Ask a Planner: Jason Heath, CFP, takes reader questions

Our resident financial planner answers reader questions online

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Got an important financial planning question and want unbiased advice? Leave your question for Jason Heath in the comment section below or email ask@moneysense.ca and he may answer it in an upcoming column. Watch for it every Tuesday.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products.

26 comments on “Ask a Planner: Jason Heath, CFP, takes reader questions

  1. Hi,

    I have all Canadian ETF’s in my Questrade TFSA portfolio and was wondering if this the right approach for me. My goal is to maximize the returns and grow the TFSA over the long term, not necessarily only for retirement(I’m 35) but also as a reserve fund. I have all CDN ETF’s in it to avoid any tax complications as I believe holding anything but CDN ETF’s in a TFSA leads to tax issues.
    This is my current allocation:
    ZDV.TO 15.3%
    ZRE.TO 9.8
    XIU.TO 15.3
    XRE.TO 9.8
    XDV.TO 15.1
    VAB.TO 19.2
    VCN.TO 15.4
    Please lend your expertise and advise if I’m on the right path with this allocation or if it requires tweaking and what it might be that should be tweaked. I’m open to taking risk and would label myself a moderate to liberal risk taker. Thank you for your time.

    Reply

    • Harpaul — looks like you have tons of overlap/redundancy there!
      ZDV, XIU, XDV, VCN are all Canadian Equities… and have very similar holdings.
      ZRE and XRE are almost identical in terms of holdings, except for the weightings

      I’m not the expert here – but I would just stick to 1-2 Canadian Equity ETFs (maybe VCN and either ZDV/XDV), and 1 REIT ETF (ZRE or XRE).

      Then, diversify into other regions! You have zero US equity, zero Int’l equity, zero Emerging Markets.
      And – diversify the income side too: maybe mix in some Preferred Shares with VAB.

      Last note: REITs being 20% of a portfolio seems high to me. I’d cut to 10%.

      Reply

      • Apologies… I missed that all of these investments must stay in your TFSA… Preferred Shares certainly don’t belong there, and even REITs with their return of capital are likely better in taxable account.

        Reply

    • Good news! Jason plans to answer your question in upcoming post scheduled for July 29!

      Reply

  2. Thanks for taking questions! I may be transferred to another city, for work reasons. I was thinking of turning my principal residence, which it have owned for three years, into an investment property, What would the process be to capture today’s value, without incurring capital gains to the property’s date of acquisition?

    Reply

  3. Hello! Thank you for considering my question. My husband and I are struggling with the classic do we pay down the mortgage or do we make minimum payments and put all of our extra money into investments. Our situation is a bit unique in that we are in our early forties, no consumer debt, 1 adult child, we owe about 200,000, on our home and have about 250,000.00 in investments. We earn just over 200,000/year combined and would like to buy a second home in a warmer climate but we aren’t sure what would be the best financial strategy to make it happen.

    Chantal

    Reply

  4. I recently liquidated my mutual finds in my rsp in order to move to etfs. The question is, do I buy right away or wait until the market cools a bit or has a correction before buying?

    Thank you
    Steve

    Reply

  5. My mother leases an apartment in a living in place building but also has a cottage. can she declare the cottage her principal residence, and also how can she avoid or minimize the taxes on the sale of the cottage to her children? thanks for your help.

    Reply

  6. Hello Jason, We meet again. You know I’m a Couch Potato. How does one avoid losing dividend income when cashing in or rebalancing index mutual funds? Are dividend payment dates traditionally near or at the calendar year end or the company’s fiscal year ends? Is there a better time during the year to sell or switch? Thank you.

