Tag: withdrawal

Categories
Investing

RBC Direct Discount Brokerage Review

I recently moved my investment accounts from Questrade to RBC Direct in order to take advantage of the RBC 1% rebate deal so I thought it would only be fitting to do a review of their services.

Who are they?

RBC Direct is the discount brokerage arm of the Royal Bank of Canada which is the biggest Canadian bank.

Good things about RBC Direct

I like the trading platform – it looks nice, easy to use and is well designed.  There is also access to analysts reports etc.  It does the job.

If you would like to compare all the different Canadian discount brokerages, check out the Canadian discount brokerage comparison.

Bad things about RBC Direct

Everything else.  🙂

Fees – ridiculous fees in my opinion.  $10/trade is not bad for a passive investor but why anyone would pay $29 a trade is beyond my comprehension.  I’ve outlined the fees at the bottom of the post.

No electronic money movement unless you have a RBC bank account.  This is the stupidest thing about RBC – yes, I understand they want to ‘bundle’ all their services but forcing investors to open up new accounts to use their discount brokerage when most of the other discount brokerages offer excellent electronic money movement options is just bad business.  Get out of the stone age RBC!

In order for me to put money into the account, I have to write a cheque and mail it to them.  If I want to remove any money – I have to pay $10 for a cheque to be written.  My plan is to keep all cash in the account until next year when I can move back to Questrade and then withdraw it electronically.  The most annoying part of this is that when I looked into the 1% deal – a customer service rep told me on the phone that I could do electronic money movement which turned out to be false.  Speaking of customer service….

Bad Customer service

I won’t bore you will the multitude of issues I’ve encountered with RBC but suffice to say that I think their computer system was probably build sometime in the 20’s which makes it very hard for the customer service reps to do their job.

Most of the reps are pretty good although one time I called without an account number and the rep told me it was “very hard to look up an account without the account number”.  I challenged him on it and he somehow was able to find the account immediately just using my name.  Kudos jackass…kudos.

Conclusion

I can’t really recommend RBC Direct since I really don’t like them and can’t wait to collect my 1% and go back to Questrade.  However, if you already do your banking with RBC and have a $100,000 in assets then they are not a bad choice.  If you don’t meet those criteria then look elsewhere.

Trading Fees

  • $28.95 per trade unless you have $100,000 in household assets at RBC Direct or complete more than 30 trades per quarter.
  • $9.95 if you have $100,000 in household assets at RBC Direct.
  • $9.95 if you make between 30 and 149 trades per quarter.
  • $6.95 for those super-active traders who do at least 150 trades per quarter.

Annual account fees

  • No fees if total client assets are $15,000 or more.
  • If assets are less than $15,000, a $25 quarterly fee will be charged regardless of the number of accounts.  Can be avoided by making three or more trades in all accounts

Other discount brokerages reviews

Questrade discount brokerage review.

Categories
Personal Finance

Tax Free Savings Account (TFSA)

The Canadian government recently announced a new type of tax-free savings account (TFSA) available to Canadians which is similar to the Roth IRA account available to Americans. Here are some of the details:

What is the TFSA?

A type of account where you make contributions but don’t get any income tax refund. While the money is in the account there are no taxes applied to any kind of earnings such as interest, dividends, capitals gains. Any withdrawals from the account are not taxable and won’t count against any government programs ie GIS, OAS.

How does the TFSA work?

  • You can contribute $5000 per year to this account for the years 2009 to 2012 and $5,500 for year 2013 and beyond.
  • The contribution room is carried forward.
  • No taxes on any earnings.
  • No taxes on any withdrawals.
  • When you withdraw money from the account, the contribution room available gets increased by the amount of the withdrawal – please note that this new contribution room is not available until the following calendar year.

When can I open up a TFSA account?

January 2, 2009 was the first day you could deposit funds into a TFSA.  Most institutions allowed customers to set up accounts prior to this date however.

Why do I want to open a TFSA account?

Any money that you might be saving for emergencies or upcoming large purchases will have a constant tax drag in an non-registered account. With the TFSA, this tax drag no longer exists so you will end up with more money for your purchase or emergency.  Here are some more benefits of the Canadian tax free savings account.

