FINANCIAL FACELIFT: How can this couple save for their son’s higher education and their own retirement?


Below you will find a real life case study of a couple who is looking for financial advice on how best to arrange their financial affairs. Their names and details have been changed to protect their identity. The Globe and Mail often seeks the advice of our VP, Wealth Advisor, Matthew Ardrey, to review and analyze the situation and then provide his solutions to the participants.

Written by:
Special to The Globe and Mail
Published September 25, 2020

Since coming to Canada from India in 2016, Sanjay and Maya have found well-paying jobs, bought a large condo in Toronto and had a child. He is age 35, she is 32.

Both are professionals, bringing in a combined $300,000-plus a year in salary. Sanjay earns another $15,000 a year in income from his business, which he hopes to expand.

“We have assets across Canada and in India, spanning equities, bonds and real estate,” Sanjay writes in an e-mail. While they are both well educated, “financially, we believe there’s so much more we can and should do,” he writes. “The last few years were so unpredictable in the stock market that most of the time we spent on the sidelines.”

Their questions: “What should be our portfolio structure to achieve our goals?” Sanjay asks. Their long-term goals include saving for their son’s higher education and for their own retirement. Their retirement spending target is $6,500 a month or $78,000 a year. “How much should we be saving on a monthly basis?” As well, “what products are we missing that are unique to Canada and which can give us some tax benefits?”

We asked Matthew Ardrey, a vice-president and financial planner at TriDelta Financial in Toronto, to look at Sanjay and Maya’s situation.

What the expert says

Now that they are settled, Sanjay and Maya would like to take stock of their lives and ensure they are on the right path for their financial future, Mr. Ardrey says.

“Sanjay’s goal is to work at his own business full-time once his income from it is sufficient, which he figures will take another two years.” In preparing his forecast, Mr. Ardrey assumes that for the next two years (2021-22) Sanjay will earn $15,000 a year from his business and in 2023 will start working there full-time, earning $150,000 a year.

After communicating with the couple and analyzing their income and expenditures, the planner discovered some holes in their budget. They appear to have a larger surplus than their numbers indicated, he said. Although some of the difference can be attributed to RRSP refunds, “Sanjay and Maya need to review their budget thoroughly,” Mr. Ardrey says.

The next step is for Sanjay and Maya to open a registered education savings plan for their son, who was born in 2018, to take advantage of the Canada Education Savings Grant, the planner says. The grant adds 20 per cent to the first $2,500 in contributions made to an RESP each year up to a maximum of $7,200. “To maximize the grant, they should look at contributing $5,000 for this year and next (to catch up with missed contributions) and then $2,500 a year afterwards,” he adds.

The savings will not be enough to cover the expected future cost of postsecondary education, estimated at $20,000 a year for a student living away from home, Mr. Ardrey says. Including investment returns, they would be able to cover off about 55 per cent of the expected costs. The remainder would have to come from the child’s work income, student loans or other family savings or current income.

In addition to their above-mentioned savings, Maya will be enrolled in a defined contribution pension plan by the end of the year, the planner says. Starting in 2021, she will contribute 6 per cent of her salary, matched by her employer. In addition, Maya makes the maximum contribution to her RRSP annually. Mr. Ardrey assumes that after he leaves his job to run his own business, Sanjay will maximize his RRSP contribution room each year as well.

Next, the planner looks at the couple’s investment portfolio, which has an asset mix of 95 per cent equities and 5 per cent fixed income, with most of the stock portion in U.S. and international markets. Aside from bank accounts, all of the non-registered investments remain in investment accounts in India, with the bulk in mutual funds, he says. The historical return for a portfolio with this asset mix is 5.6 per cent a year, with an average investment cost of 1.25 per cent, Mr. Ardrey says. When they retire, his analysis assumes their rate of return is reduced by one percentage point as they add more conservative investments to their asset mix.

Both Sanjay and Maya plan to retire at the age of 65. Based on their time in Canada, they would get 85 per cent and 93 per cent of Old Age Security benefits, respectively. If they continue to work at their current income levels, then they would get 87 per cent and 95 per cent of Canada Pension Plan benefits, respectively.

