One Reason Why Spousal RRSPs Are Useful and How to Make a Contribution to an Existing Spousal RRSP at Tangerine

Well it’s that time of year again! We’ve received our Notices of Assessment and therefore know exactly what the CRA thinks we can put into our RRSPs for 2014. Since ING Direct was sold to Scotiabank it has become Tangerine.ca with a revised website. So I decided to check exactly how to make a new contribution to our existing spousal RRSP from our existing Tangerine savings account while topping up our RRSPs.

One Reason Why Spousal RRSPs are Useful

Right now, income taxes in Canada for most people are calculated based on the person’s total personal income.

For a married couple,
if one person has income of $150 000 per year with no special deductions in Ontario in 2013 that person would pay about $48 752 in tax.
If the spouse had income of $50 000 that year, the spouse would pay about $8758.
That’s a total in tax of about $57 510.

If, instead, they each earned $100 000, they would each pay about $26 599.
That’s a total of about $53 198.
They would save $4 312 in taxes.

There may be no simple way to ensure two working people have almost identical incomes.

However, with some planning for retirement it may be possible for the couple to have almost identical retirement incomes. This could reduce their combined income tax bill during retirement.

One way to balance retirement income is to create a larger RRSP for the spouse with the lowest other sources of retirement income (e.g. work pension income; investment income; rental income; etc.) Obviously, you would want to only increase the RRSP until the projected taxable income for the two people balances.

Now at this time the Canadian government is letting married and common law couples who are 65 years of age and retired split their RRSP/RRIF, LIRA/LIF retirement income when declaring their income for taxes. They are not allowing couples under 65 to do this yet, though. So if early retirement is a possibility, it’s still worth considering maximizing the RRSP of the spouse who will otherwise have the lowest income until their income is brought up to the same level.

If the spouse with the highest retirement income has no RRSP contribution room, then there is nothing that can be done via a spousal RRSP.

However, if that spouse has contribution room, instead of using it for her or his own personal RRSP, the higher-income-in-retirement spouse can contribute to a Spousal RRSP for their lower-income-in-retirement partner.

Here’s an example:

  • Kimiyo will receive $25 000 a year from a work pension, indexed to inflation in retirement, starting at age 58.
  • Yusuf will receive no work pension in retirement.
  • Both will receive 60% of the maximum CPP and 100% of the maximum OAS.
  • They hope to retire at 58.

If Kimiyo has any available RRSP contribution room, she might want to use it to contribute money to a Spousal RRSP for Yusuf. Ideally, his RRSPs (personal and spousal combined) should be projected to generate  $25 000 per year, indexed to inflation, in retirement, before they start contributing equally to their personal RRSPs.

Making a Contribution to a Spousal RRSP at Tangerine

  1. Go to: Tangerine.ca
  2. From the list of links on the left side of the screen, click on Move my money.
    When the screen opens, usually the CAD button will be shaded the darkest gray. That means that you are requesting to make a contribution is Canadian dollars. For a RRSP contribution, this is the usual choice, so just leave it that way.
  3. In the Amount text box, type the amount you want to contribute to your spouse’s RRSP.
  4. From the drop-down list in the From box, select the account from which to take the money to make the contribution.
  5. From the drop-down list in the To box, select your spouse’s Spousal RRSP account number.
  6. For the When line, click to select, and darken the gray shading, for one of
    • Now
    • Later; or
    • Ongoing

    I selected Now.

  7. Read the warning about checking your RRSP contribution limit. For example, the maximum amount you can contribute to your spouse’s RRSP is *YOUR* maximum allowable RRSP contribution for the year. It doesn’t matter if your spouse has any RRSP room or not. A spousal contribution comes out of your room.
  8. If everything looks ok, click on the Next button.
  9. Review the details of the proposed contribution. If they are ok, click on the Confirm button.
  10. Make a note of your confirmation number in case you need to discuss the transaction with Tangerine. You can print it by clicking on the Print button.
  11. Click on the Continue Banking button. (If you are finished, click on the Log me out and close your browser session.)

Did It Work?

  1. If desired, click on View My Accounts.
  2. Click on the account you used to make the contribution. You should see the withdrawal listed on the Transaction History.
  3. Out of curiousity, I clicked on the link on the left side of the screen called My documents.
  4. I then clicked on the link Tax receipts.
  5. I cannot select 2014 from the View drop-down list. So I cannot view and print my RRSP contribution tax slip yet. I’ll probably have to wait till January 1, 2015.
  6. If you are finished banking, click on the Log me out link and then close your browser session.

