Golden Girl Finance
Sabrina DaSilva Friesen
Posts (9)

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Q&A: Canadian investment options when you become a non-resident

September 17th, 2012 by

I am a 32-year-old teacher currently working overseas. For tax reasons, I am not currently a resident of Canada (but I am a citizen). I want to put some money into an investment for my retirement (RRSP, tax-free savings account), but am unsure what is best for me as I continue to live overseas and am not sure when I will return to Canada to live and work. What would you suggest?

Asked by Heather, Canadian living abroad


It makes the most sense to respond to this question as if you are contemplating leaving Canada. In this case, I would strongly encourage you to contact your Investment Advisor as well as a cross-border tax or legal professional well in advance of your departure. They can discuss the various income tax and estate planning issues that may apply to you and help you decide on the appropriate strategies that can be implemented.

With that said, the following are some general guidelines as to what can and cannot be done when it comes to non-resident investing:

Tax-Free Savings Accounts (TFSA)

If you become a non-resident of Canada, you are allowed to keep your TFSA. However, no contributions will be allowed and no contribution room will accumulate while you are a non-resident of Canada.

Any withdrawals made from your TFSA while a non-resident of Canada will be added to your unused TFSA contribution room the following year; however it will only become available for use once Canadian residency is re-established.

Although the investment income earned in the TFSA is tax-free for Canadian purposes, it may be taxable in the country you are a resident in. You should ask a cross-border tax accountant to confirm taxation of a TFSA in the residing country.

Registered Retirement Savings Plans (RRSP)

Contrary to popular belief, one is not required to deregister their RRSPs upon ceasing Canadian residency. You have the option to keep your RRSP intact and have the income continue to grow tax-deferred for Canadian tax purposes. The tax laws in the other country may require the taxation of income earned annually in your registered plan. If this is the case, you will need to weigh the option to keep the RRSP or deregister it.

Although you can continue to contribute to an RRSP as a non-resident (assuming you have the contribution room), it may not make sense to do so. For example, if you no longer have a requirement of filing a Canadian tax return, you will not be able to make use of the RRSP tax deduction as a result of any RRSP contribution and a tax deferral may not be available in the country in which you are residing. An RRSP contribution can be carried forward for Canadian tax purposes, however will only be usable in the future if you re-establish Canadian residency.

Also note if you have a Home Buyers Plan (HBP) or Life Learning Plan (LLP) balance and subsequently become a non-resident of Canada, your whole HBP or LLP balance will become payable. If you do not pay the outstanding balance by the required due date that applies to you, the unpaid balance must be included in calculating your tax liability for the year in which you became a non-resident.

Canadian Mutual Funds held in non-registered accounts

Canadian mutual fund companies will not sell their domestic mutual funds to residents of a foreign country. If you already own Canadian-based mutual funds before you leave Canada, you will generally not be required to dispose of them, and may only be allowed re-investment of distributions. You will not be allowed any trading of mutual funds either.

So what's left, you ask?

Once your residency code changes, Canadian investment options are pretty much limited to savings accounts and non-registered GICs, unless you know of a dual-licensed (also licensed in the country you reside in) Investment Advisor that is willing to take you on as a client.

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Q&A: Should I diversify my investments or take money out to pay down my mortgage?

June 18th, 2012 by

I am 33 years old, single, currently have $50K in my employee stock program, $25K in RRSPs, plus a really good pension from my work, where I have been employed for 13 years. I have $260K remaining on my mortgage (have paid off $30K in 4 years, thanks to paying biweekly and putting an extra $10K in payments over the last year). I have had the mortgage for 4 years and have one more left before I renew. I am currently paying 2.4% (prime - .6%) on a variable rate. I am debating whether to diversify my investments (i.e. take out company stock and get some other type of investment) or take a big chunk out and put it on my mortgage. I know that my interest rate will likely go up next year...just wondering what is the best thing for me to do with that money right now?

Asked by Jen, Brampton, ON


First of all, congrats! To be in the financial position you are in, at such a young age, tells me you have a good head on your shoulders and you should be very proud of yourself. From what I can see, you are doing all the right things. Considering you're already doing bi-weekly and lump sum payments along with a low interest rate, you are well on your way to having this mortgage paid off in record time. Given what you've done with your mortgage over the last four years, if you continue doing what you've been doing, you are set to be mortgage free by the time you're 43 or so. Not bad at all!

