RRSP question

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LiNK666

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Hi there,

Never dealt with RRSPs before since there was never a need for me to buy them. I know very little about it.

I'm looking after my parent's finances now. They have a self directed RSP account with TD. I want to get them out of these high fee managed funds and into ETF and equities. Is that possible to do or can I only invest in cash, FI, mutual funds, bonds...?
 
all the major banks have a discount brokerage package available for consumers
sign up is fairly easy, and you can do this with RRSP sheltered funds

and this is not a cash-out, it's transferring to a different investment vehicle is all
but would suggest extreme caution if your parents may need to draw some of this down in the near future as income
 
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You can have your RRSP entirely self directed and invest in US-Canadian equities (maybe others), mutual finds, ETFs, GICs, etc. They (what you are buying not your parents) just have to qualify. No idea on the process of moving from what they have to this.
 
If it's in a self directed TD account, they have access to TDs efunds, which have very low MERs. Check out model portfolio #2 at Canadian Couch Potato for details.

Also, they should have the ability to buy and trade any ETFs, just a matter at what cost per trade they qualify for, based on their account and balances.
 
JavaFan said:
all the major banks have a discount brokerage package available for consumers
sign up is fairly easy, and you can do this with RRSP sheltered funds

and this is not a cash-out, it's transferring to a different investment vehicle is all
but would suggest extreme caution if your parents may need to draw some of this down in the near future as income
Click to expand...

might not be a cash out, but your still taking monies from your RRSP and putting them elsewhere

something I found....not exactly what the OP is doing, but probably close....

Can I move stocks from a registered retirement savings plan to a tax-free savings account?

Yes, you can transfer shares from an RRSP to a TFSA, but it's a two-stage process and there are tax implications.

First, you must withdraw the shares from your RRSP to a non-registered account. When you make an RRSP withdrawal, whether of cash or an "in-kind" transfer of shares, the amount will be added to your income for that year. As a result, the financial institution will hold back some tax: 10 per cent for withdrawals up to $5,000, 20 per cent for amounts from $5,000.01 to $15,000, and 30 per cent for withdrawals of more than $15,000. (Withholding tax rates are different in Quebec.)

If you don't have enough cash in the account to cover the withholding tax, you'll have to sell some investments and possibly pay a commission. What's more, you may have to pay a deregistration fee. At my discount broker, it's $25. Once the shares are in your non-registered account, you can contribute them to your TFSA. Because of the tax consequences, you must carefully weigh the costs and benefits of making an RRSP withdrawal. "You would only withdraw from an RRSP in a year where you have unusually low income, unless of course you need the money
Click to expand...
 
There are quite a few brokerages out there, some are more expensive than others, but with a bit of digging, all of the costs are published. There isn't one suited for all people. There are 2 questions you need to ask yourself, 1.) How much equity do they have (often you need a certain amount for better rates) and 2.) How involved do you want to be in managing it? ETFs are cheap and generally passive. Personally I switched from scotia itrade to Questrade (a discount brokerage). Questrade has had some negative press when they first started, but I haven't had any issues with them. The website is not terrible.

The reason I use them is they allow you to buy/sell US equities and keep the sale in US dollars. This is important if you want to buy a combination of ETFs (most have CAD offerings through a hedge), and stocks directly. It allows you to buy anything on the NYSE, Nasdaq, etc. Without this you get hit with 2.5% exchange fees for every transaction which add up fast if you have any reasonable sum.

I know Questrade has a pile of ETF's that are free to buy (and sell?) as well.

edit, if you do transfer RRSP holdings, make sure you do an actual transfer and not a withdrawl then a deposit or you'll loose the RRSP contribution room and have some fun tax to deal with.


LiNK666 said:
Hi there,

Never dealt with RRSPs before since there was never a need for me to buy them. I know very little about it.

I'm looking after my parent's finances now. They have a self directed RSP account with TD. I want to get them out of these high fee managed funds and into ETF and equities. Is that possible to do or can I only invest in cash, FI, mutual funds, bonds...?
Click to expand...
 
