to 30 days.
In our case, our RRSP's are on average between $13,000 to $19,000 so take the middle there, $16,000, it is around $26 to $40 in lost interest each.
Rates are already so low that this is just more money lost that can add to anywhere from $450 to $500 in less money in our pocket.
I am not working anymore as my income is around $14,000-$14,500 a year from C.P.P. disability because of my back injury and now I am almost 56 years old.
I was making at least 3.5 to 3.75 times that even when things were so so and not so busy. I don't want to keep off topic here but with all the financial hits that all of us are taking, I don't see much improvement on the rate side for us.
These fees and other costs is more money gone for good.
Hi, I assumed larger amounts and not multiple investments....makes sense.
No doubt you know what you are doing....have you considered keeping in the lowest tax bracket and fuel your TFSA account with RRSP withdrawals? Or RRSP to RRIF if you need income splitting (must be 65 though). Take advantage of your age and room to increase income at the lowest income tax rate and let the funds grow beyond what you would yield in the RRSP withdrawal minus at least 20%. While I have TFSA money in ETFS I plan to move all GIC TFSA money to Peoples Trust Savings at 3% which should work out better than a 3% GIC.
1:19 pm
November 4, 2014
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Kanaka, we are all considering many different tax saving and possible rate rejigging money around but we are limited so far because of our younger ages on the tax side so far.
We are maxing out all our TFSA's and this is probably the only major thing that 3.00% tax free compounding is like a 4.00% to 4.25% equivalent rate in a non-registered GIC or RRSP, RRIF GIC.
We have used spousal RRSP's as well that will help with future income taxes as well. Good suggestions Kanaka, as this could help others that are nearing 65 next year.
2:46 pm
December 23, 2011
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Greg Franklin said
Kanaka, we are all considering many different tax saving and possible rate rejigging money around but we are limited so far because of our younger ages on the tax side so far.
We are maxing out all our TFSA's and this is probably the only major thing that 3.00% tax free compounding is like a 4.00% to 4.25% equivalent rate in a non-registered GIC or RRSP, RRIF GIC.
We have used spousal RRSP's as well that will help with future income taxes as well. Good suggestions Kanaka, as this could help others that are nearing 65 next year.
Thanks. My suggestion is for anyone in a lower income with no intention of gaining taxable funds...like working, severance pays, or proceeds from any other taxable incomes or maturing investments. Some thing to consider and may not be able to do every year. I wish I started the year after I retired as I missed out a few years of RRSP withdrawals. By the way you dont have to wait for 65.
Ps. I kind of thought you had it all under control.....but you never know what you learn here to improve or modify your strategies.
4:36 pm
November 4, 2014
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Kanaka, we thought about RRSP withdrawals but since in most provinces like here in Ontario, you can earn at 65 years old, a bout $18,000 a year and pay no income taxes if maybe $100 to $150.
After that until around $37,500 a year, you pay around 21% to 25% depending on your province. We will not be paying much income taxes as modest income individuals.
You point about making early RRSP withdrawals is a valid and good one for those lower income individuals that will have $25,000 a year and less of annual income.
We will be using the annual $2,000 pension income amount each for our RRIF's, income splitting, personal amount, age amount and in my case disability amount to keep our taxes lower.
I calculated that between us, we will pay between around $7,200 a year in annual income taxes on $80,000 of C.P.P, OAS, RRIF income, interest from non-registered accounts, TFSA interest income when we around 67 years old or older.
Our incomes will be much lower until we get OAS and our RRIF income is received after anytime after 65 years old plus our non-registered investments will be larger by then too generating more annual taxable interest income.
This is only about 9% of all our income so 91% is still left for us for other expenses, cost of living etc..
Even as I believe income taxes will at least 20% higher in coming years, this would bring our annual income taxes bill to $8,640 which is still only 10.8% of our total income.
This is if our incomes don't increase or drop. Kanaka, good points and early RRSP withdrawals and saving taxes which can work and be a good idea for lower income and much higher income individuals than us.
Please write your comments in the forum.