The Huddle – Open Forum

Most people have burning questions about their money. The most common are:

  • Worrying about cash flow being tight.
  • Worrying about paying debts.
  • Worrying about outside forces that could hurt you, such as unemployment (if the economy goes into recession) or the risk of losing money with your investments.
  • Worrying that you are not getting ahead.
  • Wanting to buy something, such as a nicer home or car.
  • How to pay less tax.
  • How should you invest?
  • When will I be able to retire?
  • Worrying about how to pay for your kids’ education.
  • What happens if something happens to my spouse/partner?
  • Which of my worried and wants is priority?

This is where you can get answers to these important questions on your mind.

The Huddle is an open forum. Ask your question – any financial question or question about your life that has financial implications. Your money and your life are intertwined.

I will try to give you my wisdom from experience. Other readers may give their views. I may point you to articles to read. This will also be a source for me for future articles.

This is a safe place and constructive forum. The only rules are:

  • No personal attacks.
  • No specific investments.
  • No sales pitches.

What is your burning question?

Planning With Ed


Ed Rempel has helped thousands of Canadians become financially secure. He is a fee-for-service financial planner, tax  accountant, expert in many tax & investment strategies, and a popular and passionate blogger.

Ed has a unique understanding of how to be successful financially based on extensive real-life experience, having written nearly 1,000 comprehensive personal financial plans.

The “Planning with Ed” experience is about your life, not just money. Your Financial Plan is the GPS for your life.

Get your plan! Become financially secure and free to live the life you want.


  1. Michel R. on January 18, 2024 at 2:29 PM

    Good afternoon M.Rempel.

    Let’s say that I want to buy a new house and, therefore with a new mortgage. The standard approach with SM is to have the margin portion at 0 at the beginning and each monthly capital payment on the fixed part can be invested and then the margin grows up from 0. But it will take time to have meaningful numbers in play.
    Can the SM be started at T0 with let’s say 50% fixed and 50% margin, so that extra cash from investment account can be used to pay the margin portion and reinvest back to make, from start, more meaningful interest deductions?

    Also, when the 65% limitation of the margin part occurs, the remaining balance in the fixed part can no longuer be used as monthly capital investment, right?

    If the limitation of 65% on the margin part is attained more rapidly, the whole process of SM, starting at 50%, is more efficient as far as the compounding aspect is concern.
    Can we push the thinking on having righ away 65% margin to be able to convert by a lump sum, and collect the maximum of deductible interests from year 1, and have a fixed portion of 15% (in the case we want 80% overall financing). Of course that fixed part would not produce elligibile capital to reinvest because the margin portion is alraedy at maximum.

    Can banks be open to start at 65% margin. I know that at one point it all related to the quality of the borrower.
    Finally, if the maximum interest deductible is reached within the first year, does the CRA accepts the fact that this maximum deduction will be presented in each and every last 24 years of the 25 year mortgage?

    Thanks for answering me quickly (if possible)and have a nice day.

  2. Ed Rempel on November 27, 2023 at 10:50 PM

    Hi Frank,

    I don’t discuss or name specific investments on my blog. The fund I mentioned that our portfolio managers are using is actually a mutual fund that uses hedge fund type strategies.

    It is an example of the totally cool methods that some of the very best All Star Managers do.

    It sells cash-covered put options, which if done right reduces your risk for modest market declines and provides quite a high cash flow. It still leaves you open to large market declines, but there are ways to manage this for a small cost.

    There are quite a few funds and ETFs selling call options, but that is far less effective. It offers no protection at all against market declines and the cash flow is quite modest.

    Writing cash-covered puts is a sophisticated strategy & requires some management, but it’s quite amazingly effective.

    The top All Star Managers our portfolio manager invests in all have cool methods to outperform their index. I enjoy studying them, the cool methods they do, and to understand how they outperform over time.


  3. Eddy M on November 23, 2023 at 5:33 AM

    Hi Ed. Is 5 years prior to retirement too late to start leveraging into stocks with a loan? Is it ever too late? Much appreciated. Eddy. Australia.

  4. Mike Stankovic on November 15, 2023 at 8:35 PM

    In the cash damming strategy, you mention capitalizing the investment LOC interest. How exactly does one do this? I just started cash damming against my rental property and would like to take advantage of this also.

  5. Ed Rempel on October 29, 2023 at 10:44 AM

    Hi Michel,

    The new OSFI rules still allow you to start the Smith Manoeuvre at 80% of your home value. They reduce your total credit limit to 65% over many years. There are methods to limit or avoid this effect.