“Based on the above assumptions, Maya and Sanjay can meet their retirement goals with ease,” Mr. Ardrey says. At Maya’s age 90, they would have $3-million in investment assets, largely in RRSPs or other registered accounts, and $4-million in real estate value, he says. If they decided to spend that investment value, they could increase their spending by $4,500 a month, in addition to the $6,500 a month in planned spending.

“With that kind of financial cushion in place, Sanjay and Maya may want to look at retiring earlier than 65,” Mr. Ardrey says. He did a projection with a retirement age of 60 for Sanjay and age 57 for Maya. Even if they retired sooner they can still meet their goal, though the additional spending room would fall to $1,000 a month more than the $6,500-a-month target.

Despite this rosy picture, there are things that Sanjay and Maya can do to improve their financial picture, Mr. Ardrey says. First is to open tax-free savings accounts and contribute the maximum allowable. “Being able to save an additional $6,000 each and every year tax-free will greatly benefit them in retirement,” he says. Unlike RRSPs, withdrawals from TFSAs are not taxable.

As well, a considerable amount of their investments remain in Indian rupees, which adds foreign-exchange risk to their investment portfolio, the planner says. They should look to move those investments to Canada where they can form part of an overall investment strategy, he says.

Because Sanjay plans to run his own business, they might want to consider a less volatile asset mix, the planner says. Given low interest rates and turbulent stock markets, they could add some private income-producing investments such as a private debt fund or a global real estate fund, Mr. Ardrey says. “These funds would be designed to supplement their returns while reducing the volatility risk of the equities.”

Client situation

The people: Sanjay, 35, Maya, 32, and their son, 2.

The problem: How best to chart a path to a solid financial future.

The plan: Open an RESP for the child to take advantage of the government grant. Open TFSAs for both of them so their earnings can grow tax-free. Consider lowering risk in their investment portfolio.

The payoff: A brighter financial future than they may be anticipating.

Monthly net income (budgeted): $19,000

Assets: Bank accounts: $32,700; stocks $72,000; mutual funds $145,000; Indian mutual fund $27,900; his RRSP $37,000; her RRSP $49,000; his DC work pension $6,300; residence $1.25-million. Total: $1.6-million

Monthly outlays (forecast): Mortgage and property tax $4,200; condo fees $750; home insurance $70; electricity, heating $150; maintenance $240; transportation $400; groceries $800; child care $1,880; clothing $540; gifts, charity $200; vacation, travel $600; other discretionary $1,000; dining, drinks, entertainment $700; personal care $100; club memberships $150; sports, hobbies $150; subscriptions $40; other personal $100; prescriptions, supplements $100; health, life insurance $105; phones, TV, internet $215; his group RRSP $830; her RRSP $2,160. Total: $15,480. Surplus of $3,520 goes to unallocated spending and saving.

Liabilities: Mortgage $850,000

Want a free financial facelift? E-mail

Some details may be changed to protect the privacy of the persons profiled.

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
(416) 733-3292 x230

Are RRSPs really worth it? The answer may surprise you


More and more people say to me that they don’t contribute to RRSPs. They don’t think it makes sense. If they ask my opinion, my response always depends on the specifics of the person who is asking. For the purposes of this article, I will address a few different scenarios.

For all of these examples, the key factors to consider are the following: In retirement, will the person likely be in a higher tax bracket than they are today, the same bracket, or a lower one? I call this the tax teeter-totter. Will their income likely be meaningfully higher or lower in the next five to ten years? How old are they? Are they married and, if so, how long will it likely be until both spouses have passed away?

Situation No. 1: Higher income, significant RRSP

This person has seen what happens when someone dies with a large RRSP or RRIF. When a single person (including widows and widowers) dies, their remaining RRSP or RRIF balance is fully taxable in the final year. For example, if their final balance is $500,000, nearly half of their account will disappear to taxes. Because of that concern, many people with a sizable RRSP and often high income decide that the RRSP isn’t a good use of their funds. To these people I say, “You are making a mistake.” If you are in a tax bracket where you can get at least a 45 per cent refund on an RRSP contribution, I say take the money today, get many years of tax-sheltered growth, and you can worry about a high tax rate on withdrawals at some point in the future. Depending on the province, this 45 per cent tax rate tends to be in place once your taxable income is above $150,000. While you could make a financial argument that it is possible to be worse off to do an (R)RSP contribution depending on what happens in the future in terms of taxes, given the certainty of tax savings at the front end, I would highly recommend making the contribution.

