Professional Development Course

Investing Fundamentals: Asset Allocation and Tax Strategy

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All rights reserved. No part of this publication/course material may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means (photocopying, electronic, mechanical, recording or otherwise) without the prior written permission of the copyright holder and publisher, applications for which shall be made to the Chartered Professional Accountants of British Columbia, 800-555 West Hastings Street, Vancouver, BC, V6B 4N6.

DISCLAIMER

This course material deals with complex matters and may not apply to particular facts and circumstances. As well, the course material and references contained therein reflect laws and practices which are subject to change. For these reasons, the course material should not be relied upon as a substitute for specialized professional advice in connection with any particular matter.

Although the course material has been carefully prepared, neither the Chartered Professional Accountants of British Columbia, the course author and/or firm, nor any persons involved in the preparation and/or instruction of the material accepts legal responsibility for its contents or for any consequence arising from its use.

January 2018

1

Member-Canadian Investor Protection Fund

ODLUMBROWN.COM

Welcome CPABC Chadwick Walker | Investment Advisor, Odlum Brown Limited

Michael Erez | Director, Odlum Brown Financial Services Limited

Investing for Generations

Investment Fundamentals

Building a Portfolio

Approach and Examples

Agenda: Part I

2

Agenda: Part II

Types of Investment Accounts

Asset Location

Tax Tips

You are probably wondering…

=

Chadwick D. Walker, BSc, BEd, CIM®

Associate Portfolio Manager, Investment Advisor

Direct: 604 844 5433 cwalker@odlumbrown.com

3

Limitless

Financially Challenged

Priorities

4

Amplified Focus

Excited to be of service.

Investing (n-vsting)

Assets - Liabilities

5

Car

Debt

Shopping

Kids

Vacations Charity

Savings Account

0%

5%

10%

15%

May-89 May-99 May-09

Source: Statistics Canada

Investments

Property

Annuity

Bonds Start Business

Equities

6

The Power of Compounding

Year 1

Interest

Year 2

Interest

7

Year 1 Year 20 Year 40 Year 60

Currency Risk

$4.00 USD $5.00 CDN

Purchasing Power Parity

8

2016 2017

$10.00

↑5%

$10.50

Inflation

1950 2050

NOW

↑ Money Supply

9

Help Wanted!

Canadian Inflation

12.5%

2%

0%2%4%6%8%

10%12%14%

1967 1977 1987 1997 2007

Source: Statistics Canada

0%

5%

10%

15%

20%

1967 1977 1987 1997 2007 2017

Core InflationBank of Canada

Source: Statistics Canada

10

Current Lifestyle: $50,000.00

+ Inflation (2% in 30 years)

Future Lifestyle: $90,000.00

What about mortgages?

0%

5%

10%

15%

20%

25%

1982 1987 1992 1997 2002 2007 2012

Conventional 5 year mortgage rate

Overnight Bank Rate

Source: Bank of Canada

11

When should I start?

One Diamond

Equals One Year

Average Human Lifetime

12

Average Human Lifetime Each row is one decade Birth

30th Birthday

60th Birthday

Turning 90

Investment Horizons Each row is one decade Birth

25

65

40-year time horizon

Financial Independence Each row is one decade Birth

65

100?

35-year time horizon

13

Price - $50k/year

Retirement Lifestyle Costs

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

25 35 45 55 65 75 85 95 105

Invest $10k per year from 25-65

5% Net Growth Withdraw $50k/year starting at age 65

$0

$100

$200

$300

$400

$500

$600

$700

$800

25 35 45 55 65 75 85 95 105

5% Net Growth Withdraw $50k/year starting at age 65

Invest $10k per year from 35-65

14

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

25 35 45 55 65 75 85 95 105

5% Net Growth Withdraw $50k/year starting at age 65

Investing for Generations

Maximize Gains

Risk

15

Other Considerations

Inflation

Fees

Taxes

Debt

Income

Savings

Risk Tolerance

Fit?

