Categories
RESP

Reader Question About RESP Withdrawal Limits

Jay wrote in with an interesting RESP strategy that I thought I would share;

He writes

Our child has a (roughly) $25,000 RESP and will begin attending post-secondary in September.

From what I’ve read, we don’t have to provide receipts for expenses, we just have to provide proof of enrollment to begin removing funds from the RESP.

Now my questions…
1) After the first $5,000 is withdrawn at the beginning of September, are there any limits to the amount that can be removed on a yearly basis? (I *think* there isn’t, and the only ‘limit’ would be choosing to keep the withdrawals below the threshold where income tax would have to be paid.)
2) The reason we’re asking (1) is it *seems* like it would be a good idea to take out any *extra* cash and divert it into a TFSA (Tax Free Savings Account). Do you know if there are any problems with doing that?

My Answer

First of all – the $5,000 withdrawal rule in the first term only applies to non-contributions in the RESP account.  Contributions you can take out any time once the child starts school.  Non-contributions are things like grants, capital gains, dividends, interest that have accumulated in the account.

Second – as Jay notes, to do a withdrawal from your RESP, you only need to show proof of enrollment – no receipts for books etc.

Jay wants to know if there are any other limits on withdrawals after the first 13 weeks, as he sounds like he wants to remove the money from the RESP as quickly as possible and put it into a TFSA.

The answer is that no there are no limits.  In fact, since you can take the contributions out right away, most people can take out a large percentage of the RESP in the first term and then clean it out entirely in the second term.

He does mention income tax as a consideration but you have to remember:

  1. Contributions are not taxable when withdrawn – it is only the non-contributions that are taxable.
  2. Withdrawals of non-contributions are taxed in the hands of the student not the parent.

In Jay’s case, it sounds like he can probably withdraw all the money in the first two semesters without any problems.

Check out my RESP rules page for more RESP information.

Categories
Announcements

LinkStuff – New Dual Monitor Edition


Hope you had a great “holiday” week. I managed to get my home office setup. I’ve been blogging from a laptop on my couch for the past 3 years and I decided that having a proper workspace would help with productivity. I’m also hoping it will allow me to set “office hours” so I can limit my blogging time a bit.  I have a hard time putting the laptop away.

I bought a used PC and 2 19″ monitors. After using a laptop for so long, the extra screen space will take a bit of getting used to.  They are about five years old, but work quite well.

On with the links

Preet uncovered this gem. BMO wants to rename their index funds to include “ETF”. This is the stupidest thing I’ve ever heard of. Why stop at ETF? Why not call it the ETF Gold Lady Gaga Index Fund?

Jon Chevreau wrote an amusing article about the best and worst bank mutual funds. He points out that Gordon Pape somehow likes to ignore the ETFs in his evaluation.

Canadian Capitalist wrote an “I told you so” post about an ill-conceived investment product.

Larry MacDonald wrote about fundamental weight ETFs and bear markets. In my opinion, there are passive investing products (market cap ETFs) and then there is everything else.

Rachelle from Landlord Rescue finishes off her trilogy of Landlord from Hell stories. This one is a doozy!

The Oblivious Investor needs help deciding whether to invest in retirement savings or invest in income growth. I say both.

Michael James says that pet insurance is hard to justify. Sometimes I think that the cost of pets is hard to justify.

Million Dollar Journey came up with 6 ways to buy gold. I have a 7th way – just don’t buy any.

The Financial Blogger explains the difference between working on salary or 100% commission.

Categories
Money

Will There Be A Stimulus Check In 2011?

America is still hurting from the recession. Unemployment is high and the economy is not doing well. The country is just not growing fast enough to handle the large numbers of unemployed people.

People who don’t have jobs, tend not to have much money. People who don’t have much money, don’t spend much money. The economy slows down when too many people stop spending and indicators such as unemployment rates start to climb.

Find out if there will be a stimulus check in 2012.

It’s not just the unemployed who aren’t spending, many employed people have cut back on their expenses for fear that they might lose their jobs or face wage cuts.

Another problem is the real estate crash. Owning a house that has fallen in value or is under water will often make a person more careful with their spending.

