I received an E-Mail over the weekend from a Canadian business journalist (L.M.) asking me about my RSP investing activities for this year with specifics on whether I’m investing, where and what alternatives I’m taking if not.
As I’ve mentioned in many previous posts investing in one specific account (RSP, TFSA, Non-registered, etc) should be about balance and that always depends on each individual investor; their tax bracket, financial situation, skills and need for income.
Generally I make RSP contributions each year and this year was no different except for needing to repay a small portion of the Home Buyers Plan (HBP) loan from 2009 when we purchased our first home and that I plan on making my first spousal RSP contribution (having just gotten married in early September). My wife’s RSP will be organized very simply: a couch potato portfolio of TD Index mutual funds (E-Series). She won’t be making any contributions herself this year because she’s completing her last year of professional training and her income was minimal. For 2010 my contributions to my RSP will be a little less as we’ve had a wedding to pay for, I’m earning the sole income and the interest rate on our mortgage (3.64% fixed) is low enough that we feel making a few additional payments is better financially than contributing solely to an RSP or TFSA alone.
Making regular contributions during the year rather than one lump sum before the RSP deadline has always been my approach although this year we have not contributed any new money to our TFSA’s. As I said for my wife an indexed strategy is the approach for her RSP and with mine I’ve largely converted my contributions into USD and set them into cash in my US/Int RSP account of dividend paying stocks. The reasoning for placing it in cash is for two reasons; the relative fair value of many US based stocks and the remaining uncertainty of where the US economy is heading (recovery vs. stagnation). I’ve never been afraid to sit in cash waiting for opportunities and my cash position is low (15%) relative to the amount in equity in that portfolio based on my age.
In future years a focus on savings will be much larger as we continue to live off my income and place my wife’s into savings. Its a strategy we’ve had, and that’s worked well, since we merged our finances and got engaged in 2008/2009. We keep costs to a minimum, track what we spend and are happy making small sacrifices (we have one vehicle and I walk 20 minutes to work) so we can pay off half our mortgage within 5 years. With children likely in the future in the next 24 months staying on track is very important for us so we have the financial flexibility to make choices that allow us to focus on family.
So to condense: no TFSA contributions this year, a small RSP contribution but some has gone to repay the HBP and to make a spousal contribution for the first time. My wife’s strategy is indexed while mine is being placed into cash (USD) while I wait for equity opportunities in the US & International markets. The tax return will be placed into savings.
I am surprised you are still putting money in your RRSP given that you will be receiving cheques from HOOPP in your old age.
I'm no longer working fulltime at the hospital so my HOOPP contributions are much less now than they were. I'm making the same contribution to my RSP that I would to HOOPP and will continue to unless I go back to the hospital at some point in the future. Whether that split at retirement is 80/20 or 20/80 won't make a huge difference since I intend to retire off the non-registered portfolio and maximize spousal contributions in future years.
nice post, looks really good!
If you are planning on living off your dividends from your non-registered portfolio, why even bother putting money in your RSP at all?
Interesting thoughts. Anything that will allow someone more financial flexibility and give them more choices in the future offers the chances for greater financial success.