Comments on: RRSPs are (Mostly) a Good Thing

By: Kevin Malone

Kevin Malone — Thu, 26 Jul 2007 03:33:53 +0000

Actually most “rich people” don’t bother with RRSPs because they have figured out (or have people to figure out for them) much better arrangements.

The one person that easily qualifies as a “rich person” (extreme wealth) in my extended family has no RRSP. He accumulates equity with borrowed money…in his case he has chosen to acquire vast real estate holdings…using the equity to borrow (the interest is fully refunded by the government despite the fact that he is worth tens of millions) and generate income and acquire more real estate. Understanding more about what the wealthy do actually helps understand why investment strategies like the smith manoeuvre make so much sense. Unfortunately the middle class tend to do exactly what the banking and investment industry tells them to do – to the benefit of the industry and detriment of the middle class.

By: Mike in BC

Mike in BC — Mon, 12 Feb 2007 01:23:52 +0000

I believe what he is getting at, is what Shillington says on his website.

http://www.shillington.ca/Financial_Planning/General_Advice.htm

That is, that unless you have about $100,000 in RRSPs, you are probably better off having none.

The Average Joe is being taken on an RRSP ride by the financial industry

By: Canadian Capitalist » RRSP Tip # 1: Should you Contribute?

Canadian Capitalist » RRSP Tip # 1: Should you Contribute? — Wed, 07 Feb 2007 05:09:42 +0000

[...] As the deadline for contributions to your RRSP approaches (March 1, 2007 is the deadline for 2006 contributions), you are going to be bombarded with full-page newspaper ads, commercials in television and radio and even phone calls at home (I’ve received three calls already). Instead of being hustled into doing something, take a deep breath and find out if making a contribution even makes sense for your financial situation. While RRSP’s are mostly a good thing because they allow you to contribute pre-tax dollars and you get to defer taxes on interest income, dividends or capital gains you receive within it, they may not be suitable for everyone. [...]

By: Michael Moore

Michael Moore — Thu, 18 Jan 2007 04:55:09 +0000

I wouldn’t want to try and retire on the value of a typical middle-class home bought in the cities of Flint, Detroit, or Cleveland a generation ago. Few rustbelt cities have seen the property price appreciation of Toronto. In some deteriorating neighbourhoods, prices have fallen.

By: Mark

Mark — Thu, 18 Jan 2007 01:04:13 +0000

Actually the implied point (as noted) is that there really needs to be public support for pensions.

And for all his wrongheaded argument he probably does have a point-most Canadians who do not home a home do not have an RRSP either. It’s not simply that the average RRSP is small (the figure is misleading) but that the overwhelming majority of RRSP assets are in the hands of the wealthy and upper middle class.

By: Canadian Capitalist

Canadian Capitalist — Wed, 17 Jan 2007 12:06:27 +0000

Jon: Fair enough. RRSPs are not for everyone (that’s why I put mostly in the title). A convincing case can be made that those already in the lowest tax bracket are better off saving in taxable accounts. Also, in any tax bracket, getting rid of credit card debt must be the first priority.

By: Jon D.

Jon D. — Wed, 17 Jan 2007 02:50:59 +0000

Although brief, the article does not mention at all that for some people, tackling their high-interest debt is far more important than RSP contributions.

Also the simple fax is depending on your marginal tax rate, RSP contributions are more rewarding to top bracket earners. If you can get 44 cents back of taxes on the dollar, rather than 21, obviously it makes sense for more than others.

RSPs should be treated on a case by case basis, and not everyone painted with the same brush on either side of the argument.

By: Canadian Capitalist

Canadian Capitalist — Tue, 16 Jan 2007 20:57:11 +0000

Al: I’ll agree that a paid-off home is a major step towards retirement and I’ll also agree that there is a lot of self-interest in Bay Street’s advice on RRSPs. But to me the problem seems to be that many Canadians are saving too little (especially those without any pension plans. OAS+CPP = $2400 per month for a senior couple), not too much as evidenced from many StatsCan surveys. Mr. Stanford’s prescription seems to be that we are not saving anyways, so why bother?

By: Al R

Al R — Tue, 16 Jan 2007 19:57:11 +0000

As much as I take issue with Stanford’s bi-weekly rantings, I agree with him in this instance – partially. Bay Street really does exaggerate how much the average person will need in retirement – usually the figure they cite is something like 70% of pre-retirement income.

In actuality, most people won’t need anywhere near that level of retirement income if their home is paid off. I completely agree that a principal residence can’t provide an income stream, but owning your home goes a long ways towards securing financial freedom.

It’s easy for me to say, since I’m lucky enough to have a defined-benefit plan, but to listen to many financial planners, 80% of Canadians are going to be forced to subsist on catfood when they retire…

By: growth in value

growth in value — Tue, 16 Jan 2007 16:59:11 +0000

I kind of glossed over my objection to his ‘house + public pensions’ theory, but yeah — that’s certainly an interesting position for an economist (of all people) to take.

“Don’t buy RRSPs — just pay off your mortgage, remodel your kitchen and rely on OAS, you’ll be fine…”

Doesn’t the mantra of diversification apply to retirement planning too? It’s surely a good thing to own a home outright, but does that really have to come at the expense of any other investments?