    In general, it means that you invest about 80% of what you would otherwise with the Smith Manoeuvre every month. It reduces the benefits a bit, but not a lot.

    Here is a detailed post and video about it:


  6. Frank Huggins on October 29, 2023 at 10:23 AM

    Thanks for getting back to me re: Alts.
    I guess some alts can be good if one has a very long time horizon.
    I’m curious about the income oriented hedge fund that you mentioned in your response.
    How to I learn more about that?

  7. Ed Rempel on October 29, 2023 at 9:37 AM

    Hi Frank,

    Alts are a new category of funds. Most are hedge fund type strategies that average investors could not previousy access. Many of these strategies are very complex, so you shouldn’t invest in them unless you understand what they do. The risks are often related to their strategy, not just general market risks.

    You can consider them on a case-by-case basis.

    In our case, we have never used them. We work with elite independent portfolio managers that are able to offer hedge funds to our clients. They are the only investors in Canada with a fiduciary duty to do what is in your best interest, but that can include an actual hedge fund. No reason to use the alt version.

    Hedge funds can be an exceptional addition to your portfolio, if you understand them. They can add extra growth or provide down-side protection without bonds.

    At the moment, our portfolio manager has an hedge fund type income fund with a 9% tax-efficient payout for more conservative clients, and a high growth hedge fund for more aggressive clients.

    Neither of these is avaialable in an alt version.


  8. Michel Rathé on July 31, 2023 at 8:32 AM

    Good morning Mr.Rempel,

    Thanks for such relevant content.
    Recently I received a letter from my institution in Quebec stating that my heloc would have a cap of 65% for the re-avanceable portion. I have yet to implement a SM but it will not be with this actual institution.

    So, does that mean that the benefits of SM will be capped at 65% of the mortgage once fully converted?

    Ex: Value 700k. Mortgage 560k (80%) splitted in 105k (regular mortgage) and 455k (heloc). At 6% interest that’s 27.3k deductible with a refund of 10.92k on a tax level of 40%.

    Since OSFI tends to have a certain reach on institutions regulations, in the context of indebtedness trends of canadians, could they eventually ban heloc and therefore kill SM? Personnaly, I would not be surprised of such a next step.

    Could there be alternatives to deduct interest ?

    Thank you,

  9. Frank on June 25, 2023 at 8:57 PM

    Hi Ed
    Please comment on ‘ Alts’ or point me to where you may have already done so. There’s of chatter these days about ‘alts’ including funds for music royalties, private debt, private equity, real estate, agriculture plays, etc. etc. Of course there are good and bad apples. Are you a fan or not?
    ( new to this site)

  10. Ed Rempel on June 12, 2023 at 11:45 PM

    Hi Rick,

    Good questions.

    Yes, bonds give you the return you signed up for if you hold to maturity, including government & corporate bonds. However, that means you end up owning very short-term bonds the last few years before maturity, which are usually a lower return. Holding to maturity is usually not the most effective strategy with bonds.

    The bigger factor is the bond return is often less than inflation. I can remember Canada Savings Bonds paying 10% interest, but inflation was 12 – and the interest was fully taxable.

    From 1040-1980, the bond index lost half it’s value after inflation – after 40 years! Disaster and far worse than has ever happened long-term with stocks.

    Inflation contributed to inflation in the 1970s, but many economists think that is a temporary effect. For a few years, people spend more on energy and less on something else, but over a period of years, it’s unclear how much effect it actually has on inflation.

    I agree that energy costs will keep rising with the attempt to move to “greener” sources. There will be a lot of resistance, since it makes the cost of living higher for everyone. The energy transition is not clear and will take far longer than the media will have you believe. Current projections are that use of oil & gas globally will continue to rise for at least 20-30 years. This is a 50-100 year transition if it happens. Most likely, new technologies will be the answer in the future.

    Energy costs likely can affect inflation short-term, but not very much long term, since people adjust their spending on other things. More expensive energy over many decades may have very little effect.

    The biggest contribution to inflation over time is growth of the money supply. Government deficits are a signficant contributor. All budgets are balanced. We pay for part of the spending with taxes and the rest with inflation.

    I agree it does not look like we will get anything less than huge deficits as long as this government is in power. Until the Trudeau government, a deficit of $20 billion was considered massive. This government will not get down to that massive number. This year, they project a $60 billion deficit – and they have had larger deficits than in their budget every year.


