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Common Questions

Recently we have received a lot of random questions from people concerned about what has been going on with RRSP, the budget, the markets etc.. In reviewing and responding to them, I thought that these ten examples listed below might be of interest to a wide range of readers.

(Disclaimer: Do NOT act solely on anything I say here. Use this as an idea only and take it to someone who knows more of your specific situation)


Common Questions



 1.      I am presently investing in GICs, however I have been to a free seminar on information pertaining to investing in the Foreign Exchange Market (FOREX) using a software called…You make money as currencies rise and fall against each other. The price of this software is $4000… Is it safe or is it risky? 

Predicting the future for anything is impossible. Predicting the future of currency exchange rates given both the size and volatility of the market is even harder. Unlike the stock markets where the prices are fixed, currency traders get different priced based on the amount they trade. (The currency market, according to wikipedia trades THREE TRILLION –THREE THOUSAND BILLION- a day, plus another 2.1 TRILLION in derivatives. The TSX traded $8 Billion yesterday)

I personally break into a sweat trying to decide whether to convert $50 or $100 into US dollars the day before a vacation so… I’d say “risky”. Especially if your current “investment” experience consists of buying guaranteed, insured, fixed-rate certificates. Perhaps instead consider selling FOREX software for $4000…


  2.      Kevin, when my Mother became ill, all my savings went towards her needs. I borrowed $10,000 dollars from the Lifelong Learning Program (RRSP) and used only $4,000 dollars but never repaid the remainder to date. What are the repercussions of doing something like this?  Will Canada Revenue demand I return the unused portion?  What happens to the RRSP account when I take money out for Lifelong Learning? 

Assuming you properly qualified for the LLP when you made the withdrawal, CRA (Canada Revenue Agency) does not officially care how you spent the money though they will expect you to return 1/10th of the money to the RRSP per year over the next 10 years. If you do not, you will be required to claim that 1/10th in that year’s income. You should check with a tax accountant to find out if any of your mother’s medical expenses can be used as tax deductions for you to offset this possible future income tax liability.  



3.      I am a new teacher, have my T4 in hand and will be contributing to my RRSP for the second year this year. WHERE do I find how much I can contribute based on my earnings? I have had money taken out for a teachers’ pension by my board, and have a box that says pension adjustment on my T4. Help! 

You should see your RRSP limit printed on your Notice of Assessment that you probably received in May 2007 tell you your 2007 RRSP limits. If you cannot locate that handily you can contact the Tax Information Phone Service (TIPS) at 1-800-267-6999. Your RRSP limit is 18% of your earned income from the previous year LESS any Pension Adjustment.  



4.      What is the difference between RRSPs and this new tax free savings account that was just announced?  Are there fees with this new account? 
This new TFSA (tax free savings account) is different from an RRSP in some very key ways. First there is no deduction for money deposited into the TSFA account. However, the money grows tax free and is NOT taxed when it is withdrawn. The $5000 limit room rolls over from age 18 for any year you do not do a full $5000. So it should be seen as either an extra non-RRSP retirement account or as a simple non-retirement account. I am, as yet, not sure which really. It depends on whether you lose room when you make withdrawals –which I assume. Or you do not. I’ll NOT get right on digging up this info because a. it does not happen for another ten months and b. the rules may change before then. There should not be fees aside from any purchase or trading fees normally charged to you for investing.  


5.      Where's the best place to get a mortgage?  Bank or Mortgage Broker? 

Generally, my clients have reported better results using a mortgage broker since they can shop a lot of different banks and trust companies.


 6.      My employer deducts money for RPP.... what is the difference between this and an RRSP?  And if I quit my current job, do I get the RPP money back? 

An RPP is a Registered Pension Plan and it comes in two flavours: Defined Contribution-DC and Defined Benefit-DB. DC plans over the employee some investment options and then the company provides contributions to be invested as the employee desires. It is very similar to an RRSP in that sense. A DB plan pays out a set guaranteed amount based on your income and number of years worked. If you quit that job you will receive some amount from the pension plan to transfer to a Locked-In Retiring Account or LIRA. It can also usually be transferred to another pension plan or left to grow to pay out some amount at retirement.   


7.      I just contributed to (some bank’s) funds; latin america, aggressive growth and moderate growth funds.  How much should I monitor these funds or do I let rely on (the same bank’s) annual reporting??  

Whoah babe, ride the wave! Investing in volatile aggressive specialized mutual funds means you need to be able to stomach the downturns. And by “downturns” I mean drops in value of 40, 50 or 70%. As long as you are comfortable adding more money when these drops happen then you will be okay. The key question to ask yourself would be if you would be still investing in those type of mutual funds if they had been showing a one year return of MINUS 30% instead of PLUS 30%.  


8.      What’s the easiest way for someone to save money that my not be able to put away a set amount each month? 

Get someone else to do it for you! …failing that, instead of setting up a monthly amount, set aside a set percentage of your paycheque into a separate account each time you receive one. This requires more work than a monthly plan so tends to be less successful but for some contract workers this is the best option.  Another alternative would be to use a quarterly or annual bonus and simply make the total RRSP deposit from that.  



9.      I'm a 53 year old female with an annual income of $10,500 and I have $18,000 in registered savings. I never eat out or go for entertainment out of the home that costs money. What sort of money can I set aside for retirement?  Should I move out of Calgary as it seems to be getting more expensive. 

If you are in the situation described above I would suggest you do not need to worry about setting any more money aside for retirement. The combination of CPP, OAS and GIS (Guaranteed Income Supplement) from the federal government should be able to provide an annual retirement income that is equal to your current income. Moving to a lower cost centre or a another province with less inflation –which is any other province except Alberta- may reduce your living expenses and, if you are a homeowner, may free up a couple hundred thousand dollars that can then be invested to provide an income supplement. This is, of course, only looking at things from a narrow financial point of view. 



10.  I have been getting conflicting advise regarding setting up an RRSP/RESP for my infant son.  Should my I increase my personal investments so I have more to give him when he goes to university?  Or do I invest every year in his name? 

Next to the perennial questions of “Mortgage vs RRSPs?” and “Would you rather marry a Betty or a Veronica?” this is one of the questions I get asked a lot. 


My first nagging, meddling big brother question would be:

Are you sure that is the only two choices for your money?  Some people buy a bigger house or a nicer car or take a longer vacation or eat $100 dinners out two more times a month then sincerely believe they need to shortchange either their kid’s or their own future…ahem… If you truly cannot maximize your RRSP and do an RESP as well then you need to consider what your tax bracket is, what you expect your income to be in the future, what other resources are available for your baby’s education, etc. Putting more into an RRSP usually gives you a bigger bang for the buck BUT the RESP limits are not as easy to catch up in the future and, will the extra in your RRSP still be locked away in the RRSP when your son needs education funds? Ie. will you still be working? Another factor to consider is if your current income is low enough, then the deduction on the RRSP may be LOWER than the matching grant of 20,30 or 40% on the RESP contribution. As a rough compromise, max the RRSP and put the tax refund into the RESP.