Optimism #67 - August 21, 2023

Dear clients and friends,

Some of the forest around Kelowna is on fire, but we are okay.

Our community is resilient and well organized for such catastrophes.  These incredible (mostly) volunteers come together to provide food, transportation and shelter for those displaced.  We are at our worst and yet our best at the same time.

Attached is short article from the Globe and Scott Barlow on why dividend stocks might be more suitable than rental properties.

Fortis and RBC dividends arrive soon! (it doesn’t take much to get me excited.)

We only do it once a year and I always forget the details of RESP withdrawals.  I will try to make it simple.

  1. There are three parts - ask the account administrator for a current breakdown.
  2. The income, the grant (these two form the PSE) and the principal (EAP).
  3. The income and grant are taxable to the student, the principal is not.
  4. The administrator suggested we take out the ‘free’ part first.  I disagree and suggest you divide the taxable amount (income + grant) by the number of school years left and roughly divide it.  My eldest daughter is in fourth year and younger one is in second year so there are 1 + 3 = 4 years left to pay for.
  5. For mine, the income is $33,101 and the grant is $8,216 for a sum of $41,317.  I elected to draw ~$11,000 per kid from this part and the balance from the non-taxable part.
  6. There is a limit of $5,000 which may be taken from the taxable part of the plan, but it only applies to the first 13 weeks of the first year of a multi-year program.
  7. Consider moving extra funds out of the RESP into a TFSA and FHSA for the student.  Since both are fully tax free, it makes sense.
For anyone saving to buy a home for the first time, using FHSA, the new tax-free home savings account, this link might be helpful:
First Home Savings Account (FHSA) - Canada.ca

The fires will pass. I hope its less smoky where you are.

Derek Moran