Conservatives Should Buy RRSPs
It’s tax season time again and you have until February 29 to buy an RRSP investment in order to reduce your taxes and save for retirement. Conservative folks need to participate in this program for a couple of conservative reasons, but when you do contribute some cash into a fund, you need to do it better.
Why Should Conservatives Buy an RRSP?
The first reason is that an RRSP purchase is the greatest single way for an average person in this country to avoid paying tax. The last thing you want to do is give Justin Trudeau hundreds or even thousands of extra dollars from your pocket, am I right? The more money the government takes from you, the more money they have to waste. Don’t let them waste your money! Keep it for yourself.
Here is a link to a calculator showing you how much tax you get back depending on how much you contribute to your RRSP.
The second reason you should invest in an RRSP is that you’ll be demonstrating personal responsibility for your own future. As I mentioned in The Future Belongs to Seniors, Canada is going to face a huge demographic problem in the near future. Too many people have not bothered preparing for their golden years and as a result there is bound to be a generational voting-war on the horizon, pitting financially deficient seniors against everyone under the age of 50. By taking personal responsibility, you will be demonstrating personal agency and individual fiscal conservatism. You also won’t be completely at the mercy of government social programs. CPP and OAS alone aren’t enough to avoid old-age poverty.
How Should Conservatives Buy an RRSP?
If you’re not that interested in financial stuff, then you probably go to your bank and talk to TNL@TB (The nice lady at the bank). The TNL@TB usually sits you down and presents you with one of three choices. Are you an aggressive investor, a moderate investor or a conservative investor?
This being Canada, most people will say moderate.
Then TNL@TB gets you to sign some papers and you end up with a MODERATE-RRSP that makes returns of either nothing or somewhere slightly above nothing. Some years you get lucky and make 4% or 5%, but usually never more than that. The bigger problem is that the bank charges you automatic fees for these RRSP mutual funds. The fees are usually between 2% and 3%. Then on top of all that...we have inflation. Every year inflation ticks up about 1% to 2%.
So you basically have to make about 5% every year just to keep up with inflation and fees. After a few years people get fed up with the measly returns and start hating the whole process. Meanwhile, the banks rake in billions of dollars a year in profit. High fees equal relentless profit.
So what to do?
#1. Stop going to TNL@TB for your RRSP needs.
#2. Call your bank and tell them you want to open a SELF-DIRECTED INVESTMENT ACCOUNT. I linked to RBC direct investing here, but the other big banks and even credit unions have their own versions of these accounts. Some partner with companies like QTrade in order to offer these services if they don’t have them themselves.
Don’t be afraid of this. It’s not as hard as it seems.
#3. Make a face-to-face appointment at the bank. Sign the paperwork and ask questions about fees and what not. If you don’t understand something ask again. Most importantly...ask for a customer service phone number for your account so you can call someone if you have further questions. Questions like, “How do I transfer money from my bank account into my RRSP account.”
#4. I am assuming you do online banking already, in which case your self-directed RRSP account will just be another listing. You can surf around on this account and learn how to navigate it. If it’s all too much, then just phone the customer service number and ask to do a trade with someone over the phone. You’ll probably be charged a small one-time fee for this, but it’s small potatoes compared to the regular bank gouging fees.
#5. Now here’s the stock tip advice. Instead of buying whatever high-fee garbage that TNL@TB is shilling, buy the bank itself! What do I mean? I mean buy the bank’s stock and hold it inside your RRSP.
But isn’t that risky?
Only if you think our coddled, regulated,
oligarch-like banking system is “risky”. There are only five big
banks in Canada and they are all thriving. They are all thriving
because they financially gouge Canada’s placid population of
palookas. Why not profit off this situation yourself?
Here’s a list of Canada’s annual bank stock returns over the past 5 years.
Royal Bank - 19%
Bank of Montreal - 16%
Scotiabank - 13%
Toronto-Dominion - 18%
CIBC - 14%
Pretty good returns, right? No management fees either. If you’re leery about putting all your RRSP cash into a single stock, then you can buy an ETF (basically a mutual fund with low-fees). The ETF below is basically just all those bank stocks together in one low-fee fund.
BMO SP TSX EQUAL WEIGHT BANKS INDEX ETF - 16% annual returns
Canadians aren’t the most savvy financial investors. Our banks exploit this situation by gouging customers with a banking monopoly. They then sell RRSP junk to those who don’t know any better and reap massive profits in fees. If you can’t beat’em, join’em. Put the banks to work for you and invest in their swindle instead of being a victim of it.
There you have it. You just read 1000 words and you’re basically good to go. Consider it. Click the hyperlinks. Do a bit of research. Take some initiative. Too many Canadians sleep-walk with their hard-earned money when it comes to this stuff. Conservatives, of all people, shouldn’t. I know it can be hard to understand, but I just laid out a solid plan that you’re not going to get from TNL@TB. Be smart and invest wisely.