Situation No. 2: Lower income that could jump meaningfully in a few years, with TFSA room

RRSP Piggy BankIn Ontario, if your income is $35,000, your marginal tax rate is 20.1 per cent. If your income is $50,000, your marginal tax rate is 29.7 per cent. If you are making $35,000 today, but think you might be making $50,000+ in the next couple of years, it is better to put any savings into a TFSA now, and wait to do the RSP contribution until you are making $50,000. This is the situation for many people early in their careers. You will be making almost 10 per cent more guaranteed return (29.7 minus 20.1) by waiting, but will still have the same tax sheltering in the TFSA as you would in the RRSP. In general, if you think you will likely be in a much higher tax bracket in the near future, it is better to hold off RRSP contributions, and save up the room to use when you will get a much bigger refund. As a rule of thumb, I suggest people with a taxable income under $48,000 put any savings into a TFSA before putting it into an RRSP.

Situation No. 3: Income could fall meaningfully in a few years

This is the opposite situation and recommendation to No. 2. If you think that you will be in a much lower tax bracket in the near future (taking time off work for whatever reason), you may want to put money in the RRSP now, and actually take it out in a year when your income will otherwise be very low. Many people do not realize that you can take funds out of your regular RRSP at any time and at any age. While you will be taxed on these withdrawals as income, if the tax rate is very low because you have little other income, it usually makes sense to withdraw the money in those years and put it back when your income is much higher.

Situation No. 4: Couple in late 60s, not yet drawing from RRIF

Some people figure that there is no point to put money into an RRSP in their late 60s because they are just going to draw it out shortly anyways. It is true that one of the values of tax sheltering is the compounding benefit of time. Putting a dollar into an RRSP at age 30 will likely have more of an impact than at age 68. Having said that, often people forget that even if they start drawing funds out of a RRIF at 72 or earlier, they may very well still be drawing out funds 20 years later. There is still many years of tax sheltering benefit. The question goes back to the tax teeter-totter. If they are going to get a 25 per cent refund to put funds into their RRSP, but will be getting taxed at 30 per cent or more when they take it out, then it probably doesn’t make sense to contribute more to their RRSP. It all comes back to their likely income and tax rates once they start to draw funds down from their RRIF.

Situation No. 5: Husband is 72, wife is 58

The answer to the question of how to contribute to an RRSP for couples with a significant age difference depends on the taxable income of each person and the ability to most effectively split income over the next number of years. Larger age gaps can be quite valuable for RRSP investing. One reason is that if the younger spouse has a Spousal RSP, and the older spouse still has RSP room, the older spouse can contribute to the younger spouse’s Spousal RSP. This can be done by the older spouse, even if they are older than 71, as long as the younger spouse is below that age. In this example, if the 58-year-old isn’t working, she can actually draw income out from their Spousal RSP and claim the funds only as their income, even though the 72-year-old had benefitted from the tax advantages of contributing over the years. As a reminder, if the younger person had a large Spousal RSP and the older one had no RSP or RIF, they wouldn’t be forced to draw any income because the younger partner was not yet 71. The one area to be careful of is that for the income to be attributable to the 58 year old and not the 72-year-old, there can’t be any contributions to the Spousal RSP for three years. To take advantage of this scenario, maybe the older partner contributes for many years to the Spousal RSP, but stops three years before the younger spouse plans to draw the funds.

While the RSP is generally a positive wealth management tool for many Canadians, there is a time to contribute, there is a time not to contribute and there is a time to withdraw funds. Each situation may create opportunities to maximize your long-term wealth. Choose wisely.

Reproduced from the National Post newspaper article 19th February 2020.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
(416) 733-3292 x 221

The maximum OAS a couple can get is $19,600. Here’s how to collect all of it


Old Age Security (OAS) is a funny part of Canadian retirement planning.

