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Well here's a thing.. if she told you about it, it means they probably weren't being shitty about you. Just talking about you in general.
Otherwise she wouldn't mention it.
Work is boring.. we talk about people all the time at mine. It's all there is to do. We start rumors all the time too. Awful ones. It's hilarious.
Well, a 401k and a Roth IRA are both US pension plans. So you can forget about them.
An RRSP is a Registered Retirement Savings Plan.
Registered means it's being watched and regulated by the federal government. It means it has all sorts of rules, basically. An unregistered investment is basically, holding shares, a savings account, stuff that you don't have to declare. Basically.
Retirement Savings Plan speaks for itself. You're saving for retirement, easy.
The tricky part about an RRSP is that if you contribute money into it, you can't get it out without triggering a tax event. A tax event is basically any time you earn money.
So, just to be clear let's play this out:
You go to work. You earn $1000 at work. You pay income tax on those earnings.
THEN you contribute 10%, $100 of your gross (Gross is money before tax) earnings into a RRSP.
So now you have a RRSP worth $100. If you were to have an emergency and NEED that $100 you will now be taxed AGAIN on that $100.
So if you DO contribute to a RRSP, you need to be certain you won't need the money until you're of retirement age.
The upside to an RRSP comes in two ways.
1) A RRSP can earn you money.
Basically you can ask your bank what they are going to invest your money into. They'll probably have a hedge fund or a GIC or something low risk. Low risk means low reward. Maybe 1.8 or 3% interest earnings annually.
Not terrible. Your money is making you money. This is good.
2) The money you donate to your RRSP does not count as income.
This is where RRSP's really start to shine, Tim. Listen up:
So, you made $20000 last year and you paid income tax on the whole amount. Let's say for shit's and giggles you paid 10% income tax on that 20k.
So that's 2k in income tax that you paid.
BUT you contributed $4000 last year into your RRSP.
Now when you do your taxes at the end of the year the tax man goes:
Ok, he made 20k, was taxed at 10%, oh but look, he contributed 4k to RRSP, well, then he only made 16k last year, so now we owe him money.
So you would in this made up scenario get $400 back at tax time.
Do you see?
RRSP's are considered like.. non-income. And they can REALLY start paying off when they bump you into a lower tax bracket.
So instead of paying that 10% maybe now you only need to pay 5% on that 16k.
These are all made up numbers.. you'll have to look into your provincial tax brackets but that's where RRSP's really shine.. when you start using them strategically to knock yourself into a lower tax bracket.
There are other benefits too. First time home buyers program where you can borrow against your own RRSP up to 25k if you're buying a house. (I did that)
Plus you're saving for retirement.
RRSP - you contribute til you're old and making very little money because you're retired. Then you fund yourself from the fruits of your savings which have grown for years.
You get more money back at the end of the year because RRSP's count as a minus on your income.
You can use them to buy a house or pay for education.
I'm sure Jux can expand on this.. as I'm just kind of going by memory and rambling away.
I don't believe I'll die at retirement age but I definitely could. I mean, I can die tomorrow.. I can die right NOW! AHHH!
But no, I don't plan that way I just know that I'm not currently enjoying my money aside from the fact that I enjoy being responsible with it.
I'm not miserable though. I hang with friends once or twice a week.. I buy the little things I want to buy, I never, ever worry about money because I planned for tomorrow instead of enjoying today.. but I wanna go somewhere warm every year and that's still a little ways off. But it's coming!!!!
And you're right, Jux.. at it's base, it's gambling. Stock can go up, or it can go down. You're basically betting that 'I'm buying it now, selling it then and I hope it's up when I want to sell it.'
But it's not like gambling at a casino where it's stacked against you. You're betting on a company to gather shareholders.
But you can certainly hedge your bets by buying into a solid company that you think is going to perform well. And you're never forced to sell. If a company's stock tanks and you're holding it, you don't have to sell that shit. You just keep on holding. That's why it's important to invest in a company you believe isn't going to go bankrupt any time soon. But they could. Oh shit yeah, they could.
But it's all up to the individuals level of risk. You wanna get into some crazy volatile market? Like investing in Crypto? Woo... what a rollercoaster.. but you try to buy the dips and sell the peaks and you can make stupid money over night.. or lose it all.
I don't recommend that shit but it's fun as hell when you win.
Not so fun when you have to wait for a month for it to climb back up to where you bought it and then sell.
Time in the market is better than timing the market.
I mean, here's the thing and we all see it every day. Everybody deserves the nice stuff in life. We really do. Nice phone, nice car, nice house, nice clothes. I feel like we all should have these things.
But we all can't afford them and people don't care that they can't afford them.
I have a lot of friends that make similar money to my wife and I and every year they go on a nice vacation and every year they buy something big or nice. I say to myself 'How come they can afford those things and I can't?' and the answer is always the same.
They're accruing debt and we're not or they're spending the money they could be saving and we're not.
But the flipside is what I'm doing isn't the best thing either. The wife and I rarely get to enjoy our money. It's all savings for the kid and paying off the mortgage and investing and blah blah blah. There's not a lot of joy being derived from our money other than the joy we get from knowing that we're being responsible paying for our future.
I mean, if I don't spend it now and then I eat shit and die at 57 when I plan to retire, what was it all for? I didn't go on vacations, I didn't go visit my friends and family and have a good time, you need to enjoy the money too.
So there's this fine balancing line people have to walk in order to get the best of both worlds.
Luckily my job keeps getting a little better every year, people are retiring, I'm able to make a little more, the wife too so we'll have enough to save the way we want to save AND enjoy the fruits of our labor as well. But for me we HAVE to put in the time doing the saving and paying things down NOW instead of later. That's how I feel while others may go about it the opposite. Spend now, save then.