GK, after 15 years of having my nest egg doing squat with mutual funds
I opened an RRSP shelterd brokerage account with Scotia

changed the mutuals to cash within the parent RRSP account
then transferred that cash to the new account
began trading....any sales where I net a profit are held within the sheltered account
and can be used to purchase whatever I want as long as it meets CanCan rules

is only taxable when it's withdrawn as income for the sheltered account

switched a few years ago to CIBC, same thing, funds from one sheltered account to another
no tax
 
+1 for TD eSeries. Transfer to the discount brokerage account, not withdraw and recontribute (unless you want to intentionally trigger tax).

I have been using Scotia iTrade with no real complaints. Given that they already have a TD brokerage account and TD eSeries is highly regarded, opening a TD discount brokerage account seems like an easy way forward.
 
You'll have to do some research, and figure out how easy it is to get the money out.

Some things require more paperwork, and some incur early withdrawal fees.
 
Thanks all for the info. I know how to invest and do my own portfolio of equities and ETFs. My return was killing the return of the person at the bank so my parents asked me to take over their investments. I don't like MER for mutual funds. It's too high. Although, C.I. funds has had great returns for them. I'll be keeping it.

JavaFan said:
GK, after 15 years of having my nest egg doing squat with mutual funds
I opened an RRSP shelterd brokerage account with Scotia

changed the mutuals to cash within the parent RRSP account
then transferred that cash to the new account
began trading....any sales where I net a profit are held within the sheltered account
and can be used to purchase whatever I want as long as it meets CanCan rules

is only taxable when it's withdrawn as income for the sheltered account

switched a few years ago to CIBC, same thing, funds from one sheltered account to another
no tax
Click to expand...

I can convert everything to cash. If I transfer that cash to a self directed trading out is that considered a withdrawl from their RRSP? I would assume it would. It doesn't not allow me to trade through the SDRSP account right now.

I use CIBC personally too. It's cheap and fast enough to get money in and out without those stupid 3-5 day holds.
 
I know you can transfer RRSP accounts to other institutions
and other investment vehicles, tax free, as long as the recipient account is also registered
basically you have to sell whatever holdings are in the existing account and settle to a cash position
transfer to the new account which will then have a cash position, then make your investments
whole time the funds are RRSP sheltered and never taken as income or taxed

best to see someone at TD to discuss the particulars of the existing investments
to see the logistics of doing this

LiNK666 said:
Thanks all for the info. I know how to invest and do my own portfolio of equities and ETFs. My return was killing the return of the person at the bank so my parents asked me to take over their investments. I don't like MER for mutual funds. It's too high. Although, C.I. funds has had great returns for them. I'll be keeping it.



I can convert everything to cash. If I transfer that cash to a self directed trading out is that considered a withdrawl from their RRSP? I would assume it would. It doesn't not allow me to trade through the SDRSP account right now.

I use CIBC personally too. It's cheap and fast enough to get money in and out without those stupid 3-5 day holds.
Click to expand...
 
LiNK666 said:
I can convert everything to cash. If I transfer that cash to a self directed trading out is that considered a withdrawl from their RRSP? I would assume it would. It doesn't not allow me to trade through the SDRSP account right now.

I use CIBC personally too. It's cheap and fast enough to get money in and out without those stupid 3-5 day holds.
Click to expand...

Don't "convert everything to cash", as in "cash" outside of an RRSP account. You can sell the existing mutual funds or whatever it may be but retain the proceeds ("cash") as an account balance inside the RRSP account. Then you can use that to purchase whatever other assets you choose.

If the current RRSP account doesn't allow some part of this process, then establish another RRSP account that does, and do a direct transfer of assets between the two RRSP accounts, do NOT do a simple "sell".

Any financial adviser at any CIBC branch should be able to guide you through this.

The only way things could get complicated is if any of the funds in the existing RRSP are tied up in investments that are locked-in for a set time period, or if there is a penalty if you want out before a certain time period has elapsed. That's what said financial adviser is for.

