Advisors speaking out on controversial idea.
This past Friday WP posted a story pointing to Stephen Jarislowsky's controversial advice, which was, basically, to invest outside of an RRSP. According to Jarislowsky holding investment funds outside of a registered retirement fund sees the returns from those funds not taxed as income (as is the money from a RIF). This fact can save investors over the long-term. The controversial advice sparked a round of comments on www.wealthprofessional.ca
Michel Guimond took issue with the notion, suggesting that, "One can only be impressed with Mr. Jarislowsky's reputation,” but his comment on RRSPs are “baloney." According to Guimond, when it comes to RRSPs, "The deduction and sheltering beats the advantageous tax rate…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."
John Wallace also argued against the advice: “…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 also chimed in, suggesting that only by doing an individual financial plan for each client based on personal information can the right answer be arrived at. She suggests advisors need to consider whether the client has a pension plan that will cover their basic retirement expenses, before asking “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. Know your client.” Always solid advice.
Daniel Collison had a balanced view: "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."
Have your say at www.wealthprofessional.ca. While on the site, take a few minutes to fill out our latest survey, Advisors on Fund Providers 2014, found here.
Michel Guimond took issue with the notion, suggesting that, "One can only be impressed with Mr. Jarislowsky's reputation,” but his comment on RRSPs are “baloney." According to Guimond, when it comes to RRSPs, "The deduction and sheltering beats the advantageous tax rate…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."
John Wallace also argued against the advice: “…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 also chimed in, suggesting that only by doing an individual financial plan for each client based on personal information can the right answer be arrived at. She suggests advisors need to consider whether the client has a pension plan that will cover their basic retirement expenses, before asking “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. Know your client.” Always solid advice.
Daniel Collison had a balanced view: "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."
Have your say at www.wealthprofessional.ca. While on the site, take a few minutes to fill out our latest survey, Advisors on Fund Providers 2014, found here.
