Weekend Reading: Ask Me Anything About Money Edition

It seemed like I was everywhere but here this week. The Canadian Financial Summit launched on Thursday and my 30-minute retirement readiness interview with host Kyle Prevost was included in Friday’s line-up. There’s still time to catch Saturday’s sessions and/or get the All Access Pass for instant lifetime access to all three days (25+ sessions) for just $97.

I also hosted my first AMA (ask me anything) on Reddit this past Thursday. What a fun experience answering practical money questions from the Personal Finance Canada community that boasts more than 131,000 members. You can read the entire AMA thread here.

Both the Summit and AMA sent over dozens of new subscribers, so thanks for joining our community here and welcome!

As many of you know, I also post a ‘Money Bag‘ feature from time-to-time where I answer reader questions. I’m hoping to publish another one in early October so I’d love to hear your burning questions about personal finance, investing, or retirement. Go ahead and ask me anything in the comments here and I might feature your question in the next edition of the Money Bag.

Speaking of questions, my latest Toronto Star column on getting the best mortgage deal generated a bunch of feedback from readers. Not surprisingly, the angriest and most critical replies came from mortgage brokers – who I suggested you could side-step by using a rate comparison site. It brings to mind this famous Upton Sinclair quote:

“It is difficult to get a man to understand something, when his salary depends on him not understanding it.”

On a personal note, I’ve got some upcoming travel that will have me leaving behind this unpleasant southern Alberta snow storm and heading to Seattle for a couple of days. I’ll be at the Los Angelas Rams vs. Seattle Seahawks game Thursday night, watching my first live NFL game in 20 years. Should be fun!

The following week my wife and I are off to Vancouver to celebrate our anniversary with a kid-free weekend. Thanks to the RBC WestJet World Elite MasterCard’s latest $250 welcome bonus (and first-year free) and companion voucher the flight cost just $99+ tax.

Despite the busy travel schedule I’ve got a great line-up of posts to share here next week, including a look at the ridiculous claim that passive investing is in a bubble, plus we’ll take a look at preparing for the next recession.

Weekend Reading:

Stephen Weyman at Credit Card Genius shares seven things you’re paying too much for while travelling.

Canadians might be finally getting the message about low cost investing. ETF sales eclipsed mutual fund sales in August. Despite the positive sales, we still have a long way to go. Mutual fund assets sit at $1.57 trillion compared to ETF assets of $186 billion.

Mark Seed interviews Jonathan Chevreau to discuss how active and passive investing can exist in retirement harmony.

And here’s another good one from Mark about why you should consider downsizing:

“Downsizing can open up a new chapter for you, too. Whether you are an empty-nester, single, a couple with no kids or you’re simply aspiring to start fresh – downsizing can offer a host of environmental, physical, mental and financial benefits.”

Bridget Casey wound up with an unexpected LIRA after a temporary work contract ended. Here she digs into what exactly a LIRA is and what to do with it.

Tax credits, tax rates, and tax deductions. Desirae Odjick decodes the 2019 election promises.

Nick Magguilli (Of Dollars and Data) explains why there are no secrets and no easy answers in investing.

Rob McLister (RateSpy) gives a thorough explanation of how much you can borrow with a reverse mortgage.

One of the biggest complaints about the Canada Pension Plan is its meagre survivor’s benefit. Rob Carrick digs into that and argues the cost of a strong CPP is that the survivor’s benefit is pretty bad.

  • Did you know the average CPP payment in 2019 is $679.16 per month (or about $8,150 per year)?

Jonathan Chevreau explains how to avoid tax nightmares when RRIF withdrawals start.

An interesting first person account on how long it takes to get used to being retired:

“I did not miss work, but I did miss the camaraderie with my peers a great deal. So, I became a social animal going out for far more coffee klatches and two-hour lunches with friends and ex-colleagues than I could afford on my reduced income. As time passed, it became boring and purposeless to do this several times a week anyway.”

Finally, a shocking claim from Telus that a former senior manager used her corporate credit card for more than $180,000 in personal expenses. Wow.

Have a great weekend, everyone!

