DiscoveryFinance.Com » Registered Retirement Savings Plan (RRSP)

My Networth: August 2009

Ryan A. Smith — Mon, 31 Aug 2009 04:21:44 +0000

Am I excited to calculate my networth again, since last month’s financial statement?

No!

I don’t think it will get better. As you can see, my income tax and CPP tax combined are already $52,000 as of today (not even counting the income for Sept to Dec). Is this normal??? [Compare to the national average.]

Overall

Assets: +8.5% (down from +11%)
Liabilities: +8.7% (up from +2%)
Equity: +8.4% (down from +19%)

Goals Accomplished To Date

1. My max RRSP contribution for year 2009 is reached.
2. Set aside $5000 for year 2010 TFSA.

Financial Statement

Financial goal: first million networth in 7 years
Time lapse: 2 years 4 month
Time remaining: 4 years 8 months

Assets	$161,400
RRSP (mainly GICs)	$19,600
RRSP for First HBP	$21,000
TFSA Year 2009	$5,000
TFSA Year 2010	$5,000
High Interest Savings	$89,400
Cash	$2,300
Car Worth (minus 30% depreciation rate for year 2008 & 2009)	$19,100

Liabilities	($74,800)
Income Tax & CPP Tax (estimated for tax year 2009)	($52,000)
Car Loan	($22,800)

Equity
Networth	$86,600

Others (not included above)
Money to parents each month	$5,000

What Others Are Reading…

Home Buyers’ Plan (HBP) – how to maximize this plan

Ryan A. Smith — Mon, 03 Aug 2009 17:59:46 +0000

Before we begin this topic, we will briefly discuss how HBP works. Then we will talk about how to maximize this tax-saving strategy toward the end of this article.

Home Buyers’ Plan (HBP) allows first-time homebuyers to withdraw RRSP to purchase or build a home without having to pay tax on the withdrawal.

RRSP Withdrawal Limit for HBP

Individual: $25,000
Couple: $50,000

The HBP withdrawal limit has increased to $25,000 from $20,000. This applies to withdrawal made after January 27, 2009. It will allow a couple to withdraw up to $50,000 from their RRSP funds toward the purchase of their first home.

This is the first increase in the withdrawal limit since the HBP was introduced in 1992.

Amounts withdrawn are repayable in installments over a period not exceeding 15 years, starting the second year following the year the withdrawal was made.

Eligibility

First-time homebuyers are eligible, provided that the home to be purchased or built is the principal place of residence. An individual is generally considered a first-time homebuyer if the individual did NOT owned another home in the year the HBP withdrawal is made, or in any of the four preceding calendar years. In other words, if you bought a home 5 years ago, you will still be a first-time homebuyer provided the new home will be your principal residence.

Special HBP Tactics

If you withdraw your RRSP toward your first home under the HBP this year, you can utilize HBP again after another 4 years! That’s a income tax saving on the withdrawal amount $25,000 (ie, a tax saving of $3750 at the lowest income tax bracket 15%)!!! What you have to do is…declare your new home as the principal residence and your previous home as rental property. Sweet. Oh yeah, repeat this tactic every 5th year.

Reference: Canada Revenue Agency

What Others Are Reading…

My Networth: July 2009

Ryan A. Smith — Fri, 31 Jul 2009 05:00:06 +0000

I got my cheque for July. After finishing my accounting, the result does NOT look very good.

Overall

Assets: +11% (down from +21% )
Liabilities: +2% (up from -1% )
Equity: +19% (down from +55% )

Being single is so hard. Aside from loneliness, it takes too long to build weath by myself. I only have one-person work force; I only have 24 hours at maximum. In contrast, married couples can have as high as 48 working hours per day in combined.

In addition, being single is not tax-friendly. I cannot claim income splitting, spouse amount, dependent amount, “pooled” medical expenses, and several other tax advantages geared toward couples and families. Even though I give $5000 to my parents each month, I’m not eligible to claim caregiver amount because I don’t live with them.

Worst comes worst. Starting this month, my income tax will increase monthly, depending on my income. By the end of this July, I already have to pay $45,200 income tax!!! That’s 3x the average household income tax!!! See this article to find out why my income tax is 3x as high. This is insane!!! I’m not very happy today.

