We like to tackle our taxes early in the year, which means assessing last year’s tax situation quickly so we can take advantage of RRSP contributions in the first 60 days of the New Year.
Here’s the quick and dirty tax situation for our household: Since I earn a salary at my day job we’ve set up a corporation for our online business activities and stream dividends to my stay-at-home wife (Lindsay) to smooth out our income and save on taxes.
For years I’ve been catching up on RRSP contributions so I would typically get a big refund. Meanwhile, without any deductions, Lindsay would owe a few thousand dollars each year. The easy way to solve that was to make sure my refund at least matched what Lindsay owed.
That has worked out great for the past few years but I finally maxed out my RRSP contributions and now can only contribute around $3,600 per year. This is a problem.
Also, we took out more money from the business last year (because no raise), which means more taxes owing for Lindsay, which means instalment payments this year (boo!) if we don’t find a way to reduce her tax bill.
The answer? Contribute to Lindsay’s RRSP.
A Wealthsimple RRSP
She opened an account at Wealthsimple and transferred a small RRSP balance from another bank to get started. As an incentive Wealthsimple will pick up any fees for RRSP transfers over $5,000.
The transfer was ridiculously simple. She selected from a list of Canadian banks, entered her RRSP account number, uploaded her latest statement, and signed electronically. Wealthsimple completed the transfer form and sent it to the bank. The process takes anywhere from 3-5 business days. She didn’t have to leave the couch.
We’re still determining the optimal amount to contribute as a lump sum to lower her tax bill and avoid instalment payments. She has over $20,000 in available contribution room to work with, so we’ve got options for this year and likely next year as well. Keeping track of her contributions will be a breeze through the new and sophisticated Wealthsimple RRSP contribution tracker tool.
Once we know how much to contribute Lindsay will make the deposit into her new Wealthsimple RRSP growth portfolio made up of the following holdings:
You better believe Lindsay used my referral link when she opened her account.
Make sure you use a referral link, too, when you open your Wealthsimple account. You’ll get a $50 cash bonus when you open and fund an account with $500 within 45 days.
The basic management fee for accounts under $100,000 is 0.50 percent. That’s less than one-quarter of the average mutual fund portfolio (which can be higher than 2 percent).
I didn’t know this before Lindsay signed up but there are some other cool incentives for Wealthsimple members to enhance their experience and save money.
For instance, if you make your account more secure by turning on two-step verification you’ll get an extra $100 managed free.
Turn on an active auto-deposit of at least $50 per month and you’ll get an additional $1,000 managed free.
Login to the Wealthsimple mobile app and get another $100 managed free.
Finally, when you become a high roller with $100,000 or more you’ll upgrade to Wealthsimple Black. Perks include:
- VIP airline lounge access for you and a guest
- A lower 0.40% management fee
- One-on-one financial coaching
- Tax-efficient accounts
While she was at it, Lindsay opened a Wealthsimple Smart Savings account. She called it her rainy day savings account. I know that’s code for her Lululemon fund.
The Smart Savings account comes with a 2 percent interest rate without annoying account minimums or introductory promotional rates.
Best of all, free unlimited transactions – so you can contribute or withdraw as often as you like with no fees.
You guys know I’m a hands-on do-it-yourself investor and have no problem building a portfolio of index funds and ETFs to manage on my own. But that’s not for everyone. Heck, that’s not even for most people.
I’d argue that most people would be better off with a hands-off automated solution like what Wealthsimple has to offer.
You’ll get the benefits of modern portfolio theory with low fees and globally diversified investments that get automatically rebalanced as you add new money and markets move around.
The amount of money you’ll save on investment fees over your lifetime should be enough to hire a fee-only planner to help you with financial decisions that really matter, plus max out your annual TFSA contribution, RESP contribution, take a family vacation, and still have money leftover for weekly brunch.
If you’re sceptical, take them up on a complimentary portfolio review where a Wealthsimple expert will give you a free second opinion on your investments and financial plan.