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19 Comments

  1. Mary on September 28, 2019 at 2:13 pm

    Hello Robb,

    I enjoyed your summit talk very much. One question that I cannot seem to find an answer to if the impact of selling a property once someone/couple are receiving OAS payments. My husband and I purchased a rental condo so that we could help the kids possibly live in Vancouver. If we sell it, we will likely net 250,000 after paying the mortgage and capital gains. We will be forced to sell, likely within the next 5 years, as the developer who recently bought the retail portion plus the penthouse, is not known to sit on property. If we sell once we are getting OAS, will the clawback be permanent? Our combined income will drop way back to normal (30% tax bracket) the following year.

    Thanks! I can’t seem to find the answer to this one anywhere.

    Mary

    • Robb Engen on September 28, 2019 at 4:00 pm

      Hi Mary, thanks so much. I’m glad you enjoyed my interview at the Summit.

      To answer your question, you should only have your OAS benefits clawed back in the year you claim the capital gain. Once your income returns to normal then your OAS benefits would also normalize.

      That said, they *may* start withholding some of your monthly benefits the following year, but you can fill out a “request to reduce OAS recovery tax” form to get that straightened out: http://fundata.com/Analytics/ETFs.aspx

      To be clear, your OAS benefits should return to normal after the one-time capital gain.

      • Mary on September 28, 2019 at 9:30 pm

        Thanks so much Robb, and the tip about the form is good to keep in the back pocket. You never know when the government might shift the ground rules.

      • Mary on September 28, 2019 at 9:33 pm

        And thanks to Aaron as well. Hadn’t thought about that and there may well be a bit more room. As to timing of the sale, it’ll be whenever the developer wants to put out the offer – but hopefully before we want to start taking OAS.

    • Aaron on September 28, 2019 at 8:45 pm

      Mary, if you or your husband have any RRSP room remaining, you may look to make a contribution and claim a deduction to offset some of the capital gains tax in the year of sale, considering that you will be in a higher than normal tax bracket that year.

      Also, not sure of your age or overall plans, but you could consider not starting OAS until the year after you sell the property.

  2. Kent on September 28, 2019 at 3:29 pm

    Ask you anything? Okay.

    What is the single best performing ( net gain) Canadian or American ETF over a recent
    1, 3 and 5 year span?

    Thank you in advance.

    • Robb Engen on September 28, 2019 at 3:50 pm

      Hi Kent, here you go:

      1 year return | BetaPro Canadian Gold Miners 2x Daily Bull (HGU) – 167.66%
      3 year annual return | BetaPro NASDAQ-100 2x Daily Bull ETF (HQU) – 29.74%
      5 year annual return | iShares S&P/TSX Capped Info Tech Ix ETF (XIT) – 23.03%

      Note that many of those BetaPro leveraged ETFs also make up some of the worst performing funds, so it cuts both ways.

      Source: http://fundata.com/Analytics/ETFs.aspx

      • Kent on September 28, 2019 at 3:59 pm

        Thanks for your rapid response.

        OK. So what about non beta, non leveraged ETF suitable for a novice investor?

        Say, something comparable to VFV?

        • Robb Engen on September 28, 2019 at 4:07 pm

          Well, those are two different questions (highest past returns, versus a suitable diversified investment for a novice investor).

          We shouldn’t base our investment decisions on past returns.

          That said, you can use the link I provided to sort the funds by category. Sort by U.S. equity and click the 5-year column. You’ll find familiar names like VFV, XUS, and VUN in the top performing funds.

          My advice for a novice investor who is okay with trying a DIY approach is to go with one of the asset allocation ETFs like VBAL or VGRO (or XBAL, XGRO. Or ZBAL, ZGRO). One fund, global diversification, and a low 0.20 – 0.25% fee.

          • Kent on September 28, 2019 at 5:59 pm

            Robb,
            Information and advice gratefully received.
            I enjoy your educational blog.



  3. Arthur L. Keith on September 28, 2019 at 7:46 pm

    My question is about starting OAS.

    I am 69 now, and am waiting until at least age 70 to start my OAS (maximizing my deferral enhancement). I am an immigrant, and had the ten years minimum by age 65 but will not have 40 years residency in Canada when I turn 70, so I would get a partial OAS pension if I apply for it to start then.

