Post # 46
I’m not sure about that, I would hope that your financial advisor would educate you on the different types of investments available in the US – hopefully one of the other bees can answer! I’m not super educated on this, I have limited knowledge due to my parents owning property in the us but they only worked in Canada.
ETA i found a Roth IRA when googling which is apparently the closest thing the US has to a TFSA.
Given your citizenship, I really have no idea what further implications may arise regarding taxes and estate planning. I would want to make sure it is very clear as it could cause you guys a lot of headaches down the road if you run into any “surprises”.
With a 4.5% interest rate,I would be paying cash. Our interest rate (in Canada, mind) is 2.7% – we are building a house right now. Even with such a low rate, I priced out the interest vs principal going against the mortgage , payments, etc, and there wasn’t a huge difference changing the % of our down payment.
Post # 47
Im currently reading Money – master the game by Anthony Robbins. Highly recommend it. I agree with a PP and that’s to invest anything yourself in a good index fund.
In the book Tony mentions that a 3rd of financial planners don’t even have a retirement plan so why would you listen to them? They dont even practice what they teach.
Also I recommend paying cash for the house.
Post # 48
sollyb : we have a small condo, we paid cash. We do this with everything. We feel free this way.
Post # 49
ariesscientist : they key with the stock market is to also not invest any money that you need in the short term. The market always bounces back, so you need to leave it alone until it recovers which could be several years. If your cousin was saving up to buy a house within a couple years that money had no business being in the market anyways. You also should always keep a liquid cash savings account for emergencies. If you can’t afford that you can’t afford to invest yet.
Post # 50
peachybee88 : “In Canada you only pay tax on any non registered funds withdrawn”
This simply isn’t true at all.
TFSAs aren’t taxed but they also aren’t registered plans. Registered plans (such as RRSPs, RIFs and RPPs) are indeed taxed when you withdraw them- in fact with registered plans they don’t just tax any interest earned, they tax the entire amount withdrawn- which can also bump you into a higher tax bracket when added to employment &/ or retirement income, investment income etc & increase how heavily it’s taxed.
Post # 51
yes you are correct on that, I wasn’t even thinking rrsps because no one I know has ever withdrawn them besides if they were used for the first time home buyers program or something. Obviously rrsps are taxed the heaviest unless used for the first time homebuyers plan or something.
Post # 52
Cash, but impossible in Australian capital cities where you need about $650,000 minimum!
Post # 53
Im so small and very poor.
Post # 54
ariesscientist : I’m sorry that happened to your cousin. But to say the decision is always right to pay cash over mortgage is 100% irrational thinking.
If your cousin had $100k invested in the stock market (assuming DJIA/ index funds and not all in one or two stocks which individual investors should never do), their account balance would have it a low of $46k in March 2009 and would have been worth $225k by 2017 and $264k today.
Even with all the shit that hit the fan in the Great Recession, anyone who didn’t panic sell and stayed invested with a long-term view is waaaaaay better off now than in 2007. People who are scared of the stock market because of 2007-2009 just missed out on a once in a generation chance to create tremendous wealth. The average return of the stock market from 2007-2017 was 14% per year (even with a 55% decline in the first 2 years) compared to historic 10% average returns.
Post # 55
peachybee88 : Unfortunately a lot of people aren’t aware of the negatives of registered plans. RRSPs used for Home Buyers Plans (up to 25k of an RRSP) aren’t considered a taxable withdrawal unless you don’t put the money back into the RRSP, it’s more like a loan against your RRSP. If you take out 15k in an RRSP you have 15 years to put it back into your RRSP at $1000 per year, any years that you don’t do this you’re taxed on the amount you were supposed to re-contribute as it’s then considered an RRSP withdrawal.
I think RRSPs are sneaky personally, it’s like they sell you on the merits of one upfront (savings, tax break etc) but fail to mention what happens when you take them out- even if you wait until you retire to do so. I have a sneaking suspicion that’s why they give people the 60 day grace period in the following year to take out more RRSPs before they do their taxes- you lock the money in at a very mediocre interest rate, they get to loan it out at a much higher interest rate, then they gouge you when you want to use your own money. Worst of all is the effect it has on working class earners who may not have investments or company retirement benefits- if you only have your govenerment pensions upon retiring, taking out RRSPs can lower or completely disqualify your Guaranteed Income Supplement- saving the government thousands per modest income senior. It’s heartbreaking when they don’t realize this until their Old Age Security gets cut for an entire year because they cashed in even a modest amount of RRSPs the previous year. Ditto RDSPs which sound good but really benefit the government not the disabled person.
RESPs are the only ones I don’t criticize because even though the students have to declare them as income when they’re used, the vast majority of students only have part time or summer jobs that don’t put them in a tax payable position, even with the RESPs. And RESPs are far preferable to student loans when possible.
Post # 56
I agree with you on RRSPs, my financial advisor told me to only put the amount my company matches and not to go over because of how difficult it is to withdraw money from them. I have a decent chunk in mine since I’ve been working for so many years but my advisor explained them pretty much exactly how you did. It’s true that a lot of people aren’t aware of how they work, FH and his family did not understand the pitfalls to them!
Post # 57
dgirl715 : I wish I had invested more during that time. I took advantage to a point and it helped my portfolio, but we had just bought a house, got engaged, and were planning a wedding, so we didn’t have a ton extra to invest.
ETA: I did buy my condo in 2009, which is proving to be a very fruitful investment.
Post # 58
I had the chance to pay off my mortgage after inheriting some money.
I chose to invest it instead as my mortgage interest is low.
My investments, on average, have done badly and would no longer cover the outstanding mortgage. I’m likely to have to wait many years to make it back, if ever.
I really regret not paying it off when I had the chance!
The stock market is risky. Cash all the way for me!
Post # 59
Mortgage was the way to go for us. We bought in 2015 when interest rates were super low (~3.5%) and we average an 8-10% return on our investments, so it makes much more sense for us to keep our money there. Especially since the mortgage interest tax deduction also helps us, even though not as much now as a few years ago. We need all the deductions we can get.
Post # 60
TheGridMonster : are your investments high, medium or low risk? I am pretty adverse to the risk factor, and my husband moreso, so I know we would be doing medium to low risk. Also, do you pay income tax on your yearly ROI? On the money we do have invested, we receive basically a statement at the end of the year and pay taxes on it.