16

Modern Portfolio Theory

Security A: Expected Return = 12%, Standard Deviation = 20%

0%

5%

10%

15%

20%

25%

0% 10% 20% 30% 40% 50%

Security B: Expected Return = 20%, Standard Deviation = 40%

Risk

Return

Standard Deviation vs. Expected Return

17

Optimizing Risk and Return

Portfolio A % B % Return Standard Deviation

1 1 0 12% 20%

2 0.9 0.1 13% 18%

3 0.76 0.24 14% 16%

4 0.5 0.5 16% 20%

5 0.25 0.75 18% 29%

6 0 1 20% 40% 0%

10%

20%

0% 10% 20% 30% 40%

Portfolio Combinations Return

Risk

Are humans perfectly rational?

Asset Allocation

18

BONDS 4% 10%

$32,000 $20,000

$800,000 ROI ~5% EQUITIES

$200,000

BONDS 4% 10%

$20,000 $50,000

$500,000 ROI 7% EQUITIES

$500,000

BONDS 4% 10%

$8,000 $90,000

$200,000 ROI ~9% EQUITIES

$800,000

19

More Specific

Shopping for Bonds

2-Year Government Bond %

0.51%

0

5

10

15

Jan-83 Jan-93 Jan-03 Jan-13

Source: Bank of Canada

20

10-Year Government Bond %

1.73%

0

5

10

15

Jan-83 Jan-93 Jan-03 Jan-13Source: Bank of Canada

0%

5%

10%

15%

20%

25%

Sep-07 Sep-10 Sep-13 Sep-16

High Yield

4.39%

Source: Bank of Canada

Bond Ladder

21

5 Years

2019 Bond @ 1%

2020 Bond @ 2%

2021 Bond @ 3%

2022 Bond @ 4%

2023 Bond @ 5%

$$$$$$ Maturity

2020 Bond @ 2%

2021 Bond @ 3%

2022 Bond @ 4%

2023 Bond @ 5%

$$$$$$ - 2024 Bond @6%, ??

2020 Bond @ 2%

2021 Bond @ 3%

2022 Bond @ 4%

2023 Bond @ 5%

22

After Tax Return Fixed Income $10,000 4% = $400

*Inflation 2% = -$200

*Taxes on $400 *50% = -$200

*Advisory Fees 0.5% = -$50

NET Total = $-50 *Estimated Costs

Why do we need fixed income?

Return of Capital

Oppositely correlated to the markets

Downside protection

Interest income

Equities

Shopping for Equities

23

Index Composition • Index of 6 companies for an exchange

that has 11 companies trading

50

20

20

5

3 1

• Index of 6 companies

• Bigger Company = Bigger Weight

50

20

20

5

3 1

Index Composition

Global Choices

24

Canada S&P/TSX Index

6.4%* Sector Weighting Financials

Real Estate

Materials

Energy

Industrials

Consumer Discretionary

Info Tech

Consumer Staples

Telecom Services

Utilities

Health Care

*annualized over 15 years.

0

5,000

10,000

15,000

20,000

Jan-80 Jan-90 Jan-00 Jan-10

Source: Market-Q

USA S&P 500 Index

0

500

1,000

1,500

2,000

2,500

3,000

1-Jan-80 1-Jan-90 1-Jan-00 1-Jan-10

7.8%*

14.8 2.9

3

5.8

10.1

12.2 24.1

8.2

2

3 13.9

Sector Weighting (%)

Financials

Real Estate

Materials

Energy

Industrials

Consumer Discretionary

Info Tech

Consumer Staples

Telecom Services

Utilities

Health Care

*annualized over 15 years.

