Comments on: RRSP Loans never made sense

By: Sacha Peter

Sacha Peter — Sat, 06 Mar 2010 19:36:07 +0000

It depends on how much pension income you are planning on making. The phrase you want to search for is the “GIS clawback”. Generally speaking, you want to either make ZERO in other income, or make more than $15,700/year of non-old age security income.

The only reason why one would want to open up an RESP is because of the 20% CESG grant, which is virtually free money, but other than that, it is equal to just giving money to your kids and deferring income taxes to your kids when they finally go to school, but it is a very long term decision to open one up for something that may or may not happen in 18 years…

By: Raven

Raven — Sat, 20 Feb 2010 00:36:11 +0000

Also, you once told me that there is a specific dollar amount you don’t want to be withdrawing more than from an RRSP per year (during retirement), based on how government benefits are means tested.

Do you have an updated version of that number?

By: Raven

Raven — Sat, 20 Feb 2010 00:33:42 +0000

The complexity of this stuff is pretty brutal – I would like to believe that I am significantly more financially savvy than the average dude on the street, yet figuring out when it is better to pay down the house vs RRSP contributions vs TFSA (or some other option) is still not easy for me.

But the relative benefits of RRSPs are crystal clear compared to RESPs – I spent about a week trying to determine if it was worth opening one (or more!) for my children. I still have no idea if they make financial sense, but the restrictions on what you can do with the proceeds of an RESP combined with poor support by financial institutions convinced me to stay the hell away.

By: Replacing ING Direct - Divestor

Replacing ING Direct - Divestor — Fri, 19 Feb 2010 22:29:38 +0000

[...] encroachment to simplicity has been eroding at a faster pace as of late – see my post about RSP loans, for example. It is simplicity that has caused me to stick around with ING Direct instead of [...]

By: Sacha Peter

Sacha Peter — Fri, 12 Feb 2010 23:30:31 +0000

AnniM: Thank you for your comment. I believe what you are referring to is the concept called “forced savings”.

An RRSP loan is just leverage, and financially it is just better to loan the same amount of money outside the RRSP for investment purposes – you can then deduct interest.

By: AnniM

AnniM — Fri, 12 Feb 2010 19:21:13 +0000

Agree that RSP loans are not smart; but some people are unable to commit to any payment but a loan; so makes sense for a few that need the “demand” of a loan to finally do it. Agree any loan should be no longer than 12 months.