Tag Archives: Canada Retirement Savings Plan

Simplifying and Improving Our RRSPs: a Review of the Progress Made Over 4 Years

Posted on by

It’s amazing how much more time you have once your children are in school and the eldest is old enough to be left “home alone” even if only for a 5-minute bike ride to the mailbox. When we reached this milestone in parenthood, I finally had the time to start looking at where our money was and why and deciding what changes were needed. One of the first messes that needed to be cleaned up was our RRSPs: It’s taken 4 years to simplify and improve our RRSP holdings but things are progressing well.

What We Started With

Four years ago I wasn’t even sure

  • where our RRSP money was,
  • how much was in each place,
  • what the rate of return was on the money, and
  • whether we should be doing something differently with it.

I read a few books about RRSPs and one piece of advice struck home immediately.

Why You Should Always Designate a Beneficiary for Your RRSP

Four years ago, we already had our wills and the wills designated that my husband and I will inherit each other’s assets if one of us dies. What I didn’t know, though, was that if a RRSP has a designated beneficiary, the value of the RRSP is not included in the amount that the government uses to calculate the probate fee or, as Ontario now calls it, the Estate Administration Tax.

For example, say I had $100 000 in my RRSP and I died. If my RRSP did not have a beneficiary named, that $100 000 would be added to my other assets and that total amount would be taxed by the Ontario government as a condition of probating my estate. If my other assets were worth, say, $50 000, the government would charge an Estate Administration Tax of $1 750.

If I had designated my husband as the beneficiary of my RRSP, he would not have to include the $100 000 value of my RRSP in the amount used to calculate the estate administration tax. That means the tax would be calculated based on the other $50 000 in my estate. The total payable would be $250.

That’s right. He would not have to pay $1 500 in tax.

Just for having his name on a slip of paper filed at the bank!

So the first thing I did was get a Beneficiary form filled out and properly filed for each of our RRSPs.

Neither of us has died yet but it still feels like we’ve saved thousands of dollars.

Where Our RRSP Money Was

We had quite a collection of RRSP accounts 4 years ago.

I eventually determined we had

  • a RRSP invested in mutual funds and GICs at CIBC
  • another RRSP in a GIC at CIBC
  • a RRSP each holding Canada Premium Savings Bonds in the Canada Retirement Savings Plan
  • a RRSP each in GICs and cash at ING Direct (now Tangerine)
  • a spousal RRSP in GICs at ING Direct (now Tangerine)
  • a locked-in RRSP at BMO in GICs and high interest savings accounts
  • a RRSP at BMO in mutual funds and GICs
  • a RRSP at BMO in a high interest savings account

Argh! Can you see why I desperately needed to fix this up?

For anyone who is deadly curious, the mutual funds included

  • index funds mirroring the performance of the TSX and the NYSE (purchased before ETFs existed)
  • funds holding mortgages
  • funds holding bonds in Canada, the USA and internationally

Where Our RRSP Money Is

We are not finished consolidating our RRSP holdings yet. Unfortunately, you cannot simply transfer GICs from, say, CIBC to CIBC Investor’s Edge. Don’t ask me why. I’m pretty sure it has to do with making the bank more money at our expense, though.

Still, it’s looking a bit better:

  • a RRSP each at BMO InvestorLine
  • a LIRA at BMO InvestorLine
  • a RRSP at CIBC Investor’s Edge
  • a spousal RRSP at RBC Direct Investing
  • a GIC RRSP at CIBC that we will be able to transfer to Investor’s Edge in 2015 on maturity
  • a GIC RRSP at Tangerine that we will be able to transfer to BMO InvestorLine in 2015 on maturity

The CIBC Investor’s Edge RRSP could be consolidated with one of the BMO InvestorLine ones, but to avoid paying transfer fees it’s best to wait till the GICs at CIBC mature and the money can transfer fee-free up to the Investor’s Edge account. Then, if desired, the entire amount can transfer out to InvestorLine. Or, conversely, the InvestorLine account could transfer in to Investor’s Edge. That would bring us down from 10 accounts to 4.

The spousal RRSP is at RBC Direct Investing primarily so I could investigate their trading platform in more depth! It could be transferred out at any time but I’m happy to keep it there. As a spousal it cannot combine with any other RRSP so it really makes little difference which brokerage it is kept at. (All of our RRSPs qualify for the lowest trading commissions etc at their respective brokerages.)

The optimization of the holdings within the RRSPs continues. I’m sure it will be the subject of more articles in the future.

Related Reading

Join In
Did you make the mistake of opening a new RRSP at a different bank each time you moved? Did you ever despair and refuse to read your RRSP mutual fund statements for over a year? Please share your RRSP escapades and foibles with a comment.