    Reply

  7. My mother is 95 and has lived in her home for 50 plus years (worth $600K plus). If I was to add my name to home title as a joint tenant to avoid probate on her death what capital gains would I be accountable for if the house was sold, before her death, after her death or with the house as/as not my principal residence

    Reply

  8. To REIT or not to REIT. I am a resident of downtown Toronto with a little money to invest. I am hoping you can help. I cannot decide between purchasing a pre-construction condo which I would then rent for 20 or so years while I use the rental proceeds to pay off the mortgage…. or, just investing that 25% downpayment amount in an ETF REIT instead. Yes I understand that by purchasing the condo I would take advantage of leveraging, however, I would like to think that the real estate experts running the REIT would know better where and when and how to buy. Also, with a REIT I would not have to worry about the stresses of dealing with renters and condo boards. Besides, I can always add money to the REIT during those same 20 years, whereas with the condo, the money would just go towards the mortgage. Considering the 20 year time frame until I retire, and eventual tax implications at time of disposal, which should I choose? Many thanks, Charles

    Reply

  9. Hi Jason,

    Here is complicated question :)

    I am looking for advice regarding my bonds holding vs. tax efficiency.

    I am in a situation where the largest part of my assets is held in a non-registered (Canadian corporation) account. I don’t have much room in my RRSP and I expect that this situation will remain the same in the future.

    I recently shifted my bonds holdings from XBB to HBB for tax-efficiency. Has you probably already know, since HBB is a swap-based ETF that produce no distribution, it is designed to be held in non-registered accounts.

    However, I am still holding XBB bonds fund in my RRSP and I am wondering If it would make sense to use the RRSP space for something else than bonds? I could simply shift the RRSP bond holding in my non-registered account with HBB and use the RRSP space for something else.

    Let me give you an example, suppose my target allocation require that I hold 500k fixed income, I currently have:

    RSSP 100k XBB
    Non-reg 400k HBB

    Would it make sense to add 100k of HBB to my non-registered account and use the newly free RRSP space to hold another tax-inefficient asset class, such as REIT? Suppose i have a 100k ZRE holding in my non-registered account that could simply be moved to my RRSP… The following operations would take place:

    Sell 100k ZRE in non-registered
    Buy 100k HBB in non-registered
    Sell 100k XBB in RRSP
    Buy 100k ZRE in RRSP

    Thus achieving greater tax efficiency and keeping the same asset allocation.

    Sorry for the complicated post, hope everything is clear enough to get answers, for me it make sense but i am puzzled

    Reply

  10. I’m retiring effective jan 2015 @ age 61. I’m not planning to take either Quebec or Canada pensions until age 65. Assuming I do not find some part-time work,for the next 4 years and I start living off my savings, should I take out from non-registered savings or from RRSP’s. I believe the answer is from RRSP for obvious tax reasons, Do you agree.

    Reply

  11. My husband and I sold our house last December and are now renting. We are thinking of selling our cottage in Muscoka and I am wondering how capital gains tax would affect us being we do not own a house any longer. Could we claim the cottage as principal residence as we do use it a lot during the spring summer and fall.

    Reply

  12. Jason! I have the following going on:
    A beacon score of 642 (post bankruptcy 4 years), a salaried job that pays 65k/annum, a car payment of $800/mo., $600 in RRSPs, and two smaller credit products that are nearly at 90% usage. I want to purchase a home in less than 60 days as I’m moving out (end of lease and no renew option), and I want to own a 325-350k house (no condos). I live in Calgary and there’s plenty of inventory to be had that meets my requirements (rent main floor rooms, I live in the basement, I’m handy, so, if separate entrance etc. Is not already there, I’ll add it).
    What are my options with no money down and no family to “gift” a down payment?

    Reply

  13. If my 25 yr old who doesn’t live at home..is out eating out every night and has $60,000 in Credit card debt(thanks to VIsa telling her she “only has to pay the min.monthly balance”) are we on the hook if she goes bankrupt or cant pay her bills? ;(

    Reply

  14. I’m 61 -female-retired from the civil service this year with a good pension. I am selling my house in Kingston and should end with about $300,000 in equityouoit

    Reply

  15. I need help deciding which debt to focus on first.
    Currently I have a car loan that will be paid off in 4 years. The monthly payment is very high at $660 with an interest rate of 5%.
    I also have $14000 in credit card debt at 12% interest.
    Currently the minimum payment is about $120 and I pay $200 a month.
    I realize paying off the higher interest debt first makes sense, but wouldn’t paying off the car first, allowing me to put an extra $660 a month towards the credit cards be prudent?