Source: Market-Q

Build it

Build a portfolio like an orchestra

25

Build it Financials Real Estate Materials Energy Industrials Consumer Discretionary Info Tech Consumer Staples Telecom Services Utilities Health Care

Odlum Brown Model Portfolio

The Odlum Brown Model Portfolio was established by the Research Department in December 1994, with a hypothetical investment of $250,000. These are gross figures before fees. Past performance is not indicative of future performance. Trades are made using the closing price on the day a change is announced. Data as of Dec. 15, 2017.

After Tax Return Equities*

$10,000 Invested 11% = $1100 Inflation 2% = -$200 Tax on $550 (1/2 gain) 50% = -$225 Advisory Fees 2% = -$200

NET Total = $475 *Estimated costs.

26

BONDS

EQUITIES

TOTAL RETURN

Research Approach

27

High-Quality Companies

28

Putting all the companies together

January 8, 2018 | 83

1

2

3

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Symphony of Returns Symphony of Returns

7x

9x

26x

1 As of December 15, 2017. The Odlum Brown Model Portfolio was established on December 15, 1994 with a hypothetical investment of $250,000. Performance figures do not include any allowance for fees. Past performance is not indicative of future performance. Trades are made using the closing price on the day a change is announced. 2 S&P 500 Total Return Index in Canadian dollar terms. 3 S&P/TSX Total Return Index.

1

2

3

$250,000

Personal Risk

Time Horizon

Future Goals & Values

Assets to own

Recap

29

Please read our Odlum Brown Limited Disclaimer and Disclosure - It is important! Odlum Brown Limited is an independent, full-service investment firm focused on providing professional investment advice and objective research. We respect your right to be informed of relationships with the issuers or strategies referred to in this report which might reasonably be expected to indicate potential conflicts of interest with respect to the securities or any investment strategies discussed or recommended in this report. We do not act as a market maker in any securities and do not provide investment banking or advisory services to, or hold positions in, the issuers covered by our research. Analysts and their associates may, from time to time, hold securities of issuers discussed or recommended in this report because they personally have the conviction to follow their own research, but we have implemented internal policies that impose restrictions on when and how an Analyst may buy or sell securities they cover and any such interest will be disclosed in our report in accordance with regulatory policy. Our Analysts receive no direct compensation based on revenue from investment banking services. We describe our research policies in greater detail, including a description of our rating system and how we disseminate our research, on the Odlum Brown Limited website at www.odlumbrown.com. This report has been prepared by Odlum Brown Limited and is intended only for persons resident and located in all the provinces and territories of Canada, where Odlum Brown Limited's services and products may lawfully be offered for sale, and therein only to clients of Odlum Brown Limited. This report is not intended for distribution to, or use by, any person or entity in any jurisdiction or country including the United States, where such distribution or use would be contrary to law or regulation or which would subject Odlum Brown Limited to any registration requirement within such jurisdiction or country. As no regard has been made as to the specific investment objectives, financial situation, and other particular circumstances of any person who may receive this report, clients should seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies discussed or recommended in this report. This report is for information purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. The information contained in this report has been compiled from sources we believe to be reliable, however, we make no guarantee, representation or warranty, expressed or implied, as to such information’s accuracy or completeness. All opinions and estimates contained in this report, whether or not our own, are based on assumptions we believe to be reasonable as of the date of the report and are subject to change without notice. Please note that, as at the date of this report, the Research Analyst responsible for the recommendations herein, associates of such Analyst and/or other individuals directly involved in the preparation of this report hold securities of some of the issuer(s) referred to directly or through derivatives. No part of this publication may be reproduced without the express written consent of Odlum Brown Limited. Odlum Brown Limited is a Member of the Canadian Investor Protection Fund.

1

Member-Canadian Investor Protection Fund

ODLUMBROWN.COM

Location, Location, Location!Michael Erez, CPA, CGA, CFP

Director, Odlum Brown Financial Services Limited 

Where should your investments go?

$

$

Which investments will optimize tax efficiency?

Which investments to hold in which accounts to optimize tax efficiency?

2

What is Financial Planning?