Many Canadians assume they won’t receive it, or even if they do, they believe it won’t last many more years.

The truth of the matter is that for a couple, it can generate as little as $0 or as much as $19,600 a year if you receive full OAS and delay receiving it until you both turn 70.

The basics on the OAS are as follows. You will qualify for a full OAS:

1. If you have lived in Canada for at least 40 years after the age of 18. You will receive partial OAS if you have lived in Canada at least 10 years after age 18.

2. If your taxable income (your net income on line 236 of your tax return) is under $77,580 in 2019. For every dollar above this amount, you will lose 15 cents of OAS up to roughly $125,000, at which point your OAS will be fully clawed back.

3. If you delay receiving your OAS from 65 to age 70, you will receive 36 per cent more or a maximum of $9,815 a year.

There are some people with so much wealth from pensions, investment income or minimum RRIF withdrawals that they are far past the $125,000 a year in income and will simply not receive OAS. Having said that, there might still be some strategies to help.

On the other hand, there are many Canadians whose income in retirement will not be close to $77,000 and who will always receive full OAS benefits.

Senior couple examining their financesIf we start with the premise that you want to receive the most OAS possible, then you will be deferring OAS to age 70. This may or may not be the right decision for you. In general, it is the right decision if you are in good health and believe that you (and likely both of you if you are a couple) will live past age 85 and do not have immediate cash-flow requirements for OAS funds.

The risk is that if one person in a couple takes deferred OAS and the other passes away younger, the survivor is no longer able to split income and depending on their assets, that survivor may now have OAS clawed back, even on the larger deferred amount.

(As a sidenote, the CPP is a better deal as far as deferral past age 65 is concerned. If you defer CPP to age 70, it grows 42 per cent as compared to the 36 per cent growth of a deferred OAS.)

Getting back to the “How do I get the most” question, it is certainly easier if you are a couple as opposed to being single. The five best ways to maximize OAS would be:

First, split income as much as possible in order to ideally keep both individuals’ net incomes under $77,000. If you are able to fully split income, this means your household income could be $154,000, and you would still qualify for full OAS.

Second, use all tax deductions possible to lower taxable income. This includes making RRSP contributions if you have room. One trick is that even if you are over 71, you can possibly make a contribution to the younger spouse’s spousal RSP account if they are under that age. Where possible, be sure to deduct interest income on loans and investment expenses (when investing with an investment counsellor or in a fee-based taxable account). These deductions will not only lower your taxes, but if you are in the OAS clawback zone, they will add 15 cents of OAS for every dollar deducted.

Third, when drawing investment funds to cover your cashflow, consider drawing TFSA or non-registered assets which will not incur any taxable income, rather than drawing extra funds from your RSP, RRIF or corporate account.

Fourth, lower your taxable investment income. If you have taxable investments (non-registered accounts), be sure and focus on tax efficiency in this account. This would probably mean a focus on ETFs and stocks that do not have any or small dividend distributions, meaning a focus on growth stocks. Some ETFs now are structured not to distribute income for this purpose. There are still some REITs that do generate decent yields, but the yields are structured mostly as return of capital. One last thought is to either gift some of these assets to adult children if you won’t need them in your lifetime, or invest them in an insurance policy that will likely have a much higher after-tax return for your estate. If you don’t have the taxable assets in your hands, you will have a lower income.

Fifth, shift income earlier. If you are under 65 or if you are planning on deferring OAS, this would apply up to age 70. You may want to draw funds from your RRSP in the years before that income will qualify toward an OAS clawback. For example, rather than draw CPP and OAS at age 65, you could defer it five years, and in that time draw from your RRSP instead. This will allow you to have a lower RRIF minimum in later years, and possibly help to maintain full OAS at that time. There may also be capital gains on a second property or other unrealized investment gains that you might want to claim in a year prior to it affecting OAS clawbacks.

It is important to keep in mind that these strategies will all be beneficial to maximizing OAS, but still may not be the right strategy overall for you. What is interesting is that all of these strategies to lower taxable income can still apply to you regardless of the OAS strategy.

