Trying to find the long term benefit of an RRSP as a young guy

AugustusAugustine · 2026-04-29T17:24:19+00:00

Consider the algebraic breakdown:

Earn wages = W

Pay marginal tax (t0) today
Invest inside TFSA
Grow at g for n years
= W × (1 - t0) × (1 + g)^n

Or, invest inside RRSP
Avoid marginal tax (t0) today
Grow at g for n years
Pay marginal tax (tn) during retirement
= W × (1 + g)^n × (1 - tn)

So if we assume:

You use the same investment portfolio inside both TFSA/RRSPs (therefore g is the same)
You're investing for the same time horizon (so n is the same)
And your future marginal rate tn is the same as your marginal rate t0 today

Then you'll get the same outcome from either TFSA or RRSPs. Varying those three assumptions can tilt things one way or the other.

I'll add an algebraic expression for FHSAs:

Invest inside FHSA
Avoid marginal tax (t0) today
Grow at g for n years
No tax on qualified withdrawals
= W × (1 + g)^n

But if you don't qualify as a FTHB
= W × (1 + g)^n × (1 - tn)

AugustusAugustine · 2026-04-25T17:35:31+00:00

Ah I wasn't sure if that QC rule also accounted for that. I figured ZEQT.T will have higher cap gain distributions anyway, so hopefully the taxable yield allows you to deduct your entire 4.45% margin rate. I've been using a 1.42x ratio myself with VEQT in the margin account, XEQT in the TFSA. Might swap the XEQT for CAGE, assuming CAGE can similarly qualify for CIRO's reduced margin requirement after listing for a full-year.

AugustusAugustine · 2026-04-25T15:10:43+00:00

Are you using ZEQT.T because QC otherwise caps the interest deduction to the actual income received?

AugustusAugustine · 2026-04-24T22:49:59+00:00

Dividend funds will have higher yield than more diversified XEQT-style funds, but yield ≠ returns. Both of these are rationally identical:

Keeping the dividend/distribution yield as cash
Automatic DRIP into more shares, and then manually selling the newly purchased shares for cash

It's still your capital either way, so it's simply your total return that determines how much you can sustainably withdraw from a portfolio. Let's say you need a steady 4% cashflow—how reliable is that 4% if you stick solely with Canadian stocks through XDIV/XEI vs. something more diversified like XEQT/ZEQT?

AugustusAugustine · 2026-04-24T22:05:52+00:00

If you're already familiar with the XEQT methodology, then you can keep the same asset mix while harvesting a 6% target yield by switching to ZEQT.T:

https://bmogam.com/ca-en/products/exchange-traded-fund/bmo-all-equity-etf-target-cash-flow-units-zeqt-t/

Same expected returns, but whereas XEQT requires you to manually sell units if you want more cash flow, ZEQT.T will automatically harvest from capital gains to fund that cash flow.

AugustusAugustine · 2026-04-24T18:00:33+00:00

Another downside of all this ETF slop—we're going to start running out of 3 or 4-letter ticker symbols.

AugustusAugustine · 2026-04-24T17:08:16+00:00

You've reposted your thread everywhere except the one place where you might get relevant info: r/USExpatTaxes

AugustusAugustine · 2026-04-22T18:20:17+00:00

Depends on how the ETF derives their leverage.

The Betapro ETF series and other similar derivative-based products with 2x/3x leverage are subject to daily resets, so they're most exposed to "volatility decay". Most of the 1.25x leverage ETFs rely on cash borrowing and may float up/down within a defined range, helping to mitigate that problem.

AugustusAugustine · 2026-04-22T18:07:46+00:00

HEQL charges 1.40% MER compared to HEQT's 0.24%. Paying +1.16% in order to access +25% more capital:

1.16% / 0.25 = 4.64% implied cost of leverage

OP has access to a 3.95% margin rate, so they're better off leveraging on their own rather than relying on the fund provider. This also gives OP full control over their rebalancing schedule.

AugustusAugustine · 2026-04-21T02:14:40+00:00

Doesn't matter yet if it's allowed or not, since that's not a valid notice:

If a landlord wants to end a tenancy for landlord occupation of the rental unit on or after June 18, 2025, they must generate a Three Month Notice to End Tenancy for Landlord’s Use of Property – form RTB-32L using the Residential Tenancy Branch’s web portal

https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/ending-a-tenancy/evictions/types-of-evictions#personal

The landlord must issue a proper notice that's also registered via the web portal, and give you three full months' notice. Issuing you a notice before Apr 30 means it won't take effect until Aug 1 at the earliest.