Stimulus check in 2011

One solution to get people spending is another stimulus check in 2011. In 2008, the government gave out money in order to help the economy. Checks of up to $600 per person were mailed out. It’s hard to tell if that stimulus was successful or not. The economy hasn’t recovered, however the economy might be worse, had it not been for that $600 stimulus check.

The government has not announced any plans to give out stimulus check in 2011, but if the economy does not improve in the next few months then it has to be a consideration.

Recent stimulus checks

2009 – $250 stimulus check was mailed out for recipients of Social Security, SSI and others.

This stimulus check was intended to make up for the fact that the Social Security raise for 2009 was zero, because of low inflation.

2008 – $600 per adult, $300 per child.

These 2008 stimulus checks were mailed out to everyone, unless your income was too high to qualify. The idea behind these checks was to help stimulate the economy.

Check out the 2012 Social Security COLA increase.

Categories
Real Estate

So You Think You Can Landlord? A Tenant From Hell Story

Warning – this post is not suitable for family viewing!

I originally rejected this post and then decided to run it – then I rejected it again and finally decided again to publish it.  It’s not the type of post I really want to publish, but it does contain a good lesson for prospective landlords.  The item in question will not be mentioned by name here, although I have provided a link to the Wikipedia description so you can find out what it is.

This article was written by Rachelle: a real estate guru who works as a property manager and helps investors find rental properties in Toronto and surrounding areas.  She has recently started a very interesting blog called Landlord Rescue.  You can subscribe to the RSS feed here.

Check out Rachelle’s other “Tenant From Hell” posts:

This is a story about pushing the envelope of Landlord & Tenant Act, and of the system of protections in a rental building breaking down. Staff can be manipulated and make rental mistakes.  In this case we escaped relatively unscathed except for my coworker’s ego and some of her innocence.

The Humongous Electric [item]

As soon as I entered the office, a veritable mob of staffers assaulted me. I knew it was big trouble because ten people were in my office this morning.

There was a call at about 4 am about leaking water. The super played detective and followed the clues until he found the source of the water. He then observed a delightful scene. The bathtub was running full bore and the drain was plugged with cigarette butts. There was about 2 inches of water throughout the apartment. There was also a man.

In spite of the super’s knocking and shouting “Management” the man was passed out cold.  He was lying in the kitchen on a blow up mattress. He was very naked. Supers never like to find naked, passed out, obese, middle-aged men in a flooded apartment. They hate it even more if they can see an extra-large plastic pleasure prod right beside the naked man still plugged into the wall.

Now he was in MY office telling ME that I have to do something. I haven’t even finished my coffee. Then the rental agent comes over. She’s shuddering because she’s heard about the “device” found beside the guy. Every time she says the word [item], she turns a bright shade of red. I ask her for the file on this guy. I’m giggling delightedly to myself since the rental agent and I have what can best be described as a rocky relationship. I’m enjoying her embarrassment.

The File

I get the file on our newest resident… there’s nothing in it except for a lease and it isn’t signed. No ID, no work history, no previous landlord, no letter from the bank. Nothing.  There is a receipt for payment of first and last. What this guy was doing in our building with nothing but respiration to recommend him? I dig deeper, it turns out she gave the guy a break because he just got out of the mental hospital and he needed a place to stay right away. He didn’t have any of the paperwork, but he was supposed to bring it to her before the first of the month.

Literally all that is required to move into our building is a pulse and first and last. No wonder the eviction department (me) is so damn busy.

The Action Plan

I sigh and shake my head a little. I tell everyone I have a plan. I ask where [Item] Guy is. They tell me he went out. I’m guessing he’s gone to get more beer and cigarettes.  I explain that because it’s before the first and we didn’t charge him prorated rent, he’s not officially our tenant yet. Everyone breathes a giant sigh of relief.  I tell the super to change the locks and post a note on his door telling the new non-tenant to come to the management office.

Getting a check issued

My request to head office to issue a check for us to refund our non tenant’s money ASAP was met with protestations of impossibility. In buildings we only issue checks to pay bills 90 days old. I tried to do this once with my hydro bill and darkness ensued, but buildings get away with it all the time.  The list of reasons why it wasn’t possible was very long.