As you deal with retirement income planning in your late 50s and 60s, these tax and benefit strategies and ideas could easily add $100,000+ to your long term assets. Now is the time to think about them and to take the appropriate action for your personal situation.

Reproduced from the National Post newspaper article 30th April 2019.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
(416) 733-3292 x 221

These are the eight sources of retirement income you need to know about


In RRSP season there is a lot of focus on your RRSP — surprise, surprise.

As most of you know, the RRSP will ultimately turn into a RRIF and be a key source of your income in retirement. What many people don’t always think about is other potential sources of retirement income.

In our work with retirees, we see up to eight different sources of funds that they can pull from to meet their monthly or annual expenses. Some are not thought of that often, but can become important. Not all will apply to everyone, but each one will be important to a segment of retirees.

Without further ado, here are the eight sources of retirement income:

1. Government Pensions — CPP, Old Age Security (OAS), GIS. For some individuals this can be more than $18,000 a year. It can be even higher if delayed receiving until past age 65.

2. Your Investment Portfolios — RRSPs, RRIFs, TFSAs, Defined Contribution Plans and Non-Registered accounts. The key is to determine which ones to draw on and when to minimize taxes. It will be different depending on your age, your health, your relationship status, and your current and expected level of income.

3. Your Defined Benefit Pension Plan — You may be one of those who have a plan through your work that pays you a fixed monthly amount — that may or may not increase based on inflation.

8 sources of retirement income.4. Your Corporate Investment Account — If you have a Corporation, pulling money from here will likely be considered as ineligible dividend income, but could possibly be tax free due to the size of your capital dividend account or shareholder loans. Often there is an opportunity to use insurance for estate planning or even in some cases for Retirement Planning where funds can come out tax free.

5. Annuities — These are essentially lifetime GICs with a locked-in rate that becomes a monthly source of cash flow. They have been less popular due to low interest rates, but for those who bought Annuities thirty years ago and are still alive, they will definitely sing their praises as an option for retirement income.

6. Your Home — If you own a home you can use a Home Equity Line of Credit to draw down cash over time, or maybe a downsize or sale of real estate is a key source of funds for your retirement. In some cases it may even allow for rental income.

7. Insurance Policies — This is sometimes an option and usually a forgotten one. Policy holders can often access cash through the cash surrender value of a policy without hurting the core insurance coverage. Sometimes you can borrow against the policy, or for those in their 30s to 50s, you might even be able to take out a policy on your parents as a form of retirement planning.

8. Your Kids (or other family) — This is usually not a preferred option, but depending on your needs and the family situation, this can be an important source of income.

Behind each of these sources of income is often a fair bit of thought and planning to maximize the income in a tax efficient way. For example, some individuals want less income in retirement. They don’t need the cash flow and they want lower taxes. In that case, they may look to fund Insurance policies in order to lower annual income and increase the estate.

Another scenario is the person with a large RRSP who is in their late 50s or early 60s. A lot of thought might go into the idea of drawing down the RRSP meaningfully over the next 10 years, and delaying taking CPP and OAS until age 70. If they do this effectively, they may be able to receive full OAS instead of getting clawed back, and in addition, they will have a smaller RRIF balance when they die and will face less tax at the end.

Even your home has important retirement income questions. We see people who received full OAS for several years, and then they sold their home and decided to rent. They now have significantly more investment assets and taxable income than they did before selling the house. Suddenly their tax rate goes up and they lose their OAS. In these cases, much more effort needs to go into tax efficient investment, and possibly gifting some assets to family or charity earlier than through the estate.

To help with issues of Retirement Income I have seen a few great Canadian web tools.

The Government of Canada has a solid tool to help manage your Government Pensions.

A website called Savvy New Canadians has a fairly detailed overview of RRSPs, TFSAs, CPP and OAS.

And my firm TriDelta Financial recently put out the 2019 Canadian Retirement Income Guide which provides further insight into how best to manage your various forms of retirement income.

Just like the game of hockey is much more complicated than simply shooting at the net, remember that your retirement income is about much more than simply an RRSP or RRIF. There are hopefully many sources of income for you, but the more sources of income, the more complex some of the tax and planning issues become.

May your biggest challenge be figuring out income sources number one to seven, and not about how to ask for funds from number eight.

