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

Three Ways High Earners Can Earn Higher After-Tax Returns and Help their Kids


For those of us born before the 1980s, we enjoyed the benefits of affordable higher education and a fairly low entry point to the real estate market.  For kids about to enter University, the tuition cost of a three year law program could easily run over $100,000, a two year MBA between $60,000 -100,000 and the 20% down payment for their first home in Toronto would likely be over $150,000.  By comparison nearly 15 years ago, higher education was only about 10-15% of this cost and my first house down payment was less than $70,000 (and yes that was over 20% of the purchase price).  Our children, while given nearly every advantage, may find it tougher making their way in the world and to move out of our basements unless we start planning now.

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RRSP – When an RRSP is not enough


ted_financial_postRRSPs are simply one big tax game. The aim is to get at least the same (if not better) tax refund when you put money in, than you will be forced to pay when you ultimately withdraw from your RRSP or RRIF.

For those who make a high income – let’s say $300,000 in taxable income – RRSP contributions are great. Depending on the province, every dollar they contribute to RRSP’s effectively lowers their income by $1. This provides a lower tax bill of 39 to 50 cents.  As long as tax rates don’t change, you are guaranteed not to lose the RRSP game because at worst, you will have to pay the same rate when you withdraw funds from your RRSP or RRIF, as you rece22185731_sived when you made the contribution.

Therefore someone with a high taxable income should definitely contribute to their RRSP if at all possible.  The challenge is that they often have more money that they would like to shelter but the RRSP contribution limit doesn’t allow for it.

For most people, they can contribute 18% of their earned income. In the case of the $300,000 income earner, that would translate into $54,000, however the limit comes in to play for them at just $23,820 for 2013.

In order for this person to improve their retirement planning, they have several options:

1)   Maximize TFSA contributions.  For a couple, you can add $11,000 to your TFSAs this year.  In my estate planning work, especially when looking out 30+ years, we try and structure things so that TFSAs are the last pool of assets that are left in an estate – as they face no taxes (other than probate).  TFSAs will become almost as important as RRSPs for retirement planning.

2)   Make a portion of your taxable (non-registered) investments growth oriented, low income investments.  These funds will create low taxes along the way, but should grow nicely over a long period of time, and can fund retirement without having to worry about being taxed on withdrawals.  Examples of high growth, no dividend income companies might include: Adobe Systems, Priceline, Google, Constellation Software.

3)   Use insurance as a tax sheltered alternative.  If this person wanted to put $40,000 a year into their RRSP but is limited to under $24,000, one alternative option would be to put the other $16,000 into a life insurance policy on a parent or in-law. The ideal age for this type of insurance is 65 to 75. Assuming a parent is 30 years older than you, and passes away at age 90, then you will receive a non-taxable payment at age 60, just in time for your retirement. In many cases, the rate of return on this investment will be very good – 7%+ after tax equivalent – and the investment will help diversify your returns as the insurance is not correlated or tied to stock markets, real estate or bond markets . While some people feel that this is an inappropriate ‘investment,’ we have found that many parents are happy to help their children and ultimately their grandchildren in a way that costs them nothing other than a short health checkup.

4) Tax strategies such as flow through shares – which can come in two forms. Flow through shares are aimed at helping to lower the tax bill for those who have incomes in a top tax bracket. The first form is better known.  In this case you invest say $50,000 into a flow through, you can get significant tax savings through a variety of investment credits. The risk is that you must invest these funds in highly volatile companies that are usually doing mining exploration. The second form is less well known, and is more conservative. It essentially takes away the investment risk, leaves you with a tax savings that is potentially smaller, but is guaranteed from Day 1.

5)   Other strategies for high income business owners, incorporated professionals, and occasionally for key executives of a corporation, would include strategies called Individual Pension Plans (IPP) and/or Retirement Compensation Arrangements (RCA).  These strategies are too complicated to address in detail here, but serve as tools to provide additional pension income to those who are restricted by the RSP contribution limits currently in place.

While RRSP contribution limits do impose some retirement planning challenges for those with a high income, a variety of good tax planning exists to provide some alternatives that might be even better than simply having more money going into your RRSP.