Well, that’s another task off the list!

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

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Have you topped up your RRSPs for 2014 yet? Or are you laughing hysterically because the polar ice caps are more likely to start freezing up again today than you are to find enough money today to max out your RRSP? (Until our mortgage was gone we didn’t max ours out either.) Please share your RRSP insights with a comment.

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ING Direct is Now Tangerine.ca: an Update on Tangerine in 2014

What is Tangerine.ca?

As I mentioned Tangerine is the new name for what used to be called ING Direct. They recently changed their website address to tangerine.ca. They also “refreshed” their website’s look. Personally, I don’t think they improved it much but it’s not significantly different in a good or bad way, which is good, right?

It Matters That ING Direct has Changed Its Name to Tangerine If You Have a Mortgage or Unmortgage

Because your home insurance policy and your municipal (property) tax department may have the name of the company owning your mortgage on their files, you need to tell them that your bank’s (mortgage’s) name has changed from ING Direct to Tangerine.
The name “unmortgage” has been changed to “Tangerine Mortgage.”

What Happened to my THRiVE Chequing Account?

Nothing has changed with anyone’s existing ING Direct THRiVE chequing account, except the name. They are now called Tangerine chequing accounts. (Which is easier to spell, admittedly.) You can still use your existing paper cheques and transfers will go through the same as they did before this change to the name used for advertising the accounts.

Cheques ordered in May 2014 and later will have the Tangerine name.

The savings account name has also been changed from the ING Direct investment Savings Account to a Tangerine Savings Account.

What Happened to the Streetwise Funds?

Similarly, the name has changed for the ING Direct mutual funds now they belong to Tangerine.

The word “Streetwise” in the title has been changed to “Tangerine.” For example, the Streetwise Balanced Fund is now called the Tangerine Balanced Fund, as of May 2014.

ING Streetwise Portfolios have been renamed Tangerine Investment Funds.

Where Can I Get Cash or Make a Deposit to my Tangerine Account?

Although they have updated their website and changed their URL, Tangerine/ING Direct are still working on changing which Automated Bank Machines you can use for free.

Tangerine (formerly ING Direct) customers have access to ABMs to make deposits and withdrawals to and from their Tangerine chequing accounts.

Tangerine customers who only have a savings account generally make their deposits to a bank account linked to Tangerine, then transfer the money into the account electronically. (In the past, I personally have mailed cheques in to ING Direct to be deposited in my savings account. I’m not clear if that is still an option because now I have a Tangerine chequing account, and I can deposit my cheques by taking a photo of them with my tablet and using the Cheque-In deposit app.)

Right now until September 29, 2014, customers can still use ABMs that belong to the Exchange Network for free. These machines are usually in credit unions or National Bank branches. You can find the location of these ABMS using the Tangerine website. https://secure.tangerine.ca/web/InitialTangerine.html?locale=en_CA&device=web&command=goToAbmLocator

You can, of course, also just use cash back when making a debit purchase at a store. Debit transactions are no-fee with Tangerine.

As of September 30, 2014, however, the ABMs customers can use will be switching. At that time, customers will have to use machines belonging to the Scotiabank ABM Network. For cash withdrawals, these include the ones at Scotiabank branches but also include some at Shell stations, 7-Eleven’s, Quickie convenience stores, Cineplex Theatres and Couche-Tard’s. For deposits including cheques customers will probably have to go to a Scotiabank branch ABM. In fact, customers should be able to start using these Scotiabank ABMs starting in June.

This switch in ABMs is annoying many customers in B.C. where the Exchange network is larger than the Scotiabank network. Tangerine is therefore still trying to find a way to improve what they offer.

Using International Bank Machines, ABMs. with Tangerine

Scotiabank belongs to the Global ATM Alliance. This means that Tangerine will not charge you a surcharge or access fee when you withdraw cash from nearly 50,000 machines in over 40 countries. There are sometimes fees charged by the international ABM’s bank, though, so check the details with Tangerine before you travel.

Withdrawing US Dollars from Tangerine

If you can get to a Tangerine ABM (there aren’t very many) you can withdraw US dollars from your US dollar Tangerine account.

Are Tangerine’s Fees Changing?

So far, Tangerine has not announced or admitted to any plans to increase any fees. To stay competitive with other e-banks such as President’s Choice Financial, they may decide to continue to offer many no-fee services.