If rising interest rates concern you, you may want to consider locking into a fixed rate. Either way, with all time historical interest rate lows, you can't go wrong.

The great thing with employee stock programs is that they are a great way to save money since many employers offer some sort of matching. The problem, however, is that many people have no idea what they plan on using these funds for or when to use them.

Before considering cashing out any stock, make sure that you won't be penalized in any way as some employers stop matching if a withdrawal is done prior to a certain time. If there are no negative ramifications in making a withdrawal, you may want to consider maximizing your Tax-Free Savings Account with a $20,000 contribution this year and topping up your room every year thereafter. By investing for the long term, this account will not only give you the diversification you seek, but also the flexibility you may desire in your retirement. You may also have the option of using some of the funds as lump sum payments on your mortgage.

Keep up the good work!

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Q&A: What should I do with my income tax refund?

November 21st, 2010 by

I just got my income tax back, and I'm wondering what my best course of action is with that money? I just took out a variable mortgage of $175 K in July (at prime - 0.65%). I could make an extra payment towards that, or I could contribute to my RRSP, which is pretty modest. Which option is better?

Asked by Anonymous, Halifax, NS


This question is probably one of the most often asked of financial planners. Do I contribute towards my RRSP or do I focus on paying down my mortgage? The answer is, as always, it depends.

To answer your question appropriately, you must really consider all options:

  1. Pay down your mortgage first, then start contributing to your RRSP.
    • This option is most appropriate for individuals who are in a lower income tax bracket.
    • Although payments towards your mortgage will give you a guaranteed tax-free return, the one downfall with this option is that you will be missing out on the fabulous phenomena called compound interest. In doing this, you are drastically minimizing the effect of having your money grow in a tax sheltered environment.
    • The above is more true today than ever, considering our current low interest rate mortgages; you are very likely to get a better investment return from long-term investments, whether it be in an RRSP, TFSA, or investment account.
  2. Maximize RRSP contributions while keeping to your scheduled mortgage payments.
    • If you are in a higher tax bracket, this is generally a good option.
    • However, you should ensure that your mortgage amortization lines up closely to your expected retirement date. Although not necessary to retire debt-free (for many Canadians, retiring with some form of debt is becoming the norm), it does reduce some stress into retirement when most individuals must live on a fixed income stream.
  3. BOTH - Make your RRSP contributions, and apply the refund to your mortgage.
    • In my opinion, this is the most advantageous solution.
    • Contribute as much as you can towards your RRSP, then take the refund and contribute it towards the mortgage. By doing so, you are accomplishing two things: tax-deferred growth within the RRSP, along with long-term savings to enhance your retirement lifestyle, as well as a tax-free guaranteed return that comes with a reduced amortization on your mortgage.
    • An additional way to reduce the amortization on your existing mortgage is to change your mortgage payments from monthly to bi-weekly. Although your out-of-pocket expenses on a monthly basis will seem the same, you will in fact get two additional payments (the equivalent of one month) on the mortgage, thereby reducing a 25 year mortgage to just over 20 years!!!

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Q&A: Retirement planning for pension income

October 13th, 2010 by

I am a divorced, 54-year-old teacher who will get half of my ex-husband's NSTU (Nova Scotia Teachers Union) pension for the 20 years he worked while we were married. He will retire before I do and his pension will start paying out at that time. Should I put that money into an interest-free savings account to try and offset the leap in income that I will experience?

Asked by S.A., Port Williams, NS


Great question. Here's a few ways to think about it...

When you start completing your options statements regarding the division of pension credits, you may be able to elect one of two options:

1) Receive a deferred pension under NSTU.


2) Transfer your share of the pension benefit credits to:

  1. a locked-in RRSP account
  2. a life income fund
  3. another employer pension plan, if that plan permits such a transfer

By choosing Option #1 above, you would be leaving the funds within NSTU and will receive your monthly income for the rest of your life, along with appropriate indexing if applicable.

Option #2 (a and b), involve taking all future payments and receiving them in a lump sum form, upon which you then invest accordingly.

Finally, Option #2(c) - definitely worth looking into - entails your share of his pension credits being added to your pension, thereby increasing your overall expected monthly value.

Each option has its pros and cons associated with it. To help you decide which option is best suited to your personal needs, it is best to seek advice from a qualified financial planner who will provide you with a detailed financial analysis on how each option would affect your unique scenario and estate/retirement plans.

The great thing is that either option will provide you with a continued tax sheltered environment where you will pay no tax on the asset until you start receiving income from it. The amount you are entitled to receive will only be taxed upon the commencement of your payments, which you determine.