A framework for decision‐making

Risk Management

Tax Planning

Asset Management

Retirement Planning

Estate Planning

Age 45

Goals

Retire in 15 years 

Pay off mortgage by retirement

Help fund kids’ post‐secondary education

Meet Dave & Lisa

Dave & Lisa want to know…How to allocate $45K this year

Invest or pay‐down mortgage?

Which accounts?(RRSP, TFSA, RESP etc.)

Which investments in which accounts?

Spousal RRSP?

What should Lisa do with her locked‐in RRSP?

Hold assets in joint name?

1 4

2 5

3 6

When should they convert their RRSPs to RRIFs? 7

3

INVESTMENTACCOUNTS

Types & Features

FRAMEWORK 

How to Allocate Funds

FRAMEWORK

Where to Put Investments

PLANNING TIPS

By Account

Asset Location

Investment Account Types

Non‐Registered(Taxable)

Registered

LIRA

LIF

LRIF

RDSP

TFSA

Estate

Joint

Corporate

RESP

Contributions Non‐registered RRSP/RRIF TFSA

Maximum age ‐ Age 71* No limit

Annual limit (2018) Unlimited $26,230 $5,500

Cumulative limit (2018) ‐ ‐ $57,500

Carry forward room ‐ Yes Yes

Withdrawals added to contribution room

‐ No Yes(Following year)

Penalty on excess ‐ 1% per month 1% per month

Non‐Reg Accounts vs. RRSP & TFSA

4

Taxation Non‐registered RRSP/RRIF TFSA

Contributions ‐ Deductible ‐

Income & growth TaxableDeferred until withdrawn

Tax‐freeExcept: foreign withholding tax

WithdrawalsOnly if disposition triggers capital gain Fully taxable Tax‐free

Upon death Capital gain/lossExcept: spousal rollover

Fully taxableExcept:                

spousal rollover        Tax‐free

Non‐Reg Accounts vs. RRSP & TFSA

INVESTMENTACCOUNTS

Types & Features

FRAMEWORK 

How to Allocate Funds

FRAMEWORK

Where to Put Investments

PLANNING TIPS

By Account

Asset Location

$570K invested

$700K mortgage

Have $45K to allocate this year

Dave & Lisa

5

Start with goals: What’s most important to you?

What are the easy wins?

Framework for allocating funds

RRSP vs. TFSA vs. non‐registered?

Retirement accounts vs. RESP?

Mortgage vs. investments?

Mortgage vs. Investments

Rates on mortgage vs. investments(Mortgage rate is after‐tax)

When do you want to be debt‐free?

Mortgage vs. Investments

What keeps you up at night?

6

Mortgage vs. Investments

Pay down mortgage 

in 15 years

Extra payment of $10K/year required

Caution—build in future rate increases!

19.5 years

RESP

Do you want to fund kids’ entire education OR just help out?     How much do you currently have saved?How much grant (CESG) room is available? 

$2,500 Contribution             $500 CESG        (up to $50,000)                              (up to $7,200)

RRSP vs. TFSA:Marginal tax rates – Now vs. Retirement

Now > Retirement          RRSP

Now = Retirement          RRSP = TFSA

Retirement > Now          TFSA

Both, if possible

7

Example:

Smaller balanceLess risk of withdrawing @ higher rate 

Longer retirement     More time to ‘income smooth’