Financial Statement

Financial goal: first million networth in 7 years
Time lapse: 2 years 3 month
Time remaining: 4 years 9 months

Assets	$148,700
RRSP (mainly GICs)	$19,600
RRSP for First HBP	$21,000
TFSA Year 2009	$5,000
TFSA Year 2010	$1,000
High Interest Savings	$80,300
Cash	$2,700
Car Worth (minus 30% depreciation rate for year 2008 & 2009)	$19,100

Liabilities	($68,800)
Income Tax & CPP Tax (estimated for tax year 2009)	($45,200)
Car Loan	($23,600)

Equity
Networth	$79,900

What Others Are Reading…

My Networth: June 2009

Ryan A. Smith — Tue, 30 Jun 2009 22:25:52 +0000

I just got my cheque today. Let’s see what’s been changed during the month June.

Overall

Assets: +21%
Liabilities: -1%
Equity: +55%

In terms of assets, I’ve contributed my maximum RRSP limit for year 2009 which is $21,000. As such, I put the remaining money in high interest savings accounts. I don’t have any plan yet to invest in mutual funds and/or stocks, because I need to save some “liquid” cash for the down payment of my first home. I figure the first home will probably cost me around $300k-$400k range.

I still need to set aside $5000 for TFSA for year 2010—six more months to work on that. And of course, $5000 for my parents which I give every month and have deducted in the cash portion.

Financial Statement

Financial goal: first million networth in 7 years
Time lapse: 2 years 2 month
Time remaining: 4 years 10 months

Assets	$134,500
RRSP (mainly GICs)	$19,600
RRSP for First HBP	$21,000
TFSA	$5,000
High Interest Savings	$68,200
Cash	$1,600
Car minus 30% depreciation rate for year 2008 & 2009	$19,100

Liabilities	($67,600)
Income Tax & CPP Tax(estimated for tax year 2009)	($43,200)
Car Loan	($24,400)

Equity
Networth	$66,900

What Others Are Reading…

RRSP – Maximize Your Retirement Savings

Ryan A. Smith — Fri, 12 Jun 2009 01:23:08 +0000

What’s an RRSP

Registered Retirement Savings Plan is a retirement plan that you or your spouse or common-law partner establish and contribute to. RRSP contributions are tax-deductible;ie, it can be used to reduce your income tax.

RRSP vs CPP

Why should I invest in RRSP when I can get CPP (Canada Pension Plan) benefit at retirement?
Reason: CPP – small plan, big potential?!

RRSP vs TFSA

What are the differences between RRSP and TFSA (Tax-Free Savings Account)?
See this article: RRSP vs TFSA.

RRSP vs IPP

For anyone who has reached their annual RRSP maximum limit and would like to attain more tax-deductible retirement savings than what their RRSP can offer, it is POSSIBLE with IPP option which allows an even more attractive contribution room than RRSP does!
See this article: IPP – Supersize Your Retirement Savings.

RRSP Contribution Deadlines

March 1 of the following year is the deadline for contributing to an RRSP for the current tax year; eg, March 1, 2010, is the deadline for 2009 tax year.

December 31 of the year you turn 71 is the last day that you can contribute to your RRSP.

How does the Government Calculate My RRSP Contribution Room?

It’s based on your “earned income,” not Total Income (line 150), Net Income (line 236), Taxable Income (line 260), or Gross Income.
See this article: How to Calculate RRSP Contribution Room.

How Much Do Others Contribute To Their RRSPs?

See this article: RRSP – national average annual contribution.

What Types of Investments is Better for RRSP?

RRSP is a registered plan; ie, the income earned is tax-deferred till you withdraw the fund during your retirement when your income will be in the lower tax bracket. Because of this, it is better to place RRSP in the investments that generate interest income which can be taxed as high as 45%, according to your tax bracket of that year.

In contrast, although investment earnings outside a registered plan are taxable, you can reduce the tax on investment income by focusing on investments that generate primarily dividends and capital gains, which are taxed less heavily than interest income. The tax on dividends and capital gains is usually around 25%.

What Can You Do With Your RRSP Fund?

Home Buyer’s Plan (HBP): Withdrawing your RRSP funds to buy or build a qualified home.
Lifelong Learning Plan (LLP): Withdrawing your RRSP funds for continuing education or retraining.
Registered Retirement Income Fund (RRIF): Transferring your RRSP funds to RRIF when you turn 71.