I bailed out of all mutual funds years ago.
 
Thanks folks. I've never bought mutual funds. The MER was too high for me.

I'll figure it out. I didn't meant to say sell and get it out of the account. I'll go the branch and figure it out. These bastards don't want you to leave or stop investing with them. I like the CIBC system. It's pretty straight forward and basic. TD system confuses the hell out of me. I can't transfer them out of TD because my parents like the FA too much. They've been using him since 2003. Nice guy, but his job is to sell. That's the account they have. For the life of me I couldn't buy any ETFs with this. $27k cash sitting in there.

https://www.td.com/ca/products-serv...ting/accounts/self-directed-rsp-rif/index.jsp
 
Get them to fix it so that you can use EasyWeb (on-line banking) and WebBroker (on-line brokerage) and then you can do whatever trades you want, yourself. I think they might have to set up the account with TD Wealth (formerly TD Waterhouse) and do a direct transfer of assets from the existing TD account to the new TD Wealth investment account. They should be able to do this at the branch that they normally deal with.
 
Brian P said:
Get them to fix it so that you can use EasyWeb (on-line banking) and WebBroker (on-line brokerage) and then you can do whatever trades you want, yourself. I think they might have to set up the account with TD Wealth (formerly TD Waterhouse) and do a direct transfer of assets from the existing TD account to the new TD Wealth investment account. They should be able to do this at the branch that they normally deal with.
Click to expand...

Awesome. Will do that tomorrow.

Thanks Brian!
 
LiNK666 said:
I like the CIBC system.
Click to expand...

Haha, I had RRSP MF with CIBC at one point (with the expected horrible returns). I got tired of that and wanted the money out (HBP was a easy time to clean up multiple accounts). CIBC wanted $100 to close the RRSP account but I could entirely defund the account and leave it there with no service fees or charges so that's what happened. Idiots, all of them.
 
I used to work in Operations for a mutual fund custodian (basically operations for about 20-30 MF companies). Most of your questions have been answered, PM me if you have any other questions.

To sum up

They have an RSP account.
With money invested in funds. Lets called it the vested part of the account.
If they were to transfer money in the account, without investing it, it would be referred to as the cash part of the account (which you understand already since you trade.)

If you sell the vested part of the account, it'll go to the cash portion of the account. At that point you can whether
a) re-invest it in the funds/stocks you deem best for them
b) submit a registered transfer form, sometimes they're simply online, to transfer to another financial institution (which from what i understand your parents don't want to do) and all this process is tax free. SOMETIMES they might have transfer fees, sometimes the receiving institution covers those fees, depends on the policies and promos at the time of the transfer.
In both cases, if you haven't done so, you might want to get Trading Authorization on their account first though as usually the reps might not be so helpful if you have questions about the account. Even though i'm guessing you just get them to log in and do the work for them :P
And you probably know all of that but ya know... just making things obvious lol

Anyhow, in any scenario, definitely check the MERs of any funds you get, some of them might have higher MERs but have the returns to somewhat back it up some have lower MERs as they're only offered through certain platforms (such as self-directed investment accounts where an actual broker doesn't need his cut ;) ) Definitely check if those funds have Deferred Sales Charges (back-end) before selling or if they're not applicable (like front-end funds/no-fee funds)

I think that's all i can think about for now
 
It might be possible to have EasyWeb and WebBroker within the existing account - thus, no transfer is needed. If not, they have to set up a new investment account with the right access to it - but since they want to stay within the TD family, it shouldn't be a problem for the adviser at their local TD branch to do all the paperwork so you just have to sign it.
 
I think Brian is right. They need to setup a new account. We'll call the adviser tomorrow and sort it out.

On that note, once we sell everything and it's cash under the SDRSP account, can I transfer it to their TFSA and buy from that without it counting as a withdrawl? I read somewhere you can do that... not sure. Please advise.

Thanks all for the input!
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