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Wealth Professional | 12 Sep 2014, 11:11 AM Agree 0
The grand man of Canadian capital markets sat for a Q&A in the latest issue of WP. The master was in classic form.
  • Michel Guimond | 12 Sep 2014, 01:39 PM Agree 0
    One can only be impressed with Mr. Jarislowsky's reputation, but his comment on RRSPs is baloney. We can mathematically prove that RRSPs are good to great vehicle for most people. The deduction and sheltering beats the advantageous tax rate. And if done properly, most people will pay lesser marginal tax rate at retirement than while at work. His comment is so unfortunate given that already so few people invest in RRSPs. Sincerely. Michel Guimond
  • John Wallace | 12 Sep 2014, 03:01 PM Agree 0
    I agree that for most people, RRSPs make sense. One good example, the spousal rrsp. When spouse A earns good income and spouse B very little, it's tough to find a better solution than a spousal plan.
  • Judy Mulder | 12 Sep 2014, 03:55 PM Agree 0
    I agree with both comments and take an individual view for each client based on their personal information. Do they have a pension plan that will cover their basic retirement expenses and what is the spread between current tax rates and retirement tax rates? For the average Canadian without a pension and paying tax at a rate of 25% or more while employed, I'd suggest both an RSP and TFSA. Each client is unique and each situation is also unique. KYC
  • Denzil FEINBERG CFP R.F.P. | 12 Sep 2014, 04:06 PM Agree 0
    Certainly do respect eminent Stephen Jarislowsky, yet he should be fair to himself and net 50% clients to invest the tax savings in open holdings which deliver the tax-favoured dividends & capital gains. Total after-tax returns from both after decades should be far more than zero-RRSPs. Even better to feel that federal & provincial taxes paid half of gains! profits.
  • Daniel Collison | 12 Sep 2014, 06:26 PM Agree 0
    Mr. Jarislowsky might be correct in his assessment if there is no investment of the refunds brought on by RRSP contributions, but once any refunds have been invested in RRSPs, non-registerred funds, or TFSAs, the numbers move towards the benefits of using RRSPs. Without the refund being invested, he is very correct . . . especially if TFSAs are being compared long-term in comparison to RRSPs or non-registered funds.
  • Peter Redolfi MBA, CFP, CIM | 15 Sep 2014, 10:35 AM Agree 0
    Assuming the original investment amount is the same (RSP = Non-Registered account plus income taxes paid) and the RSP and non-registered account have the same equities, generating dividends and capital gains, taxed at the same rate, the ultimate cash flow to the individual is the same. If the portfolio contains "investment income" which is fully taxable, the non-registered fund will under-perform. Ideally, place equities generating capital gains and dividends in non-registered, and bonds in RSP.
  • Larry Gaucher, BSA, CFP, CFA | 15 Sep 2014, 10:56 PM Agree 0
    I find it funny/ridiculous that people do not see that RRSPs have a great advantage over non registered accounts under most circumstances. No one argues that non registered accounts are better than TFSAs because TFSA give you tax free compounding with no tax paid in the end. No taxes in a TFSA are better than paying some tax even if it is taxed as capital gains and only being taxed at 50% of the regular marginal tax rate. RRSPs will give you the same after tax return as a TFSA if the client withdraws the money at the same tax bracket as he made the original contribution. He will be better off if he withdraws the money at a lower tax bracket than when he made the original contribution and worse off if he takes the money out at a higher tax bracket than when he made the original contribution. But even if he takes it out in a higher tax bracket at retirement he will still probably better off after tax than having used a non registered account. The only time he may be worse off is if he takes it out at a higher tax bracket and gets OAS clawback at the same time and still he may not be worse off. Here is a comparison of a TFSA vs RRSP. We will assume that he was in a 40% tax bracket when he made the contribution and at a 40% tax bracket when he withdrew the money from his RRSP. Let us assume $1,000 of income, he can chose to pay $400 for taxes and have $600 to contribute to his TFSA or he could defer the tax and put the full $1,000 into an RRSP. Let us assume that he does both and buys the same investment in both the TFSA and RRSP and sometime in the future the investment doubles so now he has $2,000 in his RRSP and $1,200 in his TFSA and he decides to withdraw the money out of both. He will withdraw $1,200 from his TFSA and this will all be tax free, he withdraws $2,000 from his RRSPs and pays the 40% tax = to $800 which leaves him with $1,200 tax free. In this example he is left with $1,200 tax free whether he used a TFSA or an RRSP and both are better than if he had a non registered account because he would have paid some tax which is not as good as paying no tax. People are focused on how much tax they pay on RRSP contributions and not on the tax they saved. The bottom line is that a RRSP gives you tax free compounding on your money the same as a TFSA assuming the same tax bracket going in as out as coming out. If Stephan would stop to do the numbers( surprising for an analyst) he would not make the comments he made.
  • Patrick Sullivan, CFA | 16 Sep 2014, 09:53 AM Agree 0
    I don't know if the lowered taxable income early in life, or the benefits of tax-sheltered growth are intentionally being ignored in the presentation of these 'hard truths and deep wisdom.'

    I would recommend that if Wealth Professional wants to avoid being known as a blogging site instead of reputable source of financial insight, they should be wary before dubbing incomplete analysis and advice as "perfectly rational."

    I look forward to the next article touting the wisdom in not getting basic vaccinations for your children. That would be on par with the advice in this column.
  • Bob Jamieson, CFP | 17 Sep 2014, 04:35 PM Agree 0
    The WP headline, and most of the comments, seem to ignore the fact the article's recommendation was made for people who would have a $2M RRIF, and so would be looking at a post-age 71 retirement income of at least $150,000 from this investment alone.

    It is true that for this category of individual an RRSP might not make the most sense.
    However, for the vast majority of Canadians who earn a reasonable income, the RRSP should be the first savings vehicle they look at.
  • Joe Prins | 20 Sep 2014, 06:22 PM Agree 0
    Personally, I think Mr. Jarislowsky suffers from the HNW syndrome. One tends to forget that there are Low or No net worth people in this country. It is a lot more work and hand holding for $ 100.00 a month then it is to look after 2 mil folk. Some people actually do not have the assists to diversify across various investment vehicles. It is probably not politically correct to assume the home made adage: HNW people may be better off, but L or NNW folk need to save. RRSP's are still the best way to do that.
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