    I inquired at the OAS toll-free number and was told (after a long time on hold) that the OAS amount calculation ends at age 65. However, that didn’t sound right (the law apparently doesn’t state that). I called again later and spoke with a different person. I was told, after the obligatory hold time, that I could wait longer and have my OAS pension increased (for more Canadian resident time).

    Which is correct? I might have to wait to start at age 86 to get the full OAS pension amount. Do I have that option?

    • Robb Engen on September 29, 2019 at 9:53 am

      Hi Arthur, thanks for this question. My understanding is the OAS amount calculation ends at 65. The deferral of up to five years enhances that benefit, but does not increase your years living in Canada, if that makes sense.

      You can apply for your OAS pension up to 11 months before you want your OAS pension to start.

      Your deferred OAS pension will start on the date you indicate in writing on your Application for the Old Age Security Pension and the Guaranteed Income Supplement.

      There is no financial advantage in deferring your OAS pension after age 70. In fact, you risk losing benefits. Since you’re already 69, you should apply right away and indicate your start date for your 70th birthday.

      Application form: https://catalogue.servicecanada.gc.ca/content/EForms/en/Detail.html?Form=ISP3550

  4. Aaron on September 28, 2019 at 8:52 pm

    Hey Robb,

    Great stuff as always!

    It’s kind of funny but I had actually missed the MoneySense RRIF/tax article from Jon when it came out this week (I was busy at a conference) and only read it after you mentioned it as one of your weekend reads. I was a little surprised to see I was quoted in it! (He had asked me some questions about this stuff but it was months ago and this release wasn’t on my radar at all) Great to have you to show me where to find my quotes! Haha! Keep up the good work!

    • Robb Engen on September 29, 2019 at 9:56 am

      Hey Aaron, thanks for the kind words. Always a pleasant surprise to find a quote in the media, isn’t it?

  5. Rebecca on September 29, 2019 at 8:02 am

    Hi Robb,

    Question on RESP, first year post sec.

    My niece ended up withdrawing from Uni this year, after receiving the $5000 EAP from her RESP. She plans to take the year off and reapply next year for 2020 enrollment.

    Do you know what the implications are? Combed through a lot of text and could not find reference to this scenario.
    Thanks

    • Robb Engen on September 29, 2019 at 10:04 am

      Hi Rebecca, so I found this reference online:

      “The maximum amount in EAPs that can be made by one RESP promoter full-time student as soon as he/she qualifies to receive them is $5,000. After the student has completed 13 consecutive weeks in the qualifying educational program, there is no limit on the amount of EAPs that can be paid if the student continues to qualify to receive them.

      If there is a 12-month period in which the student is not enrolled in a qualifying educational program for 13 consecutive weeks, the $5,000 maximum applies again.

      If the beneficiary requires more than this amount, the client may make a written request to Human Resources and Skills Development (HRSD) providing proof of the additional costs to the beneficiary.”

      ——-

      So, if I’m interpreting that correctly your niece must have been going into her first year of studies, received the maximum $5,000 in EAP, but then withdrew from school. Since she won’t be enrolled for 13 consecutive weeks AND there will likely be a 12 month period before she’s enrolled again, she’ll once again only be eligible for $5,000 in EAP withdrawals.

  6. Wayne Kells on September 29, 2019 at 3:10 pm

    Hey Robb: if a robo-advisor holds say seven ETF’s, do they issue one T5 or seven separate ones?Thnx- Wayne

  7. Dan on September 30, 2019 at 6:20 pm

    What is the expected distribution for the all in one ETF
    VEQT

  8. Ronaldo on October 5, 2019 at 2:08 pm

    Rob would u agree with this article by David Stanley and if not what would u say also article 5 years ago: the point made by DS that a good dividend portfolio will outperform both mutul funds and etf’s and i believe he makes point here that since its been more than 10 years since a major market correction most etf’s risks may be understated as they do not include such a correction to factor in (if not here then someone else made this point). thks as always

    https://www.canadianmoneysaver.ca/total-return-investing-mutual-funds-etfs-or-individual-stocks/

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