RRSP

RRSP vs. TFSA:Account Balance & Length of Retirement

Tax & additional information Dave Lisa

Income $250,000 $70,000

Marginal tax rate (MTR) 49.8% 28.2%

RRSP Room $40,000 $64,000

TFSA Room $15,000 $15,000

Lower ratein retirement =  RRSP

Investments Dave Lisa Total

RRSP $330,000 $90,000 $420,000

Locked‐RRSP ‐ 30,000 30,000

TFSA 45,000 45,000 90,000

Non‐registered 30,000 ‐ 30,000

Personal investments $405,000 $165,000 $570,000

*Excludes RESP

Current Investment Balances

8

Investments Dave Lisa Total

RRSP $330,000 $120,000 $450,000

Locked‐RRSP ‐ 30,000 30,000

TFSA 45,000 45,000 90,000

Non‐registered 30,000 ‐ 30,000

Personal investments $405,000 $195,000 $600,000

After Spousal RRSP Contribution

Retiring before 65:Spousal RRSP Contribution

Dave claims the deduction

Fund Allocation Summary 

$30K

$5K

Based on Dave and Lisa’s goals

Run a financial projection:Is desired retirement spending sustainable?

Pay off mortgage by retirement

Help fund kids’ education with RESP

Retire in 15 years (RRSP)$30K

$5K

$10K

FRAMEWORK 

How to Allocate Funds

FRAMEWORK

Where to Put Investments

Asset Location

Tax Treatment of 

Investment Income

9

Investment Income Comparison

Interest income

Foreign dividends

Eligible dividends

Capital gains

Non‐registered(taxable) accounts

Tax Treatment

Interest income

Foreign income

Eligible dividends

Capital gains

Fully taxable @ marginal rates

Tax Treatment

Interest income

Foreign income

Eligible dividends

Capital gains

+Foreign 

withholding tax‐

Foreign tax credit(?)

Fully taxable @ marginal rates

10

Rates vary based on tax treaty. 

Foreign Withholding Tax Rate

15% most accounts (i.e. Non‐reg, TFSA, RESP, RDSP)

0% all accounts

35% all accounts

Exception0% on RRSP/RRIF/Locked

Tax Treatment

Interest income

Foreign dividends

Eligible dividends

Capital gains

Grossed‐up amount taxable @ marginal rates

Enhanced DTC

Top effective rate = 34.2%(vs. 49.8%)

Tax Treatment

Interest income

Foreign dividends

Eligible dividends

Capital gains

50% taxable @ marginal rates

Top effective rate = 24.9%(vs. 49.8%)

11

Tax Rates & After‐Tax Yields

Exam

ple

Interest & Foreign Income

Eligible Dividends

CapitalGains

Top marginal tax rate 49.8% 34.2% 24.9%

Pre‐tax amount to    provide $10,000 after‐tax

$19,920 $15,198 $13,316

Tax Rates & After‐Tax Yields

Exam

ple

Take‐home message:

Don’t need to earn as much in capital gains or eligible dividends to get the same after‐tax return on interest or foreign income.

But...

Don’t let the tax tail wag the investment dog!

INVESTMENTACCOUNTS

Types & Features

FRAMEWORK 

How to Allocate Funds

FRAMEWORK

Where to Put Investments

PLANNING TIPS

By Account

Asset Location

12

PutInvestments that pay

IntoThese accounts

Interest & foreign income‐Fully taxable

Registered accounts (RRSP/RRIF)‐Withdrawals fully taxable‐Character of income is not retained 

Eligible dividends & capital gains‐At lower marginal effective tax rate

Non‐registered accounts‐Character is retained 

Large capital gains(High‐growth equity)

TFSA‐Tax‐free

Traditional Rules of Thumb

No one‐size‐fits‐all 

General Guidelines Only

Complexity varies w/: • # of accounts • investment type

Real life is messy 

Optimal location considerations

1.Tax rate

2.Time 

horizon

3.Liquidity

4.Turnover

All interconnected

13

Marginal Tax Rate (MTR)Rate of tax you pay on an additional dollar of income

Marginal Effective Tax Rate (METR)MTR + impact of tax deductions, credits & income‐tested benefits

Tax Rate

ExampleOAS Clawback: $0.15 per $1 of net income >$75K (upto $122K)

Impact on current & future tax rates

Tax Rate 

More sensitive to highly taxable investments in taxable accounts(i.e. bonds, foreign dividend‐paying stocks)