More information on the TFSA

Tax Free Savings Account (TFSA) Basic information for Canadians

TFSA contribution limits

TFSA Over-Contribution Penalty Fix

Tax Free Savings Account refresher for Canada

ING offers TFSA refresher for Canadians

Using the Tax Free Savings Account (TFSA) for Canadians as an emergency fund

Categories
RESP

RESP Withdrawal Rules and Strategies For 2020

When the RESP beneficiary (student) is ready to go to school, the subscriber (owner of RESP account) needs to start withdrawing money from the RESP account. To withdraw money you have to provide some proof to your resp provider that the resp beneficiary (child) is going to an approved post-secondary school. You don’t have to show receipts for specific purchases.

Two types of money in the RESP account

In your RESP account, there are two different types of money: contributions and accumulated income.

  • The contribution amount is the sum of all the contributions that you made to the account over the years.
  • The accumulated income is made up of grants, capital gains, interest, dividends earned in the account.Any money that is not a contribution is considered to be accumulated income.


This distinction is important because the taxation of withdrawals from the contribution portion of the account is different than withdrawals from the accumulated income portion.

  • Contribution withdrawals are not taxed.
  • EAP (educational assistance payments) which are withdrawals of accumulated income, are taxed as income at the hands of the student.

The good news is that students have the personal exemption, as well as tuition tax credits which helps lower their tax bill. Obviously income earned during summer jobs or on co-op work terms will affect their taxes as well.Another bit of good news is that you can tell your financial institution if you are with drawing contributions or EAP (or both) so you can manage the taxes to some degree.

Please note there is no withholding tax on any kinds of RESP withdrawals, so if the student ends up in a taxable situation, they will have to pay the taxes at tax filing time.

A withdrawal limitation

First – one withdrawal rule to get out of the way – you are only allowed to withdraw $5,000 of accumulated income in the first 13 weeks. After 13 weeks, you can withdraw as much accumulated income (via EAP) as you wish.  There are no limits to withdrawals from the contribution portion as long as the child is attending school.

Basic RESP withdrawal strategy

When planning the withdrawals, try to withdraw as much accumulated income money as you can tax free.For example when the student first starts school, they will have just completed a short summer (two months) so they probably won’t have much income for the year. That might be a good time to maximize payments from the accumulated income portion of the account (EAP).

On the other hand, if the student is in a co-op program and has two work terms in one year and only one school term, that might be a good year to take out contributions rather than accumulated income.

You don’t want to end up with accumulated income in the RESP account if the child is no longer going to school.

What if your child doesn’t go to school?

What happens if Junior decides that school is not for him?  You have to collapse the plan and pay a pile of tax on it.

First of all you have lots of time to collapse the plan so don’t do it right away. It’s always possible that your child will give up on their pro hockey or musician career and will need the money for schooling later on.  You can keep the account open for 35 years after the year in which the account was opened.
If you do collapse the plan, the contributions are tax free, anything else (accumulated income) is added to the subscriber’s gross income for taxation purposes.And on top of that, the accumulated income is charged a tax of 20%.
If you are retired or have any way to reduce your income in the year you collapse a resp plan, do it to save taxes.

What if the child does more than one session at school (ie multiple degrees)?

You are allowed to use the RESP for one degree and then keep some money in the account for future education.  The only limit is the 35 year limit previously mentioned.  Be warned that it’s not a bad idea to take out all the RESP money during the first degree so that there are minimal taxes and no penalties.  If you save money in the RESP account for future degrees and the child doesn’t end up using the money, there will be increased taxes and penalties.

More RESP information

8 Things you need to know about withdrawing money from your RESP account.  Lays out the details of how to actually withdraw the money.

How to withdraw excess money from your RESP account.  Some strategies for withdrawing extra RESP money without penalty.  This applies if the student started school and quit early or ended up with extra money.

How to avoid RESP withdrawal penalties if the child doesn’t go to school.  If you child ends up not using the RESP at all – here are some ideas to avoid penalties and taxes.

More RESP information – Comprehensive list of RESP articles on this site.