pls explain the RRSP plan my advisor gave to me. Thanks

[kentridge]

Here is the situation. my RRSP contribution is 400 per pay (before Tax, which is going to RRSP). The actually amount is 320 deducted from my net pay.

The advise was to put that 320 outside RRSP for an Index fund for example. Using RRSP loan (the premuim rate) to continue my RRSP contribution.

In the need of the year I have an outstanding 8320 investment outside of RRSP and I have an outstanding RRSP loan 8320 inside RRSP.

1) since my RRSP contribution is 10400 and the average return of my investment is average of 6.98% and my acutal return is 344 dollars

2) sell my 8320 investment outside my RRSP, which has a return of 7.25% (603). i will have to pay captial gain on 301 based on my current tax rate.

3) Put this 8320 into my RRSP, i do have some room there.Then, this is the part i missed. he said I will borrow from RRSP to buy back the 8320 that I sold. since it is a borrowing against the investment the cost part is tax deductable. i will have a huge refund.

can someone explain this for me. basically, it is only 8320 a year but it sounds at least 30000 is rolling. And based on his calculation, according to my current income and contribution, and of course his ultimate strategy. i will have at least 2.5 millions dollars when I am 60. it sounds so good, walalalal.......

 

[qwer]

最初由 kentridge 发布
Here is the situation. my RRSP contribution is 400 per pay (before Tax, which is going to RRSP). The actually amount is 320 deducted from my net pay.

The advise was to put that 320 outside RRSP for an Index fund for example. Using RRSP loan (the premuim rate) to continue my RRSP contribution.

In the need of the year I have an outstanding 8320 investment outside of RRSP and I have an outstanding RRSP loan 8320 inside RRSP.

1) since my RRSP contribution is 10400 and the average return of my investment is average of 6.98% and my acutal return is 344 dollars

2) sell my 8320 investment outside my RRSP, which has a return of 7.25% (603). i will have to pay captial gain on 301 based on my current tax rate.

3) Put this 8320 into my RRSP, i do have some room there.Then, this is the part i missed. he said I will borrow from RRSP to buy back the 8320 that I sold. since it is a borrowing against the investment the cost part is tax deductable. i will have a huge refund.

can someone explain this for me. basically, it is only 8320 a year but it sounds at least 30000 is rolling. And based on his calculation, according to my current income and contribution, and of course his ultimate strategy. i will have at least 2.5 millions dollars when I am 60. it sounds so good, walalalal.......

看不懂，
看上去RRSP里面的钱是借的，只是把借款成本冲掉了，
外面的钱利用资本增殖少上了一点税，实际收益不会超多10%吧。
你实际出了10400，一年，RRSP省了301的税，就算是省了135块，RRSP把借款成本等于收益，等于没赚钱，所以你实际赚了468RRSP外面的钱。RRSP可以减税，所以RRSP的10400，你还可以退回些钱，这些钱本来就是你的。

 

[nathanj]

Re: Re: pls explain the RRSP plan my advisor gave to me. Thanks

It some times benefits you if you have a better return (means more volatile) at out side investment.The idea is when you invest money in a RRSP plan you look at long term and stable investment, most of the time lower reture.But the outside investment you look at a more aggresive way, some time you get a better return but you may lose,If you don't want to be this complicated, just put money in rrsp plan,the type of investment is the one you choose in the outside plan.

最初由 qwer 发布


看不懂，
看上去RRSP里面的钱是借的，只是把借款成本冲掉了，
外面的钱利用资本增殖少上了一点税，实际收益不会超多10%吧。
你实际出了10400，一年，RRSP省了301的税，就算是省了135块，RRSP把借款成本等于收益，等于没赚钱，所以你实际赚了468RRSP外面的钱。RRSP可以减税，所以RRSP的10400，你还可以退回些钱，这些钱本来就是你的。

 

[吾言]

It it too complicated.

Just don't forget risks are multiplied with returns at the same time.

 

[dkwan]

kentridge,

basically, the advisor give you an advise that is the highest risk, so the return will be very high. Keep in mind that you are borrowing money to invest. ( from rrsp to outside rrsp or outside rrsp to rrsp ) In either direction is still high risk.