Higher Current METR

Lower‐income vs.Higher‐income years

Assess impact of each type of income/gain on METREligible dividends  vs. capital gains 

<  $110K  >

Taxable IncomeInterest,

Foreign DivCapitalGains

Eligible Dividends

$40,000 22.7% 11.4% (3.2%)

$60,000 28.2% 14.1% 4.4%

$80,000 31.0% 15.5% 8.3%

$100,000 38.3% 19.2% 18.3%

$110,630 40.7% 20.5% 21.6%

$150,000 45.8% 22.9% 28.7%

$205,000 49.8% 24.9% 34.2%

Combined Federal & BC MTR (2018)

<

>

14

Time Horizon

Accumulation

Withdrawal

Asset allocation & location 

How much cash do you need & when do you need it?

If in the short‐term…

• TFSA:       No tax, but using up scarce room

• RRSP: Taxable withdrawal Consider if retired or in lower tax bracket

• Non‐reg:  No tax on withdrawalsConsider unrealized gains

Liquidity 

A measure of how often assets are bought & sold

Higher turnoverMore frequent taxable capital gains

Tax drag (Lower compounded returns)

For securities with expected capital appreciation:

• Buy & hold:    Non‐registered account is suitable• Active trader: Tax sheltered account (RRSP/TFSA) preferred

Turnover

15

Dave & Lisa’s Accounts

RRSPs (incl. $30K contribution)TFSAsNon‐registered (Dave’s name)

$480,00090,00030,000

Total $600,000

*RESP excluded

Dave & Lisa’s Investments

CashFixed income

High growth equityDividend‐paying stock:• CDN• Foreign (incl. US)

2.5%

37.5%

20.0%

20.0%

20.0%

$   15,000225,000

120,000

120,000120,000

Total $600,000

Investments ($000’s) TFSA Non‐reg RRSP Total

Cash 15

Fixed Income 225

High Growth Equity 120

Dividend Paying Equity‐Canadian 120

‐Foreign (U.S.) 120

Total $90 $30 $480 $600

Dave & Lisa

16

What If . . .

. . . at high rates. . . at high rates

Ongoing taxable capital gainsOngoing taxable capital gains

High turnover in non‐registered account

High turnover in non‐registered account

Dave wasn’t a buy‐and‐hold investor?

RRSP > Non‐registered 

Taxable income RRIFEligible 

Dividends

$40,000 22.7% (3.2%)

$60,000 28.2% 4.4%

$80,000 31.0% 8.3%

$100,000 38.3% 18.3%

$150,000 45.8% 28.7%

$205,000 49.8% 34.2%

Combined Federal & BC MTR (2018)

What If . . .

Likely < MTR

on future RRIF withdrawals

Likely < MTR

on future RRIF withdrawals

Current MTRon dividendsCurrent MTRon dividends

Dave was in Lisa’s tax bracket ($70K)?

Non‐registered > RRSP

17

Taxable income RRIFEligible 

Dividends

$40,000 22.7% (3.2%)

$60,000 28.2% 4.4%

$80,000 31.0% 8.3%

$100,000 38.3% 18.3%

$150,000 45.8% 28.7%

$205,000 49.8% 34.2%

Combined Fed & BC MTR (2018)

Investments ($000’s) TFSA Non‐reg RRSP Total

Cash 10 5 15

Fixed Income 225 225

High Growth Equity 90 20 10 120

Dividend Paying Equity‐Canadian 120 120

‐Foreign (U.S.) 120 120

Total $90 $30 $480 $600

Dave & Lisa Tax Rate

Capital gains inclusion rate increases to 75%?

Interest rates go up?

Dave & Lisa take a year off?

They are now 70 and retired?

They want to help their kids with a down payment?

What If . . .

