CIBC Global Asset Management
After 10 years of outperforming stocks, bonds aren’t a sleepy and boring asset class. You only need to look at what happened to bonds during the credit crisis. Patrick O’Toole, portfolio manager for CIBC Global Asset Management, writes.more…
Opinions expressed in articles published on this site are solely those of the contributing authors and do not necessarily represent the views or opinions of The Fund Library, its staff or affiliates.
Q – About 10 years ago, I had about $110,000 in my RRSP. I became a single mom, and my finances changed considerably. I have not contributed any more than a few thousand dollars max per year since then.
Q – I am very fond of income funds that pay a monthly distribution. However, advisors often tell me that most of these funds generate the majority of their yield by return of capital. As an example, there is a monthly income fund that has a current yield of 6%, but an advisor told me that two thirds of that yield comes from a return of capital. The net asset value (NAV) on this particular fund has remained relatively stable over the past five years, so it does not appear that the distributions are affecting NAV. As well, this fund has maintained the same monthly distribution of $0.06 on every unit for over seven years.
Q – We have approximately $300,000 in RRSPs in Canada. We became U.S. citizens 20 years ago. We would like to pay our mortgage off with these funds. What is the process and the “good and bad” of doing it? – Rick S.
Q – I earn $40,000 a year, and with a company pension adjustment amount of $4,900, it leaves me with an RRSP deduction limit of just $2,300, which I max out. Since there is $2,000 overcontribution room, is it worthwhile to overcontribute by that amount (to $4,300/year) when the $2,000 is after-tax dollars and will be taxed in the future when withdrawing?
Q – I’ve contributed to my wife’s spousal RRSP; she had no earned income. The last such contribution was in the 1990s. I’ve always been under the impression that the funds in the plan are hers – that I have no claim on them and no control over them. Is this the case? – L.A., Alberta
Last time, I wrote about the results from the latest review of the five model portfolios created for my Mutual Funds/ETFs Update newsletter. I noted that over the first six months of this year, the portfolios with the highest component of fixed-income funds fared best, because of the unexpectedly strong performance of the bond market.
Q – I am 25 and have a mortgage for 30 years. I am currently making weekly payments and paying extra money every week as well. However, is it smarter for me to think about my retirement and put that extra money into mutual funds or RRSPs, or should I continue doing what I am doing. – Michael V., Alberta
Q – My RRSPs have to be converted into another investment vehicle. Is a RRIF the best place to invest my money or is there a better investment? As for taxes, will I pay taxes only on the amount I withdraw, and what is the minimum I can withdraw? – Ronald S., Ontario
Q – I contributed to a spousal RRSP for my husband. Due to the new income-splitting tax rules, we would like to close that account. Is it possible for him to transfer the holdings in that account into his own regular RRSP? – Beth B.
Q – I am a widow, age 62. I am employed and have an annual income of $50,000. I have two children who are the beneficiaries of my estate. I have about $200.000 in RRSPs and own a condo with no mortgage, which is valued at approximately $250,000. Is there any way of avoiding estate taxes on the RRSPs upon my passing? I have no other investments. Would having a first right of survivorship help? – Marsha N.
Q – My wife turns 71 in October this year and has an RRSP account. When should she convert it into a RRIF, and when will it be necessary to make a minimum RRIF withdrawal? How does one determine the minimum percentage applied, and who is responsible for calculating this obligatory amount if the account is self directed? – Bryan N., B.C.
Q – I have just retired and have an RRSP for myself and a spousal one for my wife. Can I combine the two and draw on it? If I can’t do that, do I withdraw the minimum amount on one fund at a time? Does this start when I am 72? I was reading that it would be best to wait till December of that year to start. – Joe
Q – Next year I will be receiving a $60,000 severance package, and I would like to know how best to invest this. I was told I could put the money into an RRSP with no problem, but come tax time, I would not get a refund on my taxes. Is it possible to deposit the money into a non-RRSP, withdraw it a later date, and then deposit into an RRSP without any penalties? – Terry D.
Q – My wife and I subscribe to the Income Investor. We find it very helpful. Earlier this year I transferred 25% of my new life income fund (LIF) to my RRSP. (This was in response to an initiative by the Financial Services Commission of Ontario.) My financial institution issued an official tax receipt for a contribution to a retirement savings plan. Should the institution have issued this receipt, since on the face of it, my RRSP contribution room is thereby reduced? In addition, it strikes me that I previously received a reduction in my taxable income when the funds were originally contributed to the LIF. Thanks. – David M., Ottawa
We spend years coaxing, building, nurturing our registered retirement savings plans, or RRSPs. When it comes to registered retirement income funds, or RRIFs, however, many of us simply treat them like a bridge to be crossed when they get there.
Q – I understand that our Old Age Security pension will be clawed back if our earnings are too high. We are considering withdrawing all our RRSP savings (not spending the money) before age 65 to reduce or eliminate the clawback. We plan to retire at 60. Any advice? Thanks! – Randy and Pat, Alberta
No matter what time of the year it is, one of the most popular questions I get is whether it makes sense to buy RRSPs. I remember coming out of university and my father telling me I should invest in RRSPs for retirement. When I asked him why, he simply said, “It’s a good investment.”