Couple of points:
1) There is no guarantee on the return of investment
2) There is no guarantee of current income

The plan sounds like you have 2 times the investment ( you have your own money into outside rrsp AND borrow rrsp loan to contribute rrsp ), but in order to be safe, the return of outside must greater than the regular rrsp.

It sounds very attractives, but complicated. You need to understand every single point of the plan. The key to this plan is to borrow rrsp money to invest in outside again, so this makes the investment princple tripled, but once again, its only a loan, need to payback.

It just like borrow money to buy stock, only if your current income is stable and can payoff any outstanding loan if needed, then ,its not a bad idea.

In this case, every body happy.
1) You have the return ( not guarante )
2) Advisor make comission ( guarante, from loan and trailer fee BIG TIME )

Just a reminder, higher the risk, higher the return.

cheers~

 

[挺傻]

用RRSP loan or credit 来进行投资，是可以把borrowing cost计入投资成本，不过同样以贷款方式进行投资，需要保证投资自己的收益相对高。其实很多人是利用此种方法购买rental property，当然也有进行投资的，不过对投资收益有完全把握的人毕竟不多。尤其市场变化莫测，投资周期变化总是有的，真正能TIMING MARKET的有几个。
其实不仅仅是RRSP，你也可以用其他方式从银行获得LOAN或CREDIT来进行投资，其成本都是可以算入投资成本免税的。这里你的顾问就是把投资，借贷和RRSP挂钩，因为还可以获得RRSP退税的优势。
建议你问清楚那个投资回报7.25and 6.98是如何计算的，是否具备保证，并且根据你的投资知识和对操作过程的理解作个综合考虑，高回报总是表示着高风险。但是higher the risk, 只是表示higher the potential return.而有时候potential并不一定会成为truth.

 

[kintrust]

RRSP loan
As I know that interest from RRSP loan is not tax deductable.

 

[挺傻]

我想这里面说的有点误解，如果你借钱去CONTRIBUTE你的RRSP，是RRSP CATCH UP LOAN OR CREDIT,仅仅因为有RRSP 的ROOM存在，那你借的钱是不可以tax deductable的。
但是如果你用你的RRSP里面的GIC作为COLLATERAL，来从银行借钱，明确钱的用途是INVESTMENT,就可以tax deductable。可能上面没有说清楚，在此解释一下。

 

[kintrust]

最初由 挺傻 发布
我想这里面说的有点误解，如果你借钱去CONTRIBUTE你的RRSP，是RRSP CATCH UP LOAN OR CREDIT,仅仅因为有RRSP 的ROOM存在，那你借的钱是不可以tax deductable的。
但是如果你用你的RRSP里面的GIC作为COLLATERAL，来从银行借钱，明确钱的用途是INVESTMENT,就可以tax deductable。可能上面没有说清楚，在此解释一下。

Are you sure RRSP can be collateraled?

Thanks

 

[dkwan]

think about it,

if you can use your RRSP GIC as collateral as loan, then you can reinvest your loan to GIC in RRSP and then use as collateral as loan, and invest again.

So, then you may need only invest 1000 and contribut over 3000 in RRSP. Of course in different banks.

I pretty sure that regular GIC can be used as collateral as loan, but with the same bank.

 

[kentridge]

thanks a lot

it sounds very plausible now with my little portion of RRSP rolling into a bigger one.

thanks again for the explanation. i decide to DIY some to taste how that work. I might have to ask more of your advice when i actually do it

thanks a million

 

[挺傻]

最初由 dkwan 发布
think about it,

if you can use your RRSP GIC as collateral as loan, then you can reinvest your loan to GIC in RRSP and then use as collateral as loan, and invest again.

So, then you may need only invest 1000 and contribut over 3000 in RRSP. Of course in different banks.

I pretty sure that regular GIC can be used as collateral as loan, but with the same bank.

no, you can not use the loan to purchase GIC and recollateral the GIC that you purchased by loan to make further investment. And, many banks do not accept GIC in other FIs as secure.