    Right now I have $6600 to put towards either taking 1 year off the car loan or putting it towards the credit card. Also in one years time I intend to have another $6600 payment ready for either the car or credit card.

    Reply

  16. I am in the process of transferring my registered accounts (TFSA and RRSP), presently with a financial broker, to a discount broker account. Once transferred, I would like to build a coach potato portfolio. I have investments (600K) in non-registered accounts (80% of which is in equities), outside my registered accounts. Should I take a macro approach when creating the coach potato portfolio in my TFSA (31K) and in my RRSP (200K), by taking into account my investments in the non-registered account (i.e. asset mix)? In other words, when building my coach potato portfolio, should I factor the relatively large equity stake I have in my non-registered accounts in order to find a suitable balance at my age (52)?

    Also, is there a minimum amount of investments I need to have in each registered (coach potato) account in order to appropriately apply the coach potato strategy? For instance, can/should I invest in only one Fixed Income product (ETF/Index Fund) in my TFSA in order to help me find the right overall asset balance (taking into account my non-registered investments)?

    Thank you for sharing your expertise.

    Tony

    Reply

  17. I manage my stock portfolio and am interested in knowing the steps to shift stocks from an open account to my tfsa account ( also stocks self managed ). I’ve already contributed for 2015 tfsa with the new limit so who knows what the rules might be next year. Thanks.

    Reply

  18. Hi,

    I recently changed jobs and got a letter from the pension plan of my previous employer (I was employed there for around 1 year). The letter from the Pension Plan for this organization, gave me several options regarding the pension amounts that I had accumulated while working there for around a year.

    One option was to do a non locked in transfer of the pension amount to my personal self directed RRSP which is with a financial institution. The transfer would be done directly from the Pension Plan to my brokerage account (i.e. I would not receive the pension accumulated amount, but it would go directly to the brokerage house and to my self directed RRSP account).

    Before taking this option, I wanted to confirm that this would not cause any tax or RRSP over contribution issues for me. Currently I have no RRSP contribution room – however – I understand that this type of transfer, directly from the Pension plan to my RRSP, would not count towards my contribution limit, and thus would not cause me any RRSP over contribution issues and penalties thereof. Is this correct ?

    Thanks

    Ray

    Reply

  19. My new husband has been going to the same financial planner for years. I am worried though. She has him borrowing money to invest. He is now retired and to date he has borrowed $200,000 to invest with her. Is this normal practice?

    Reply

  20. I’m a single mom of a 17 year and pregnant with my second child. My soon to be ex husband will pay me $250,000 after tax dollars and I will likely receive $10k-15 per month in child support. I will not receive spousal support as I’ve signed a prenuptial agreement. I have $11,100 in business debt from a consulting company which my husband told me to quit when we married. I’m not employed at this time but would like to continue working a couple years after my baby is born and my son is in college. I have education savings for him and $50k in retirement for me. I don’t have any credit card or auto debts.

    I live in a one bedroom plus den condo with a $260K mortgage. I really want to pay down the condo and remain in the home. But I also want to move into a bigger home that would accommodate my baby and a home office. I don’t know what to do currently. Please advise.

    Reply

  21. Hi Jason
    I am planning to retire at the end of this year . We have a reasonable size portfolio with a major fund company. Returns have been in the 6% range since inception with a MER of 1.79%. I am wondering if it would be wise to consider transferring my money out and get a better return by saving on advisor fees. I would think that my investments now would be very conservative to preserve capital so do i need an advisor. ? I am wondering if I should employ a “Fee only” advisor to let me now if this is a good move and make recommendations for future.
    I am not an active trader and my expertise really relates to what i pick up from “Money sense’.
    My current CFP is always approachable , but t dont ask the tough questions for whatever reasons.

    Can you give me your thoughts ?

    Reply

  22. Is increasing my mortgage payment by $400.00/month the same as paying $400.00/month as a pre-payment? My pre-payment allowance is $45000.00/year so there is no worries about using it all up.

    Reply

    • Further to my question, the bank seems to think that I will pay more interest with the increasing option….

      Reply

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