I called the owner of the building and tell him about his brand new tenant. I convey my regrets that I wasn’t able to get rid of him because the head office had assured me that it was impossible to issue a check. I described the plastic [item], it was huge, it was electric, it would cost a fortune in hydro. I described the flood, four floors damaged etc. Yes, it was indeed his very first day in the building. “What would the future hold”, I idly mused? “Oh well it’s too bad” I apologetically said as I hung up the phone.

I wait by the phone … about 2 minutes later it rings. It’s the exalted head accountant on the phone. It seems that they have a check ready.  A miracle has occurred, the angels are singing and my plan gets a new lifeline. Alas, another problem rears its ugly head. “How are we going to get this check to you?” the accountant with the MBA asks me. (Head office is 20 blocks away) I’m glad I’m talking to the smartest guy at head office. “I’ll use my car and drive over” I carefully enunciate.

The Tenant Reappears

After a drive, I return to my office with the check. The rental agent is talking to someone about an apartment. I notice that she’s not making eye contact with her potential tenant at all and she’s trembling. The guy has a bag from the liquor store with him. It’s [Item] Guy!

The rental agent keeps talking about the nice apartments we have and how he can get an even better apartment to rent because he had a flood in his apartment. I can’t believe what I’m hearing and my brain is melting a little. I call her over to my office.

“Thank God” she says.  [Item] Guy has been talking to her since I left. She’s afraid to tell him that’s he’s kicked to the curb. “He did just get out of the mental hospital” she says. She’d rather sit there and rent him another apartment for two hours while shaking and shuddering than tell him the truth.

“Do I have to do every single thing around here? I didn’t rent to this weirdo you did” I tell her.  She begs me to tell him that he’s not moving back in. By this time I’m fed up and just want this crap finalized.

The Brush Off

I break the news to him. You’re not moving back in here. You caused thousands in damage with your flood. I hand him the check and tell him to take his stuff. He gets really mad at the rental agent and starts screaming at her. I tell him it’s time to go and he leaves. He doesn’t take any belongings and never came back.

Can it really be over?

A couple months later, I notice that the apartment is still empty. I ask maintenance why it’s not available. He starts telling me what a problem he’s having.  “The cleaning staff won’t touch IT,” he says. So he can’t get the suite renovated or cleaned because the giant electric [item] is still in the apartment.

Now it’s over

I’m thrilled. I sneak to the apartment throw a towel over the problematic device, unplug it and chuck it down the garbage chute. I don’t tell anybody.  I snicker randomly for the next few days and wait.

A couple days later the maintenance manager comes into my office. He’s very concerned.  “One of the staff must have stolen the [item]; it’s disappeared.”  Staff theft is a big concern in buildings. I tell him that someone must have needed it badly and to look on the bright side of things. Now we can clean and rent the suite. I’m keeping a straight face somehow; as soon as he leaves the office I start laughing so hard the tears are rolling down my cheeks.

I never did tell them… until now.

Categories
Announcements

Linkstuff – Future Disgusting Post Edition

Busy week here at MSB with posts every day. Next week will be a bit lighter since Monday is a holiday, however I will be publishing the last post from the “tenant from hell” trilogy. The last post is very much on the disgusting side and I’ve changed my mind several times about whether it is appropriate for the blog or not. It would be easy not to publish it, but on the other hand the “tenant from hell” posts are a good reminder that real estate investing is not always so “passive”.

I’ve been on a bit of a writing holiday myself, since I’m finishing up a pretty big project which I’ll be announcing near the end of September or early October.

On with the links

Sad story about a mother who is suing her kids for support even though she allegedly abandoned them. The story profiles one of the sons, and is worth reading just to see how he made out.

In Search of Salt has some very good negotiation strategies.

Michael James makes an excellent observation that equal billing plans encourage increased consumption.

Canadian Financial DIY wrote a book review on William Bernstein’s latest book the Investor’s Manifesto.  He thinks it’s good, but not great.

Squawkfox had a great idea for microwaving popcorn in a paper bag. We’ll be trying this one.

The Financial Blogger has taken over the Dividend Guy blog. I’m sad that Jeremy won’t be blogging there anymore, but hopefully the acquisition will pay dividends for Mike. You can win an iPod touch by commenting on the linked post.