Goodbye Canada Retirement Savings Plan, Hello ING Direct RRSP

Posted on by

For me, investing includes emotions not just facts. I like Canada Savings Bonds. My parents invested each of our “Baby Bonuses” into CSBs and those same bonds later helped pay for my engineering degree. When I started working, I enrolled in the Canada Savings Bond payroll deduction plan and each year I’d get some new bonds with the money that was taken from my cheques before I could see it, want it or spend it. Later, when we were cash-short to make RRSP contributions, my husband and I would transfer some of our CSBs directly by phone to the Canada Retirement Savings Plan. The tax receipt would arrive a few days later in the mail. So it’s with sadness that I am finally saying goodbye to the Canada Retirement Savings Plan and to the last of my Canada Savings Bonds; But I’m also saying hello to an old friend, our ING Direct, now called Tangerine.ca, RRSP account, which is offering me a bonus right now.

Why Am I Closing Our Last Canada Retirement Savings Plan Account?

I moved the bulk of our RRSP money invested in our Canada Retirement Savings Plans out a few years ago. I moved it to our brokerage accounts at BMO InvestorLine. Most of it was re-invested there in GICs. Why did I move the money from an investment in Canada Savings Bonds to an investment in GICs? Because after all those years of good returns, the Harper government had finally dropped the rates on CSBs below the rate trust companies offered on GICs.

I think that’s a shame. I think the Canada Savings Bond programs were two of the best, most accessible programs for small investors out there. Through automatic payroll deduction, free to employees and almost free to employers, regular people could be encouraged to save. The savings felt safe. Many people, especially those who moved here from other countries, don’t particularly trust banks. Investing in the government feels safer. The rates used to float a percent or two higher than that of GICs as additional incentive.

And the bonds could be transferred quickly and easily, without redemption, into a no-fee RRSP account called the Canada Retirement Savings Plan administered by the government. The tax receipts came quickly and accurately. Statements came (for free!) in the mail quarterly or semi-annually. Withdrawals (aside from withholding taxes) came with no fees. There were no fees to transfer the funds to another RRSP either. No sales people called, ever. It was a simple, pain free, secure way to save for retirement.

The Federal Government’s War of Attrition on Canada Savings Bonds

Unfortunately, a few elections ago, the government decided it wanted out of the Canada Savings Bond business. Given the tremendous goodwill out there for the bonds, they didn’t want to simply cancel the programs. Instead they began a war of attrition.

First, the interest rates payable on Canada Savings Bonds were slashed. Next, the CSB payroll deduction plan was significantly modified so that it became a virtual electronic savings account. While this had a few advantages it was largely intimidating to people who preferred getting a simple slip of paper telling them what they owned. Next regular CSBs, which could be cashed any time, were cancelled altogether. Only Premium bonds which could only be cashed on the annual anniversary date were offered. The Canada Retirement Savings Plan was closed to new applicants. Then they made another change such that if your balance in the CRSP drops to 0 they will close your account and you can’t re-open it.

That last one is why I left a small balance in each of our accounts. I was quietly hoping for a change in government and a change in policy. It’s not happening though. And I realized if we do get a re-think, they will probably re-open the program to all Canadians. So it’s time to close our accounts for now.

And the best time seems to be exactly now. The interest rate on our remaining premium bonds has dropped below that for a GIC. And ING Direct Tangerine is offering me a bonus to transfer in the money.

Tangerine Offers a RRSP Transfer In Bonus

We already have daily interest savings account RRSPs with Tangerine. They have been very handy for making last minute contributions, printing a tax receipt immediately, and then deciding whether to invest the money in a GIC at Tangerine or transfer it for free elsewhere later when we have time to think.

Their offer says:
“Simply transfer RSP savings you may have to your RSP ISA between August 26 and September 30, 2013. You’ll get a Cash Bonus equal to 1% of the amount you transfer in, up to $100.”

It’s a sign that it’s time for me to make the transfer.

UPDATE: Please be aware that as of January 2015, Tangerine has started charging a fee if you transfer your RRSP or TFSA from Tangerine to another bank, credit union, brokerage or financial institution.

I would no longer transfer money from a RRSP into Tangerine unless I planned to keep it there for the long term.

Goodbye CRSP and Thanks for all the Fish

Today I’ll fill out the T2033 online at ING Direct Tangerine, print a copy and mail it in. My next statement from the Canada Retirement Savings Plan will show a balance of 0. And I will feel sad.

Related Reading

Join In
Did you use the Canada Retirement Savings Plan? Was it simple and useful for you? Please share your reminiscences with a comment.