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E&Y's Top 10 Tax Filing Tips (pg. 4)
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| rabbitjoker |
| quote: | Originally posted by Riggz
that $140/month of savings exists for ALL 25 years, not just after the HBP "loan" is "paid off"....it's $140/month that is getting contributed to your RRSP.....
Using your assumptions, in the "with HBP" scenario you actually end up with roughly $173k in your RRSP after 25 years, not $44k... |
Ah ha! That is what you were talking about. I see it now. Got ya. Danke.
Still, there is a $40k (23%) difference between leaving the $20k in the RSP or borrowing against it. 23% is not insignificant IMO.
| quote: | Originally posted by Riggz
Interest is still compounded while you are paying back the RSP within the entire 25 year period even though it is not the full $20,000. You will still earn interest on those monthly payments when invested properly. |
Yes - that is what I neglected to include (see above). |
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| Pettiscool |
| quote: | Originally posted by rabbitjoker
Danke.
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all this technical talk is hurting my head.....
the ONLY reason i borrowed from my rrsp is because i had NO rrsp to begin with, i opened a brand new one tempoarily....only because i am going to buy a house regardless this year...... so if i didnt transfer my savings into an rrsp then i wouldnt have gotten any money whatsoever and now i have an extra $1400 towards my downpayment which is tons of saving on a long term mortgage, not to mention the immediate tax benefits......
so you cant say your 100% against borrowing from your rrsp , because i my situation, it makes complete sense. |
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| JRinger |
| quote: | Originally posted by rabbitjoker
Still, there is a $40k (23%) difference between leaving the $20k in the RSP or borrowing against it. 23% is not insignificant IMO |
You're still not getting it. You're only looking at one very simplistic scenario, with one set of assumptions and one time horizon. As I said numerous times, try reworking your figures assuming you return a more reasonable 7%-8% on your RRSP. Also try looking at scenarios where refinancing comes into the equation. There are so many other factors to consider -- different assumptions about rates of return or mortgages rates only just begin to scratch the surface. Some people can use the mortgage savings to put into house repairs and can actually generate a greater long-term return through that, some people use the HBP to secure a mortgage when they otherwise wouldn't be able to, some people benefit from having greater home equity down the road if they need to get a home equity loan, some people benefit from being able to receive larger tax deductions down the road when their top marginal tax rate is greater than it is today....the list goes on and on....just as there are many reasons why one might benefit from using the HBP, there are reasons why one might not....there is no global "right" answer to which is best for all individuals |
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| rabbitjoker |
| quote: | Originally posted by JRinger
try reworking your figures assuming you return a more reasonable 7%-8% on your RRSP. |
If my advisor provided me a 7% return on my RSP after 25 years (less than 5% after inflation) I would fire him.
| quote: | Originally posted by JRinger
there is no global "right" answer to which is best for all individuals |
I never said I had the answer for others. READ:
| quote: | Originally posted by rabbitjoker
I'm not a CFP nor am I interested in being anybody's financial planner - I'm simply offering my opinion (which is to NOT borrow against an RSP to buy a house). |
| quote: | Originally posted by rabbitjoker
My personal decision would be the same - to maximize long term value I'd rather have my money in my RSP than in my mortgage. |
| quote: | Originally posted by rabbitjoker
I will not be borrowing from my RSP to finance my house purchase. I do not see the long term value in it. |
Someone needs to be less aggressive in dealing with people and listen to what they have to say with more detail (could not listening to details be the reason for 7% return? :eek: ).
The tone of your response in this discussion is unbelievable! |
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| JRinger |
| quote: | Originally posted by rabbitjoker
If my advisor provided me a 7% return on my RSP after 25 years (less than 5% after inflation) I would fire him. |
7%-8% is a reasonable expectation for PLANNING PURPOSES. When planning for retirement, you should be realistic, but conservative. If you're making long-term decisions on the assumption that you will return 9%-10% long-term you're setting yourself for big problems -- I defy you to find me a trained professional willing to use 10% to plan an individual's retirement. Individuals are not like corporations -- they have limited capacity to make up deficits in their retirement savings when they're 60 years old.
| quote: | Originally posted by rabbitjoker
I never said I had the answer for others. READ: |
READ:. This a pretty general statement
| quote: | | Originally posted by rabbitjoker Personally, I'm 100% against using one's RSP as a loan for a down payment on a house. |
| quote: | Originally posted by rabbitjoker Someone needs to be less aggressive in dealing with people and listen to what they have to say more detail (could not listening to details be the reason for 7% return? :eek: ).
The tone of your response in this discussion is unbelievable! |
My apologies if I'm being overly agressive. I just find it asinine when people insinuate that they have simple answers to complex and situational financial planning issues, and then back it up with incorrect, questionable and/or incomplete examples. |
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| Abercrombie |
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| MarkT |
I've been thinking about this 10% return thing.
true or false...the larger, more diversified your portfolio, the more likely you are able to realize a 10% return over time?
i.e. if someone has a small portfolio (let's say just the 20k in RRSPs they intend to use under the HBP), isn't it reasonable to assume that 10% is *way* high for expected returns and that their mortgage interest savings would in fact exceed their "lost time" on their RRSP investment if they paid it back quickly enough?
for some people, the improved cash flow of a lower mortgage (or the ability to buy "more" with that HBP option) outweighs the benefits of a bit more money in the long term in their portfolio. |
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| Jem_hadar |
| quote: | Originally posted by MarkT
more diversified your portfolio, |
Statistically they always do better.
Porfolios diversified internationally - those are the portfolios that have the best overall returns!
Even if you have a well diversified Canadian portfolio or American portfolio, it has been shown/proven that if you were to diversify internationally, you will do better - have better overall returns. |
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| dEsidEL |
| quote: | Originally posted by Abercrombie
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lol.. only on the internet do you find arguments over tax filing within a trance forum :conf:
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| MarkT |
shameless PCF plug:
PC Financial and Firstline Mortgages, both part of CIBC, have an exclusive (AFAIK) arrangement with CMHC to offer a 30 year amortization option for a limited time (3-4 months?) prior to the anticipated widespread rollout to all lenders. Normally the max. amortization in Canada is 25 yrs (the U.S. has had the 30 yr. option for some time).
hopefully no one here would need a 30 yr am., but ya never know! ;) |
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| rabbitjoker |
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