Million Dollar Journey says that rental applicants have declined in quality because of looser lending standards. A very interesting idea and I tend to believe it.

Canadian Capitalist says give yourself a financial education. A great message.

Preet is giving away an iPad, a gold coin, and a spork! Not sure what a spork is? Go find out.

Larry MacDonald says that special offers from financial institutions are not worth the hassle.

Mike from the The Financial Blogger talks about improving his newsletter. Go and sign up now. I’m thinking of starting a newsletter as well.  I hope Mike signs up for it.

For any bloggers out there – learn how to create useful and positive titles that people want to read.

Categories
Announcements

LinkStuff – Tour de France Edition

Any cycling fans out there? I’ve managed to convert my wife to an avid fan.   This year’s Tour de France was quite exciting and you just can’t beat the scenery and interesting historic buildings along the route.

It looks like Contador will win this year. I am cheering for Schleck, but I always thought Contador was the favourite.

On with the links

Larry MacDonald looks at the book How to buy at maximum pessimism. I’ve tried to do this by switching some of my bond etfs to equity when the market tanks. So far it’s worked fairly well.

Preet has an infographic showing 40 years of asset class performance.

Canadian Capitalist says that Canadians don’t need to add commodities to their portfolio. I agree.

Canadian Personal Finance Blog says that interest rates are skyrocketing!!!!!

Squawkfox is giving away a free windfall planner worksheet. Now if she would just tell me how to get that windfall.

The Financial Bloggers offers everything you need to know about income trusts.

Million Dollar Journey deciphers the insurance puzzle.

Categories
Book Review

Great book for Canadian Investors – Rob Carrick’s Guide to What’s Good, Bad and Downright Awful in Canadian Investments Review

I recently picked up Rob Carrick’s new book “Rob Carricks’s Guide to What’s Good, Bad and Downright Awful in Canadian Investments Today“.  For those of you who aren’t familiar with Rob Carrick, he is the top personal finance journalist in Canada.  You can read his articles in the business section of the Globe and Mail.

This book is excellent.  It covers all the topics you need to get started in investing such as how to find a financial advisor, how to do your own investing, recommended discount brokerages, various financial products to buy or avoid and much, much more.  Rob writes with a very casual, easy to read style and explains everything in very clear terms.

I have to admit when I bought the book, I thought that:

  • It was strictly for beginners.
  • I wouldn’t learn anything, because I know everything already.  🙂

While this book is perfect for someone who doesn’t know much about investing, it contains a ton of information, and I would challenge any other self-proclaimed “experts” out there to read this book and not learn at least a few things.  As it turns out, I learned quite a bit of useful information.

What kind of investor should read this book?

The book is aimed at the bookshelf of a beginner to intermediate investor.  Advanced investors will learn a few things, but might want to get the book from the library.  I am keeping my copy for future reference by the way.

What was good about this book?

  • No punches pulled.  In the intro, Rob states that he doesn’t hold back and he wasn’t kidding – he has lists of the worst mutual funds and scathing criticism of the investment industry, especially the idea that advisors are acting on behalf of their clients.  I was impressed, considering that most of the companies he named, probably buy advertising in the Globe and Mail.
  • Complete.  The book covers all the investing topics that are necessary for most investors.
  • Uses examples.  He doesn’t just talk theory – he lists specific examples of investing products to buy and avoid ie specific mutual funds and ETFs.  Rob is clearly a big dividend stock fan and lists quite a few recommended dividend stocks.

What was bad and downright awful about this book?

The fact that Money Smarts Blog wasn’t listed in the “good investing blogs” list!  🙂

Truth be told, MSB hasn’t been doing many investing topics lately.  This will be changing in September.

What else has Rob published?

He has also written another book called “How to Pay Less and Keep More For Yourself: The Essential Consumer Guide to Canadian Banking and Investing“.  I’ll be reading this book in the near future.  It’s a few years old, so I might just see if the library has it.

Have you read this book?  What did you think?

