Spouse RRSP


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pratickm   
Member since: Feb 04
Posts: 2831
Location: Toronto

Post ID: #PID Posted on: 22-12-10 12:18:11

I forgot to mention another key loss you'll have because of doing this HBP thing.
The $25K + $25K = $50K that you are withdrawing from RRSP for a period of 15 years is going to cost you dearly in terms of retirement savings.
Assuming a modest annualized returns of 8% (which has been historical for the Toronto stock exchange, for example), do the math of how much future savings you are giving up for 15 years.
You'll be surprised by how substantial that number is.


-----------------------------------------------------------------
"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"


Heart Stealer   
Member since: Feb 09
Posts: 80
Location: Canada

Post ID: #PID Posted on: 23-12-10 00:21:46

Quote:
Originally posted by pratickm

I forgot to mention another key loss you'll have because of doing this HBP thing.
The $25K + $25K = $50K that you are withdrawing from RRSP for a period of 15 years is going to cost you dearly in terms of retirement savings.
Assuming a modest annualized returns of 8% (which has been historical for the Toronto stock exchange, for example), do the math of how much future savings you are giving up for 15 years.
You'll be surprised by how substantial that number is.



That was awesome clarification!

Can you also please confirm if the RRSP witdrawl can be repaid sooner than 15 years?

Thanks very much Pratickm .



jigz787   
Member since: Aug 04
Posts: 773
Location: Toronto

Post ID: #PID Posted on: 23-12-10 15:35:15

Quote:
Originally posted by pratickm

I forgot to mention another key loss you'll have because of doing this HBP thing.
The $25K + $25K = $50K that you are withdrawing from RRSP for a period of 15 years is going to cost you dearly in terms of retirement savings.
Assuming a modest annualized returns of 8% (which has been historical for the Toronto stock exchange, for example), do the math of how much future savings you are giving up for 15 years.
You'll be surprised by how substantial that number is.



I personally don't like putting a single penny in RRSP at all.
However, having a repayment for next 15 years will be a forcefull savings (a good thing for me).. And as for the 8 % returns concerns, We can buy/sell our own choice of stocks in Self-directed RSP account.



pratickm   
Member since: Feb 04
Posts: 2831
Location: Toronto

Post ID: #PID Posted on: 23-12-10 18:07:15

Quote:
Originally posted by jigz787
I personally don't like putting a single penny in RRSP at all.
However, having a repayment for next 15 years will be a forcefull savings (a good thing for me)

That is of course your choice whether to save using RRSP or not.
The HBP offers you nothing in this case.
I don't understand how HBP is forced saving for you, but regular RRSP is not.
Quote:
And as for the 8 % returns concerns, We can buy/sell our own choice of stocks in Self-directed RSP account.
You didn't understand my point.
When you withdraw money from RRSP under the HBP program, you are forgoing growth.
Whether it is 2% or 8% or 20% is a different matter - the higher your rate of return, the more money you are losing by using the HBP.


-----------------------------------------------------------------
"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"


pratickm   
Member since: Feb 04
Posts: 2831
Location: Toronto

Post ID: #PID Posted on: 23-12-10 18:08:09

Quote:
Originally posted by Heart Stealer
Can you also please confirm if the RRSP witdrawl can be repaid sooner than 15 years?

Yes, you can pay it back any time before the 15 years.


-----------------------------------------------------------------
"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"


Heart Stealer   
Member since: Feb 09
Posts: 80
Location: Canada

Post ID: #PID Posted on: 23-12-10 20:02:16


So we withdraw RRSP @ TSX 13400 level under HBP and keep an eye and if it goes below these levels and we refund the HBP.

In that case we are not losing any growth in RRSP and avail growth in Real estate.

Is that correct?

Can you confirm?

Thanks



pratickm   
Member since: Feb 04
Posts: 2831
Location: Toronto

Post ID: #PID Posted on: 24-12-10 10:17:19

Quote:
Originally posted by Heart Stealer
So we withdraw RRSP @ TSX 13400 level under HBP and keep an eye and if it goes below these levels and we refund the HBP.

In that case we are not losing any growth in RRSP and avail growth in Real estate.

Is that correct?

Your rate of growth depends on what you invest in.
TSX index is just one of the things.
It is possible to invest so that you are not directly dependent on the index.

You are also losing out on the dividend growth if you look purely at the index number.

Also, the loss of contribution room is significant.

I'm not saying don't use the HBP - that program has its merits.
However, you have to be aware of the trade offs.
Unless you are able to withdraw some growth alongwith your capital from the RRSP under the HBP, I don't see any merit in doing this.
If someone is just "parking" money into RRSP for a few months to get the tax deduction and then withdrawing under HBP, it seems like a big waste.


-----------------------------------------------------------------
"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"


Contributors: pratickm(7) Heart Stealer(3) jigz787(2) Cougar(2)



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