Reproduced from the National Post newspaper article 4th February 2019.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
(416) 733-3292 x 221

IPP – Why so many dentists have set this up to save taxes in 2018 and beyond


As a dentist you know that from time to time you may be presented with a challenging case of a difficult extraction.  As a Wealth Advisor and Financial Planner, I can tell you we are also often presented with a case of a potentially difficult extraction but instead of it being a molar, our challenge is to how best extract funds in the most tax efficient manner from the Dental Professional Corporation (DPC) of a practicing dentist.

One of the methods which has become more popular, especially given the recent tax changes involving Canadian Controlled Private Corporations (CCPC), is the Individual Pension Plan or IPP.

An IPP is a defined benefit pension plan tailored to small business owners such as dentists.  It allows for the DPC, as sponsor of the plan, to fund a defined benefit style pension for the dentist and even their spouse if they are also employed by the practice. Thus, extracting corporate funds and directing them to a source which will provide tax efficient retirement income.

The amount of annual funding is similar to an RRSP in that it is a percentage of T4 earnings to a maximum annual limit; however, for an IPP that limit is even higher than the RRSP contribution limit – and grows each year.  In addition to the annual funding, the company can also contribute any past service earnings as well as a lump-sum terminal funding at retirement.  All these contributions are tax deductible to the corporation.  Like an RRSP, your investment choices are broad and any income or capital gains generated inside the plan are sheltered from taxes, but unlike an RRSP, all of the administration fees and investment management fees are tax deductible expenses to the corporation.

Because an IPP is a formal pension plan, it must be registered with the provincial government and must make annual filings and reporting.  In addition, a triennial valuation must be performed by an actuary.  The plan administrator will generally perform all these requirements and the cost for these is customarily included in the annual administration fee, which is tax deductible.

At retirement the plan can be set up to provide a regular stream of income by way of a pension or the commuted value of the pension can be transferred to a Locked-in Retirement Account or LIRA.

The difference in value over an RRSP at retirement can be significant.  One projection we had calculated for a 55-year-old dentist and his 50-year-old spouse had them with over $1 million more in the IPP than if they just went the RRSP route at retirement.

This will not only allow them to extract more money from the company in a very tax efficient manner, but it will also provide them with a known pool of capital at retirement, which will provide them with a predictable income stream through retirement.

Upon death of the annuitant the remainder of the plan can be transferred to a surviving spouse or if there is no surviving spouse, the annuitant’s estate.

However, there are some drawbacks to an IPP.  The most common drawback is that it limits contribution room to an RRSP. However, this limitation isn’t a major one for dentists since the bulk of retained earnings, is destined to provide for a retirement income in the future. Some of the other drawbacks are because regular contributions are required to be made, this can be problematic for businesses that don’t have regular income streams.  Another small limitation is that funds within the IPP can’t be accessed before the age of 55, but for most dentists these constraints are not an issue.

Due to the risk of developing hypervitaminosis A, patients should avoid concurrent use of Accutane with vitamin A. Since tetracyclines can cause intracranial hypertension, they must not be mixed with Accutane. Read more at Isotretinoin can reduce the effectiveness of progesterone drugs; therefore, micro-dosed progesterone preparations must not be used during the treatment with Accutane.

At TriDelta Financial we recognize that the recent tax changes, IPP’s have become a very effective tool for extracting funds efficiently from your DPC and should be given serious consideration by every incorporated dentist over the age of 45.

Alex Shufman
For more information, please contact:
Alex Shufman
Vice President, Portfolio Manager and Wealth Advisor
(416) 733-3292 x 231

Should you contribute to your RRSP, TFSA or pay down debt



Lorne Zeiler, VP, Portfolio Manager and Wealth Advisor at TriDelta Investment Counsel spoke with Catherine Murray on BNN’s Market Sense. Lorne discussed the tax benefits of RRSP contributions, at which income levels RRSP contributions are most advantageous and he also reviewed strategies for consolidating and reducing debt.

Click here to watch the full interview.

Lorne Zeiler
Written By:
Lorne Zeiler, MBA, CFA
VP, Wealth Advisor
416-733-3292 x225