Categories
Real Estate

Evicting A Senile Old Lady – A Tenant From Hell Story

Most “tenant from hell” stories involve bad people who don’t pay their rent.  This one is a bit different…

This article was written by Rachelle: a real estate guru who works as a property manager and helps investors find rental properties in Toronto and surrounding areas.  She has recently started a very interesting blog called Landlord Rescue.  You can subscribe to the RSS feed here.

If you haven’t read Rachelle’s last post then check out The Stripper With Dirty Feet – A Tenant from Hell Story .  A great read.

Most tenants who can’t pay their rent are very dysfunctional.  How people act in one area of their life reflects in other areas.  It follows that the people who are being evicted are usually the same people who cause damage, break into cars, do drugs, run guns, store stolen cars in the parking garage and cause trouble.

This isn’t a story about those people, but rather an eviction I did that had a real impact on me as a person because I had to make a decision to betray a friend’s wishes for her good and ours.

Mrs. R and the Flood

Every building has a person who comes to the management office on a daily basis.  These residents break up our day, inject a bit of humour, and keep us up to date with the building news.  Usually seniors, they are on watch for every single going on.  If a dog does his business in the elevator, they’ll tell you.  Other people call them busy bodies but generally property managers like them.

In one building I worked in, we had a 96 year old lady exactly like this – let’s call her “Mrs R”.  Every day Mrs. R would read the Toronto Star and then she would bring us the paper so we could read it too.  She would tell us about her arthritis and how much it sucks to get old.

Show and Tell

One time Mrs. R showed me her bed sore, right in the management office.  She pulled down her pants and showed me her ass.  We even got the whole thing on video because the office had security cameras.

Mrs. R took a real shine to me.  I was her favourite.  After all she showed ME her bedsore!

Every two weeks, her daughter would come to see her and bring her food and take her to the doctor or hairdresser.  Mrs. R was getting really old – at 96 she was doing pretty well, but she needed a walker, and she also wasn’t very hungry. She was skinny as a rail and her daughter brought her container after container of food trying to fatten her up.

Mrs. R couldn’t eat all the food and she didn’t want to make her daughter mad.  She would come to the management office with her little containers of weird food and give them to me.  At first I politely refused. Then I didn’t want to hurt her feelings. So the edible deliveries continued the entire time I worked there until she got evicted.

How lies lead to more lies

The whole food gift thing got very complicated. Every day I would go through an elaborate charade – get the food, dump it, clean the dish, all while keeping a sharp eye out for Mrs. R.  The longer it went on the worse it was.  My subterfuge had taken on a horrible life of its’ own.  It got worse when she asked me to comment on which food I liked better or how great certain recipes were.  The other staff would snicker at my inventive replies and my awkwardness.

I really loved Mrs. R.  She was funny and witty and sharp as hell.  She never forgot to pick up one single plastic dish.  She shared her life with us.  Every one in the office liked her.  Religiously she came to see us.

Life was getting harder for Mrs. R as she aged.  Her daughter lived in the boonies and couldn’t visit very often.  Mrs. R forgot her pills or took them twice sometimes.  She was having a hard time getting around and she was getting frightfully thin.

The Fateful Event

One day we got a call from the 12th floor. Water was pouring into someone’s apartment.  The super sprung into action to find the source of the leak.  He followed the leak to the 18th floor, right into Mrs. R’s apartment.  She forgot to turn off her kitchen tap and flooded six floors.

Later Mrs. R calls down to the office.  I sent the super up to her apartment again.  He talks to her for a while and then comes directly back to see me.  Apparently Mrs. R was drying off her socks and pants in her oven and they caught on fire.  That’s what got her evicted.

The Eviction

Nobody wants to evict Mrs. R, but it’s the only way we’ll get her out of the building and into a home where she can get better care.  Her daughter’s been trying to get her into a home for years, but Mrs. R is stubborn.

The next day I gave her a form for impaired safety.  This woman who brought me food and the Toronto Star, I evicted using the same form as I used on the gunrunner and the guy who punched our accountant in the face.  I had to keep the mask intact as I told her she was being thrown out of her home of the last 32 years.  I had to wrestle my own feelings of wretchedness as I stripped away the last bastion of her independence.

Then I held her as she cried and wondered what to do.

And that’s the sad story of how I came to evict Mrs R.