Tax Rate Time Horizon TurnoverLiquidity

18

INVESTMENTACCOUNTS

Types & Features

FRAMEWORK 

How to Allocate Funds

FRAMEWORK

Where to Put Investments

PLANNING TIPS

By Account

Asset Location

Planning Areas Objectives

Income Tax

Estate

Minimize and defer tax  Accumulation, retirement and death

Avoid probate Process and fee

Planning Tips  (By Account)

• Joint account(s) with spouse           

• Impact on income taxation?• No. Don’t forget about attribution! 

• Right of survivorship Avoid probate

• Can have multiple joint accounts

Non‐Registered

Dave and Lisa?

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• Higher‐earning spouse should maximize contributions first     

• Regardless of whether contributing to personal or spousal RRSP• Deduction at higher marginal rate = more savings

RRSP

Dave and Lisa?

Pension income splitting for RRIF (& LIF) income: Age 65+ 

• If considering early retirement (< age 65):Balance both spouses’ RRSPs for future income splitting

RRSP / RRIF

Dave and Lisa?

Withdrawals from Spousal RRSP attributed to contributor to the extent made in:• The year of spousal contribution• 2 years after

Exception: No attribution on RRIF minimums

Spousal RRSP

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• No change in investments required

• Conversion must be done by age 71 (Dec 31st)

• Possible at any younger age

• Under age 71: Does NOT have to be all or none!

• Mandatory annual minimum withdrawals (next slide)

RRSP  RRIF (Conversion)

Age* (%)

60 3.33

65 4.00

70 5.00

71 5.28

75 5.82

80 6.82

85 8.51

90 11.92

95+ 20.00

RRIF Withdrawal Minimums

Min  =   [RRIF balance  x %] 

Example at age 71:$100,000 x 5.28% = $5,280

*As of January 1.

• Consider conversion @ age 65 (full or partial)• If already retired & spouse has lower taxable income• RRIF income ≥ age 65: Pension income splitting & tax credit

• Base RRIF on younger spouse’s age • Lower RRIF minimum withdrawals (see table)• More flexibility & control over taxable income/OAS clawback

RRSP  RRIF (Conversion)

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Refresher

• Originate from Defined Contribution (DC) pension plans

• Cannot withdraw from a LIRA • Must first convert to a LIF or LRIF

• Have minimum AND maximum withdrawal limits

Locked‐in RRSPs (LIRA, LIF, LRIF)

• Once income is needed, consider withdrawing maximum

• Tax impact at you METR?

• Use older spouse’s age when converting to a LIF, LRIF

• Establish higher minimum and maximum withdrawal amounts

Locked‐in RRSPs (LIRA, LIF, LRIF)

Dave and Lisa?

• Maximize contributions as long as possible

• Even during retirement  (current tax savings + estate preservation)• Can contribute ‘in‐kind’ (gains triggered/losses denied) • Contribution room is cumulative & includes withdrawals

• No attribution on withdrawals (unlike RRSPs)• Fund TFSAs for spouse and adult children

TFSA

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INVESTMENTACCOUNTS

Types & Features

FRAMEWORK 

How to Allocate Funds

FRAMEWORK

Where to Put Investments

PLANNING TIPS

By Account

Asset Location

Dave & Lisa want to know…How to allocate $45K this year

Invest or pay‐down mortgage?

Which accounts?(RRSP, RESP,  TFSA, etc.)

Which investments in which accounts?

Spousal RRSP?

What should Lisa do with her locked‐in RRSP?

Hold assets jointly?

1 4

2 5

3 6

When should they convert their RRSPs to RRIFs? 7

“Know what you own  and why you own it.” 

Peter Lynch  

… and where you own it!

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Questions?The information contained herein is for general information purposes only and is not intended to provide financial, legal, accountingor tax advice and should not be relied upon in that regard. Many factors unknown to Odlum Brown Limited may affect theapplicability of any matter discussed herein to your particular circumstances. You should consult directly with your financial advisorbefore acting on any matter discussed herein. Individual situations may vary.

Thank you!