an rrsp

When you’re investing and planning for retirement, make sure you make realistic calculations rather than indulging in wishful thinking

Is gold bullion a good investment? Find out why we think it’s a poor way to gain exposure to gold.

What are stock options, and can they increase your profits?

Learn how to buy gold as an investment in your RRSP

The best savings plan for retirement saves you money on taxes now, and offers peace of mind for later.

A spousal RRSP is currently one of the only means of income splitting for couples.

With today’s low interest rates, investors are paying more attention to dividend yields (a company’s total annual dividends paid per share divided by the current stock price). Dividend-paying companies are responding by doing their best to maintain, or even increase, their payouts.

In fact, dividends can now contribute up to a third of your long-term investment returns, without even considering the tax-cutting effects of the dividend tax credit (see below).

In addition, dividends are far more reliable than capital gains. A stock that pays a $1 dividend this year will probably do the same next year. It may even increase its dividend payment.

Canadian dividends give you tax advantages

Taxpayers who hold dividend-paying Canadian stocks get an additional bonus: their dividends can be eligible for the dividend tax credit in Canada.

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An American depositary receipt (ADR) is an investment unit for foreign companies that trade on a U.S. stock market, like Toyota and Honda. These units can represent fractions of shares, whole shares or multiple shares in the foreign firm. ADRs can help you simplify your international investing by letting you buy foreign shares on U.S. exchanges and avoid the complications of buying or selling on a foreign exchange in a foreign currency. ADRs can also help you cut risk, because they must follow some U.S. Securities and Exchange Commission and New York Stock Exchange rules. However, Canadian investors need to take extra care. Holding ADRs outside of a registered account, like an RRSP, will expose you to dividend withholding taxes. If you hold ADRs inside an RRSP, the withholding tax depends on whether Canada has a tax treaty with the country where the underlying company is based.

Nearly 50% of Canadians do not have a Tax Free Savings Account (TFSA). And many of those that do are not making regular contributions. This is a shame. It means that many are missing out on a savings plan that can contribute substantially to building wealth and accumulating a strong cash reserve that’s there when you need it.

Since their inception in 2009 tax free savings accounts have given Canadians an excellent opportunity to earn investment income, on interest, dividends and capital gains, tax free.

To ensure that you can take the greatest possible advantage of your TFSA, noted financial columnist Jonathan Chevreau and I have assembled a special report, Make the Most of Your Tax Free Savings Account.

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Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific investment tips and stock market advice. Each Investor Toolkit update gives you a fundamental piece of investment advice, and shows you how you can put it into practice right away.

Today’s tip: “Despite their promise to ease your tax burden on withdrawals, RRSP meltdown strategies are usually more lucrative for brokers than for investors.”

Investors sometimes ask us what we think of the so-called “RRSP meltdown.” This is a strategy that would let them make withdrawals from their RRSPs without paying income tax.

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