Canadian Personal Finance Blog

It’s RRSP time.. you can almost make up a song about that (sung to the tune of “It’s Howdy Doody Time”, but I digress.

What are your plans for RRSP’s this year? I buy RRSP’s little by little over the year, so I don’t feel quite so “exposed” about not having done enough for my RRSP’s however, I think this year I am going to get a significant boost in my RRSP limit (due to my pension being capped). I keep thinking I’d like to dump a lot of money into that RRSP space, but then I wonder where that money is coming from?

The airwaves will be plastered with Scotiabank, TD, PC Financial, Sun Life and anybody else who can buy ad time for you to buy your RRSP now, while you still have time!

Interesting RRSP Comments and Questions

Over the past few weeks I have heard more discussion on this and here are some interesting comments and questions that I have heard about RRSPs and such:

• Should you buy RRSPs or pay down your debt? My theory is “Yes”, you should pay down your debt mostly, but still make some token RRSP savings. Killing debt is the first thing to do, always.
• Should you go into debt to buy RRSPs? I don’t like the idea of leverage to buy investments (we had this discussion with the N.C.F.B.A. and many of my fellow bloggers agree on this point). If you take a loan to buy your RRSP, make sure it can be paid back in less than 6 months, so it doesn’t get forgotten about.
• Should I put money away for my house down payment in my RRSP? I don’t know about that one. When I bought my first house there was the O.H.O.S.P. and that saved you your land transfer taxes. I If anyone wants to comment on that I am open to discussion.
• Which is more important an RRSP or an RESP? The answer is YES if you have kids. RESPs give you free money for your kids education, so you should think about that, but RRSP’s take money directly off your taxes so they are good too.
• Where should I invest my RRSP? That one you should know better than to ask me. Don’t put it in Mutual Funds, but also don’t put it in “sketchy” stocks either. Check N.C.F.B.A. blogs for ideas in that area.
• Should I make an RRSP payment or pay down my mortgage? Yes again! Do both. Put money in your RRSP and then take your tax refund and put THAT on your mortgage as an overpayment. That one I stole from Gordon Pape.
• Do you have RRSPs? Yes, but I still think I don’t have enough in them right now.
• What does RRSP actually mean?  Registered Retirement Savings Plan  (someone should create a Financial T.L.A. and F.L.A. glossary somewhere)
• Can I transfer funds into my RRSP from another RRSP? Yes, as long as the accounts are in your name, no problem, just fill in the right forms at the place you are transferring it TO you should be fine. You cannot transfer from your Spouse’s RRSP to your own (although I am not sure what happens if your Spouse passes on).

As I think of more questions I’ll post them. If you have questions comment away, I will attempt to find out the answers.

Stats Canada published a plethora of interesting statistics yesterday from the 2006 Census that I find quite interesting, and very topical in the area of Personal and Home Finances:

• For the first time there are more unmarried folk over the age of 15 than there are married.
  

  In 2006, more than one-half (51.5%) of the adult population were unmarried, that is, never married, divorced, separated or widowed, compared with 49.9% five years earlier. Conversely, only 48.5% of persons aged 15 and over were legally married in 2006, down from 50.1% in 2001.

• A large increase in 1 person households (i.e. people living alone). More of us living on our own? Interesting, one theory put forward is folks are trying to get themselves together financially and mentally before committing to a long term relationship, and if that is the case, that is a good thing (in my opinion).

The one really interesting statistic for me is the following:

Over the last two decades, one of the trends for young adults has been their growing tendency to remain in, or return to, the parental home. This upward trend has continued over the past five years.

In 2006, 43.5% of the 4 million young adults aged 20 to 29 lived in the parental home, up from 41.1% in 2001. Twenty years ago, 32.1% of young adults lived with their parents.

Among individuals aged 20 to 24, 60.3% were in the parental home in 2006, up from 49.3% in 1986. Among those aged 25 to 29, 26.0% were in the parental home in 2006, up from 15.6% two decades earlier.

So, more an more of us are not becoming “Empty Nesters” in fact we are turning into a “flop house” for our 20 year old kids? That seems to line up with my observations from friends and acquaintances that I know, where kids go off to University to get their degrees, but then returning and moving back into the family home?

I must admit that I was somewhat guilty of that on work terms, but managed to not move back in with my parents after I graduated.

My question is how can you retire if your kids have moved back in with you? I guess if they move back in, and start paying room and board, that might be OK, but if they move back in and resume their role as “child” while pulling in a large salary, I do have problems with that. They keep calling my generation the “Sandwich” generation because we will have to care for both our parents and our children eventually, these statistics seem to imply that may well be the case.

I have attempted to instill in my kids a real desire to leave the house. Useful statements like:

• “You don’t like me harping on you to do your chores? Well if you had your own place, that wouldn’t happen would it?”
• “If you don’t get a summer job, you’ll be watching your brother all summer for me”
• “You want money? Room and board is not enough?”

I am kidding (although I believe in a few spots, I have actually said that to my kids at some time). It is important to get our kids prepared to spread their wings and leave the nest (and then move the NEST).

No, this is not a commentary about how folks work longer and later hours (although I suspect we are), but Stats Canada put out some interesting numbers about how our work force is aging and people who should be “retired” are continuing to work, even though they are collecting CPP benefits.

Perspectives on Labour and Income is available for free from the Stats Canada web site.

The study found that a substantial and increasing proportion of CPP/QPP beneficiaries did some work for pay the year following their retirement.

For example, in 1995, 39.8% of men who had started receiving a CPP/QPP pension had earnings. By 2004, this proportion had increased to one-half (49.9%). Among their female counterparts, the proportion rose from 37.7% to 45.8%.

Why is this is the more interesting question. Why are people still working after they are supposed to be “retired”?

1. Do we need to work to make ends meet after retirement? This might well be the case, given the soaring costs of household upkeep on houses that are paid off (the property taxes in some cities are crippling to retirees on fixed incomes).
2. Do we simply want to feel useful after we have finished our career? That is very possible, certainly the “Golden Agers” I know want to simply do something to fill their time.
3. Given folks are living a lot longer these days, maybe the age of retirement (traditionally 65 these days) is too low?

Interesting numbers in this article, well worth reading.

Will I retire? I am not sure, I hope I reach an age where some time I can at least have the opportunity to make the choice for myself.