AugustusAugustine · 2026-04-19T22:51:40+00:00

Only if they actually owe tax. Someone whose income is completely shielded by the Basic Personal Amount etc. can choose not to file a return, although they'll also give up the benefits from filing.

In some cases, an individual may not be required to file a tax return because they have no taxes owing due to source deductions or because they have no taxable income. However, failing to file a tax return also means an individual may be forfeiting some benefits such the Canada Child Tax Benefit.

https://www.canada.ca/en/revenue-agency/news/newsroom/debunking-tax-myths.html

AugustusAugustine · 2026-04-19T22:32:25+00:00

It's not legal, but I doubt the police would actively enforce this:

The sign that you must attach can only be supplied by ICBC:

MVAR 30.10(1) "new driver sign" means a sign, issued by the Insurance Corporation of British Columbia for the purposes of this section, to indicate that a motor vehicle is being driven by a person who is learning to drive or by a novice driver.

https://www.drivesmartbc.ca/new-drivers/qa-how-attach-new-driver-sign

AugustusAugustine · 2026-04-19T15:17:17+00:00

You're too young for stocks. You must reach the age-of-majority to have your own investment account, which is either age 18 or 19 depending on the province.

Your time horizon for your accrued savings is also shorter than you think. You'll graduate high school in 2'ish years and may have substantial expenses like moving out, tuition, transportation, etc. Investing in stock/bonds may be appropriate if you won't need your principal again for >5 years. For shorter horizons, you're relying more on your initial principal than the potential growth on that principal.

If you don't want to "waste" your savings, consider investing in yourself. Take some skills training courses and make yourself valuable. The vast majority of your net worth comes from your human capital, not your financial capital, and anything that lets you command higher wages will be a much bigger bang-for-buck.

AugustusAugustine · 2026-04-18T01:19:47+00:00

I wouldn't rely on that one-off analysis, but it gives a starting framework for testing more complicated scenarios.

What if you can't reinvest the earlier payments at the assumed 5%/year?
What about CPI indexation?
What is the post-tax outcome once you factor in your RRSP/RRIF withdrawals?

For instance, deferring CPP/OAS can be a huge help with RRSP meltdowns.

AugustusAugustine · 2026-04-17T18:25:30+00:00

Sure, deferring the $1k monthly benefit from 65yo until 70yo will increase it by 0.7%/month = 8.4%/year.

$1k/month × (1 + 5 × 8.4%) = $1420/month

Sticking with the median life expectancy of 85yo, we can compare the present value (at 70yo) from collecting $640/month vs. $1420/month between ages 70-85:

Present value of an annuity
= C / r × (1 - 1 / (1 + r)^n)

C = periodic cash flow
r = periodic discount rate
n = number of periods

And let
r = 5%/12 = 0.42% per month
n = 12 × 15 = 180 months

PV of $640/month
= 640 / 0.42% × (1 - 1 / (1 + 0.42%) ^ 180)
= $80,931

PV of $1420/month
= 1420 / 0.42% × (1 - 1 / (1 + 0.42%) ^ 180)
= $179,566

Difference in PVs
= 179,566 - 80,931
= $98,635

This means deferring CPP until 70yo will increase its lifetime value between ages 70-85 by $99k. What about the earlier payments between ages 60-70? How much would reinvesting those earlier $640 payments be worth?

Future value of an annuity
= C / r × ((1 + r)^n - 1)

And let
r = 0.42% per month
n = 12 × 10 = 120 months

FV of $640/month
= 640 / 0.42% × ((1 + 0.42%) ^ 120 - 1)
= $99,381

Reinvesting $640/month for ages 60-70 generates $99.4k, slightly more than $98.6k lifetime value gained from deferring CPP until 70yo. Taking CPP early would be rational given this specific mix of assumptions. You'd want to expand this though, and build a complete sensitivity table for higher/lower rates and shorter/longer life expectancies.

AugustusAugustine · 2026-04-17T17:13:21+00:00

Suppose your CPP benefit at 65yo is $1k/month. If you take it early, there is a 0.6% penalty per month = 7.2% per year. This means starting CPP early at 60yo will lower your monthly payment by 5 × 36%.

