Close to 4,000 questions have been asked over the years by readers of this newsletter, which is a lot. Here’s how I choose the ones to answer. First off, the question has to be one of fairly wide interest. Also, it can’t be too personal, too specific, too technical or too odd.
I’m going to share a question about registered retirement income funds that came in recently and initially struck me as a bit too out there. But then I changed my mind on the basis that answering it could be a chance to clear up some misinformation about RRIFs and help people manage them better.
The question reads as follows: “Rob, I recently heard that a RRIF, if not used up, cannot go to a beneficiary after your spouse dies. That any money left if you are a sole survivor goes to the government if one does not withdraw all funds. Is this true?”
The short answer is no. For more detail, I got some help from Jane Bolstad, a Calgary-based certified financial planner (CFP). Here’s Ms. Bolstad’s response to this reader:
“Good on you for thinking through your estate planning and for questioning advice you hear out there. On the death of a RRIF holder, the RRIF can be transferred tax-free to a qualifying beneficiary, which would be a spouse/common-law partner or a financially dependent child or grandchild.
If there is no qualifying beneficiary, as is the case you described in your question, you can leave your RRIF to your estate or to whomever you want to by naming them as beneficiary on the plan (with the exception of Quebec where it must be done through your will). So, the answer to your question is no, your RRIF would not go to the government. It would go to your estate and distributed according to your will, or to whomever you designated.
Keep in mind that when the second spouse dies (and no qualifying beneficiary remains), there will be taxes related to the RRIF. The fair market value of the RRIF is included on the deceased’s final tax return and taxed at their marginal rate. If you had designated a beneficiary, they would receive the full value of the RRIF and the estate would have to pay the taxes. If the estate didn’t have enough assets to pay the taxes, the beneficiary would be held liable.
I recommend that you discuss this further with a wills and estates specialist to ensure that you are passing on your assets in the best way given your situation.”
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Rob’s personal finance reading list
Bonds are back, baby
An investing strategist on how bonds have rebounded from a disappointing 2022 to once again do the job we expect of them, which is holding their value when stocks fall.
No dividend ETFs for me
An investing blogger on why he prefers to own individual dividend stocks as opposed to dividend ETFs.
Digital banking smackdown
A detailed comparison of EQ Bank and Koho, both of which offer a potentially attractive alternative to the big banks. Find out which is more suited to your needs.
Stuff you should always buy at thrift stores
Classic books, artificial Christmas trees and more. In our latest season the Stress Test personal finance podcast for Gen Z and millennials, we look at how buying used can help combat inflation and help the environment.
Readers ask
In a newsletter last week, I mentioned that I bought 12 months of travel medical insurance for my wife and I for $182.21. A bunch of readers asked for more info on that. The policy was issued by Blue Cross and covers trips with a maximum stay of 17 days. This policy won’t work for snowbirds, but it suits us well for the travel we’re doing in 2023.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
Finly Wealth is a new app that provides personalized advice on the ideal credit card for your spending patterns.
The money-free zone
Incredible, blistering vocals from Louise McCord in Better Get a Move On, which appears on a recently issued album called Soul’d Out: The Complete Wattstax Collection. The record celebrates a 1972 concert in Los Angeles featuring big and lesser known soul artists.
ICYMI
What I’ve been writing about
- Nine in 10 parents are helping their adult kids financially: Here’s how much they’re spending, why and where the money goes
- In today’s cockeyed economy, rate relief for borrowers requires a grimmer outlook for your personal finances
- 2023 Globe and Mail ETF Buyer’s Guide Part Five: Canadian Dividend ETFs
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You're not bad at money – you're suffering from money shame • Retirement might look different for Gen Z and millennials. Here's how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn’t special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home down payment in Canada’s big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here’s how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