NOTE: As of January 2015 Tangerine now charges a fee if you transfer your RRSP, RRIF or TFSA money to another financial institution. (You can still withdraw cash from your TFSA for free but remember not to contribute it/deposit it again until the next January 1 to avoid over-contributing and having to pay the CRA a fine.)

As of May 4, 2014, Tangerine.ca offers

  • unlimited free debit transactions
  • unlimited free cash withdrawals
  • unlimited free deposits
  • unlimited free transfers between an external linked bank account and your Tangerine account
  • unlimited free bill payments
  • no charges for using a cheque with your Tangerine chequing account but you have to buy the paper cheques

Is Tangerine Offering Any Bonuses or Promotions Right Now?

Today, May 4, 2014, Tangerine.ca is offering the following promotions and bonuses:

If you make a deposit into your existing

  • Savings account
  • RRSP investment savings account
  • TFSA investment savings account
  • RRIF investment savings account

which increases your total balance above what it was on April 7, then the amount that is above that April 7 total will earn interest at a rate of 2.5% per year, calculated on the balance at the end of each day, and paid monthly. The higher interest rate will only be paid until July 31, 2014.

UPDATE: In January 2015, Tangerine.ca is offering a similar deal for deposits made. The higher rate will only last until March 31 2015. Check their website for the details.

To try to make this clearer, if you have a TFSA, a Tangerine chequing account and 3 savings accounts at Tangerine, they will add up how much money in total was in all 5 accounts on April 7. They will then add the totals every day from April 8 to July 31. Every day where the daily total exceeds the daily total on April 7, they will pay bonus interest on the amount above the starting April 7 amount.

They had to make it that complicated because people love to game the system. They love to transfer money from one account to another to try to get bonus interest. Many people will even transfer money from one bank to another to try to get bonus interest.

For most of us, this bonus interest offer is not that important.

For example, if you could increase your total account balance at Tangerine by $1000 over the total on April 7, the most bonus interest you could earn, if you deposited the $1000 on April 8 and left it there till August 1, would be about
$1000 x (2.5/365)(23+31+30+31)= $7.88
(That’s just approximate. It’s not exactly how they calculate the interest but it’s close.)

So if you just sold your boat or got a major tax refund, it may be worth depositing the amount in your account. Of if you have $40 000 saved up for your next car at a different bank, and you were going to open a Tangerine account anyway now might be a good time to do that. But it’s not a huge incentive.

New Savings, TFSA, RRSP, and RRIF Account Bonus

There’s more money to be made if you decide to open a new Savings account at Tangerine before June 30 2014.

This only works if you have *never* had a savings account at ING Direct/Tangerine. They keep track even if you’ve closed an account there years ago. They include TFSA, RRSP and RRIF accounts as “savings” accounts. So if you had a TFSA account, and even if you’ve closed it years ago, you still can’t get a bonus for opening a new savings account today at Tangerine.

If you open your first Savings account with Tangerine.ca and if you put in at least $250, they will pay you a bonus of $50 within 30 days after you opened the account.

You can only get one bonus regardless of how many types of savings accounts you open.
E.g. you can get a bonus for opening one of

  • a Savings account
  • a TFSA account
  • a RRSP account
  • a RRIF savings account

but you can not get 4 bonuses for opening one of each.

New Tangerine Chequing Account Bonus

If you open your first chequing account ever, and if you put it at least $250, they will pay you a bonus of $50.

They keep track of whether you had a chequing account and closed it so you can’t get a bonus if you used to have a chequing account even if you closed it.

If you have a savings account only, though, you still can get a bonus for opening a chequing account. (That’s a bit unusual for Tangerine.ca promotions.)

NOTE that chequing accounts do not qualify for the 2.5% bonus interest rate promotion.

Direct Payroll Deposit Bonus

If you complete the paperwork to have your pay cheque deposited directly to your Tangerine Chequing Account by July 31, 2014, they will pay you a $50 cash bonus. You should read the details on this because they are a bit complicated.

Various people have tried to get this bonus for direct deposit on non-payroll money, such as an automated payment in from another bank account. It doesn’t work. They are only interested in paying the bonus for a real pay cheque being deposited regularly from an employer.

Related Reading

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Do you like to try to play bonus interest games? Do you shift a large chunk of money back and forth between banks such as Tangerine and PC Financial to catch these different offers? Does it amuse you? Please share your experiences with a comment.

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