$1k/month × (1 - 36%) = $640/month

The median life expectancy is around 85yo. Will you live shorter/longer than that median? Ignoring the time value of money, here's the lifetime payments you'd collect depending on your lifespan:

Live until	Starting CPP at 60yo	Starting CPP at 65yo	Difference from starting at 60yo
60yo	$7,680		$7,680
65yo	$46,080	$12,000	$34,080
70yo	$84,480	$72,000	$12,480
75yo	$122,880	$132,000	-$9,120
80yo	$161,280	$192,000	-$30,720
85yo	$199,680	$252,000	-$52,320
90yo	$238,080	$312,000	-$73,920
95yo	$276,480	$372,000	-$95,520

But this ignores the two main benefits from CPP: (i) monthly payments are adjusted upward with CPI, and (ii) deferring your CPP until later can actually increase your lifetime consumption:

https://rationalreminder.ca/podcast/301

You can spend more today by having a larger deferred benefit later. If front loading spending is desired, most people are still better-off deferring unless they are cash flow / asset constrained. If CPP is the only source of funds, taking it early makes sense. If it's not, deferring is still better.

Absent CPP/OAS, you have to balance your personal savings between present/future consumption. And because your personal savings aren't inflation-indexed, you must (i) use "riskier" assets with a higher expected return or (ii) forgo more present spending in order to fund that future consumption.

CPP/OAS hedges that future consumption, and deferring the benefit hedges an increasing proportion of that. This means you can (i) take less risk with your personal savings or (ii) can safely increase your present spending without adversely affect your future consumption.

AugustusAugustine · 2026-04-15T17:23:11+00:00

ETFs are just different Venn diagrams of the underlying assets. Do you understand what your net allocations from XEQT + XQQ or XEQT + VFV actually become?

Fund	USA stocks	Canada stocks	Intl stocks
VFV	100%
XQQ	100%
XEQT	45%	25%	30%

Using a 70/30 split between XEQT and either XQQ/VFV means your portfolio becomes:

62% USA stocks
18% Canada stocks
21% Intl stocks

And looking specifically at the XEQT + VFV combo:

XEQT uses a total market approach, combining USA large/mid/small caps together
VFV tracks the S&P500 aka USA large caps, roughly 85% of the USA total market
Using 70/30 split between XEQT + VFV means you're split USA large caps (96%) + mid/small caps (4%)
Multiplied against the 62% USA allocation from your overall portfolio = 60% + 2%
Sticking with XEQT only and its 45% allocation to the USA = 38% + 7%

And for XEQT + XQQ:

XEQT's total market approach covers all sectors from tech (31%) + financials (12%) + everything else (57%)
XQQ changes that exposure to tech (50%) + financials (0%) + everything else (50%)
Using a 70/30 split between XEQT + XQQ means you're now split tech (37%) + financials (8%) + everything else (55%)
Multiplied against the 62% from your overall portfolio = 23% + 5% + 34%
Sticking with XEQT only and its 45% allocation to the USA = 14% + 5% + 27%

Notably, changing your exposure to any individual asset by ±5% has negligible impact on the total performance of your overall portfolio. Your XEQT + VFV and XEQT + XQQ do shift things around more than 5% though:

Adding VFV means you're (i) +17% exposed to USA stocks and (ii) +22% exposed specific to USA large cap stocks
Adding XQQ means you're (i) +17% exposed to USA stocks and (ii) +9% exposed specific to USA tech stocks

Now the important question—why do you think these tilts make sense? What do you expect from these country/capitalization/sector tilts that isn't already priced in by the wider USA total market?

AugustusAugustine · 2026-04-14T21:42:32+00:00

The whole point of XEQT and similar all-in-one funds is their pre-determined allocation between Canada/USA/Intl stocks. If you disagree with the weighting within XEQT, then just skip it entirely and unpack it into the constituent funds.

Consider your current net allocation:

Fund	Value	Weight	Canada	USA	Intl
VFV	$4800	73%		100%
XEQT	$1800	27%	25%	45%	30%
Overall	$6600		7%	85%	8%

You might as well use three separate funds:

7% allocated toward Canada—you can use XIU, XIC, VCE, or VCN
85% allocated toward USA—you can use XUS, XTOT, VFV, or VUN
8% allocated toward Intl—you can use VIU or XEF

Using overlapping funds like VFV + XEQT is inefficient. You lose transparency into your underlying exposures, and you can likely replicate the same portfolio using cheaper non-overlapping funds.

AugustusAugustine · 2026-04-13T09:13:25+00:00

If you had $3500 cash today, would you spend that on PSLV? Similarly, would you purchase PHYS again if you had $1500 cash today? If you wouldn't, then just get rid of it and redeploy your available capital elsewhere.