When you do start receiving income from whichever option chosen, the payments will be taxable; however, they will not be considered 'earned income' and therefore will not be added to your RRSP contribution limits. That said, if you are still earning an income and are less than 71 years of age - and have available RRSP contribution room - you will be able to defer some of the taxes to be paid, by contributing to an RRSP. Please note that you will also have the option to have taxes withheld at source, which may alleviate some concerns of having to pay additional money to CRA (Canada Revenue Agency) come tax time.

By electing to have the commencement of your payments when you retire, you will eliminate the concern of possibly jumping up into the next tax bracket by earning both employment and pension income.

What you then do with the money is up to you...


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Q&A: Once you've paid off the mortgage, how to invest the extra savings?

September 15th, 2010 by

In 4.5 years, our home will be paid off, freeing up $1100 a month. We plan to use 50% of this money on upgrades & maintenance to our home (badly needed). My question is about the other $550 - where should it go? Here's some background info: my husband has no RRSP but contributes to a spousal one for me. He will have a good pension income at age 65. In the spousal and my own RRSP, there is only $30,000. I will have no company pension. We will both retire in 14 years at age 65. We have $20,000 in stock investments outside of my RRSP. We have $20,000 outstanding on a line of credit (2.75%) that we use for home improvements and a $19,000 car loan line of credit (3.25%); currently, no credit card debt. We are putting $350/month towards both debts. I have $5000 in an investment TFSA (stocks). So...what should my priority be with that extra $550/month? My salary is under $40,000/yr, his is $90,000/yr. Thank you!

Asked by BellaDonnaRocks, small town, ON


Congratulations! You have done a fabulous job in setting up your assets appropriately. Ideally, you want both spouses to have equal pools of assets to draw upon in retirement. By having a Spousal-RRSP, not only is your husband getting the bigger tax deduction, but your assets are one step closer to being equalized compared to his pension.

As for what you do with the additional money once your mortgage is paid off...It depends. It depends on what you consider a 'good pension' to be, and if that is enough for what you need to live on in retirement. Considering you are both entitled to CPP and OAS, combined with his company pension, you may be just fine. It's possible that no additional savings are required beyond what you are currently doing.

There are new pension splitting opportunities that will enable your husband to split up to 50% of his pension with you, thereby reducing his overall tax bill. You will also be able to share your CPP, based on the years you were together, further reducing the household tax bill and increasing the overall net income.

If you feel your husband's pension will sustain a comfortable retirement lifestyle, perhaps focusing all efforts on debt repayment should be top priority. Once your line of credits are paid off, you may then want to consider maximizing your TFSA accounts to provide you with added flexibility for your retirement income needs.

Also, depending on how your stocks have performed, it may be worthwhile cashing them in, claiming the capital loss or gain (shared between both yourself and your spouse if jointly owned), and using the funds to pay off any higher interest line of credit (LOC). That being said, the interest you are currently paying on the LOC is fairly low and you may be earning significantly more in your stock portfolio. And this is where restructuring your existing debt can be a highly effective strategy for building wealth over the long term with little or no incremental risk to you.

How to accomplish this?

  • Step 1: Speak to your tax advisor to help you evaluate the tax implications and costs of selling your non-registered investments.
  • Step 2: Once you have determined that the tax implications are acceptable, speak to your financial advisor to get their guidance on liquidating the $20,000 investment stock portfolio.
  • Step 3: Should it be deemed wise to move forward with the liquidation, consider using the proceeds to pay off the line of credit of $20,000.
  • Step 4: Take out a new line of credit for $20,000.
  • Step 5: Speak to your financial advisor about using the funds to purchase a non-registered investment portfolio that is suitable to your risk tolerance and investment objectives.

    (Note: you cannot repurchase the same security within a certain time frame - i.e. 30 days - if you are wishing to claim a loss in the sale of the security. If done, this is considered a superficial loss.)

  • Result: Interest payments are now tax deductible on the line of credit as they are being used for investment purposes.

Leveraging is not for the faint of heart, however it does have some significant benefits. It is important when considering this type of restructuring that you consult with both your tax and financial advisor to ensure all steps are executed properly and to assess if this strategy is appropriate for your needs.


This content is published as a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. It is intended as an introduction to the topic only and should not in any way be construed as a replacement for proper professional, individual advice. Please seek professional guidance in determining the right situation for your needs.