Ted can be reached at or by phone at 416-733-3292 x221 or 1-888-816-8927 x221

Reproduced from the National Post newspaper article 13th January 2014.

YearEnd Checklist for your Investments and Taxes


The stores are filled with Xmas themed shopping and the end of the 2013 year will soon be upon us.   During this season of family and friends, we need to find time to address the end of year tax and investments action list.    Some things to remember at this time:


  1. Capital Gains and Losses – review any investments you have already sold during the year to estimate your current capital gain or loss position.   Then consider selling some of your remaining investments to offset that gain or loss before the end of the year.   Note:  if you are working with a financial advisor that does this for you, make sure they are aware of any capital loss carry-forwards from prior years.
  2.  Rebalance your portfolio – Asset allocation is the key to a portfolio’s success, not just in return but also in managing risk that fits your needs.    To maintain the right asset allocation you need to rebalance it regularly.    If you work with a financial advisor that has your total portfolio, they will likely perform this rebalancing for you.   If you have many financial advisors/accounts, you should check that your total portfolio stays in balance with your asset allocation goals.   If your rebalancing generates any capital gains or losses, go back to paragraph 1 and look at the rest of your holdings to consider offsetting them.
  3. RRSPs – Did you contribute what you intended to this year?    Most years you have until 60 days after yearend to make your RRSP contribution and still count it in the current tax year.   However, if you turn 71 in 2013, you only have until December 31, 2013 to make that last contribution.
  4. Tax Installments – if you are required to make tax installments in a tax year, Dec 15th is the date for the last installment for individuals.  If you need to sell investments to make the installment payment, go back to paragraph 1 and include an evaluation of your already realized capital gains/losses when deciding which investment to sell.
  5. Charitable Donations – if you are considering making a charitable donation, consider completing the donation before December 31st in order to be able to claim the deduction in 2013.   Remember that donating publicly traded shares with an unrealized capital gain allows preferential tax treatment.   Also note the “First Time Donors Super Tax Credit” for donations after March 21, 2013, which enhances the federal tax credit for individuals who have not donated since the 2007 tax year.
  6. Other Tax credits – most tax credits need to be paid out before December 31st in order to include them in the current year’s tax calculation.    Some of these include:
    • Political contributions
    • Tuition fees and interest payments on student loans
    • Medical Expenses
    • Childcare and Children’s fitness/non-fitness expenses
    • Alimony and maintenance expenses
  7. Business Owners – if you own an incorporated business, review your salary/dividend mix with your financial advisor and determine the best structure of any remaining payments before December 31st.  Pay your family members a reasonable salary for work performed in 2013.
  8. TFSA withdrawals – if you need to withdraw funds from your TFSA in the next 3-6 months, consider doing so before December 31st, 2013.   If you withdraw the funds before the end of 2013, you will be able to repay them in 2014.   If you withdraw the funds in 2014, you will have to wait to repay them until 2015.
  9. RESP contributions – if you have not yet contributed $2500 to your child(ren)’s RESP, consider doing so before December 31st to receive the $500 CESG gov’t contribution.   Remember the maximum lifetime grant per child is $7200 and contributions when the child is 16 and 17 have special rules to be eligible for CESG grants.  Go to for more details.
  10. RRIF/LIF – make sure you have received your minimum annual withdrawal amount before December 31st.   The financial advisor or institution holding your RRIF/LIF can help you with this.   Also, if you turned 65 this year, consider transferring enough of your RRSP/LIRA into a RRIF/LIF in order to take a $2000 withdrawal each year, which you can offset against the Pension Tax credit.   Remember to consider pension splitting with your spouse.


Full Service financial firms such as Tridelta Financial Planning will include the above and other year-end strategies in their total service package to increase the efficiencies of your financial plan.   Having all of your investments managed by one full-service financial planner will also better enable them to maximize your opportunities for these strategies.

Lorne Zeiler
Written By:
Gail Cosman
Senior Wealth Advisor
Gail can be reached by email at or by phone at
(905) 399-2035