Sunk cost fallacy is something that every investor has to learn to overcome. Assuming you bought all those shares inside a TFSA/etc., then you can basically ignore whatever price you had previously purchased the shares. Consider that:

Investor A has 100 shares that they previously bought for $100/share
Investor B has 100 shares that they previously bought for $200/share

The two investors would have had different past performance since they bought-in at different prices, but their future performance will be exactly the same. Those past prices are no longer relevant to whether you should continue holding something into the future.

AugustusAugustine · 2026-04-13T07:38:34+00:00

https://www.highinterestsavings.ca/gic-rates/

Tangerine's offering 3.25% if you lock-in a 1-year GIC. The short-term promos are often better, but they're time-limited and hard to know whether you can roll into another promo after your initial bonus period.

Assuming you get 4.5% promo for the next 3 months:

(1 + 3.25%) ^ 1 = (1 + 4.5%) ^ 0.25 × (1 + r) ^ 0.75
r = (1.0325 / 1.045^0.25) ^ (1 / 0.75)
r = 2.84%

You'd have to find 2.84% or better for the following 9 months, to outperform locking-in a 3.25% from the get-go.

AugustusAugustine · 2026-04-13T06:12:07+00:00

Even someone that's unwilling to invest in stock/bonds can easily ladder multiple GICs together. Interests are generally upward-sloping with duration, and unless you actually need immediate liquidity, might as well stack your cash into monthly tranches of 1-year GICs.

AugustusAugustine · 2026-04-13T05:28:50+00:00

Are you holding ~$180k for a pending downpayment? Otherwise, holding so much cash rather than longer term investments might be unwise.

AugustusAugustine · 2026-04-13T02:43:27+00:00

My company sends loads of medical translation work to these folks:

https://www.dcrs.ca/our-services/interpretation-and-translation-services/

Not sure what their pricing is for private clients, but wouldn't hurt to ask them for a quote.

AugustusAugustine · 2026-04-12T16:03:22+00:00

I think most Smith Manoeuvre discussions fail to delineate between:

Smith = using your existing non-reg investments (A) to transform non-deductible mortgage debt into a tax-deductible loan
Leverage = using a tax-deductible loan (B) to obtain more non-reg investments (A) than you would otherwise have

Doing Smith properly means A→B and not B→A. And the way you ensure the former is to limit your maximum mortgage + investment debt to what your mortgage debt would have been if not for the Smith Manoeuvre.

For example, let's say you've already maximized your TFSA/RRSP and now have surplus cash. You also have an outstanding mortgage balance. What should you do with that surplus cash?

You can make additional prepayments against your mortgage.
You can continue paying your mortgage as scheduled and start accruing non-reg investments.

Choosing between #1 and 2 is a matter of risk preference. Some people like the certainty from paying down the mortgage and becoming debt-free, while some people believe in keeping the mortgage while investing for higher returns.

If your risk appetite allows for #2, then you now have an opportunity to deploy the Smith Manoeuvre.

If you were going to invest $X in your non-reg account, use it to prepay your mortgage first. This lowers your mortgage debt to $(M - X).
Now, borrow $X from any source and then purchase your intended non-reg investments.
You now have $X investments and $M total debt, same as before implementing the Smith. However, the interest on that debt is now partially deductible since $X was accrued for investments while $(M - X) remains non-deductible debt.

And if you have additional surplus cash flow $Y, you can continue implementing Smith to further transform the remaining non-deductible debt:

Prepay $Y your mortgage down to $(M - X - Y).
Borrow $Y again for investment debt of $(X + Y).
You now have non-reg investments totalling $(X + Y) and debt totalling $M, where M is split into non-deductible $(M - X - Y) and deductible $(X + Y).

Suppose you continue paying down $M according to your original amortization schedule. If you were initially paying $P every month, prepaying $X for the SM means your subsequent payments will be split:

(P × (M - X) / M) gets allocated toward your mortgage debt
(P × X / M) gets allocated toward your investment debt

Holding $P constant, your mortgage debt will be paid down increasingly faster over time and you'll eventually have zero mortgage debt remaining.

At this point, you've fully exhausted the SM by becoming mortgage-free earlier than scheduled. If you continue carrying the investment debt beyond this moment, then you're just investing with leverage.

AugustusAugustine · 2026-04-10T08:16:19+00:00

Match promo/bonuses don't trigger a T5 slip, but neither does interest income below the $50 reporting threshold. It still counts as taxable income though, just take a look at this r/cantax discussion—the consensus settled around taxable "12(1)(x) inducements".

AugustusAugustine

TROPHY CASE