  11. Rick on April 14, 2023 at 7:03 PM

    Hi, I enjoy your blogs and appreciate your pointing out that some of the conventional wisdom does not have the results that many imply. However there are 2 items I wanted to bring up. In your podcasts you indicate that bonds and similar investments can have a negative growth trend on one’s portfolio, and I understand that bonds decrease in value as bond prices rise but my understanding is that happens if you sell your bonds before the due date. I am mostly familiar with Canada Savings Bonds (no longer available) If you keep them until the due date you get back the return you originally signed up for, which isn’t as large as stock growth but still not negative. The other item is in your recent podcast about inflation you talk about how oil prices were a big factor for inflation in the late 70’s. I think that you should be considering energy costs going forward, not just oil price. I think energy costs will be higher with our switch away from oil and to a so called “greener” environment, and that this will have an inflationary impact on all of us going forward. Also without a change in government I don’t see a reduction in government spending.

  12. Ed Rempel on April 8, 2023 at 7:01 PM

    Hi Oliver,

    To answer your 3 questions:
    1. We use leveraged loan programs that allow investments from any company if at all possible. No company has all the best investments or all the All Stars. Limiting yourself to investments from one company still works, but probably signficantly reduces your returns.

    I’m not aware of any investment loan that allows you to capitalize the interest. Only some credit lines do. However, you can capitalize the interest yourself by borrowing from a credit line to pay it. We often have the investment loan paid directly by a credit line for simplicity.

    2. You should keep all tax-deductible credit lines separate from non-deductible credit lines. YOu can mix the deductible ones, as long as the same person(s) is claiming them on their tax returns. If you then sell an investment from your investment loan or Smith Manoeuvre, you can pay the proceeds down on either of them. Just don’t mix any non-deductible investments or credit lines.

    3. The general rule is that you can take the investment income that is taxable and withdraw it, as long as you can trace it. However, you can’t just withdraw a gain.

    For example, if you borrowed $100,000 and it grows to $110,000, you can’t sell $10,000 and take it out. If you sell $10,000, you have roughly a $1,000 gain, which is all you can withdraw. If you want to withdraw the entire $10,000, you would have to sell all the investments, withdraw the $10,000 and the reinvest the remaining $100,000.


  13. Ed Rempel on April 8, 2023 at 4:00 PM

    Hi Riley,

    The key point to answer your question is that legal ownership & tax ownership can be different. It’s usually best to have non-registered investment in joint names with right of survivorship (JTWROS) for estate planning purposes. The tax ownership does not have to be the same, though.

    When you start the Smith Manoeuvre, the first tax return where you records it is your declaration to CRA of who has borrowed to invest. Is it you, your wife, or both? Once you claim it one way, it should stay that way in future years. That’s why it’s important when you start to think about who is best to claim the Smith Manoeuvre interest & investment income over the years, not just the current year.

    Tracking it is important. The account where the money came from (credit line or chequing) and the investment account should have your name on it, but they can all be joint with your spouse.

    It makes sense to be taxed to you, assuming you invest tax-efficiently. You are the higher income, so you should get a larger tax refund. With tax-efficient investing, the taxable investment income should be less than the interest deduction in most year, even after you have been investing for years and even after you retire and you setup your self-made dividends from it.


  14. Oliver on February 26, 2023 at 11:49 PM

    Hi Ed,

    three questions:

    1. when it comes to finding an investment loan to start a leveraged investment program I constantly run into the issue that the companies offering the loan don’t allow you to capitalize the interest and require you to purchase their specific company investments. Any advice on how to get around this?

    2. Would you suggest using a separate credit facility for each leverage investment account you have to make it easier for bookkeeping? For example, using your investment loan with one account, your smith manoevre leverage its own separate account, and non-leveraged investments in a separate account of its own. This way there is no need to keep track with which credit facility you have to pay down.

    3. This involves the scenario where you would use the smith manoevre for a qualified investment and that investment were to experience a gain in value. If you were to sell a part of the investment (let’s say sell the gain) but keep the rest invested would the entire credit line still remain tax deductible or would you have to put an amount onto the credit facility?

  15. Riley Brown on February 10, 2023 at 12:06 PM

    Hi Ed,

    I have a quick question about joint investment accounts I’m hoping you can answer. Our SM account was set up where I, as the higher income, was to deduct the interest expense and include all the associated T3 and T5 income on my tax return.

    I was reading an article today and it suggested that the income has to be reported to CRA on proportionate basis of the contributions.

    How are SM cash investment accounts set up where one spouse claims 100% to CRA (interest deductions and income)? It would seem we would have both contributed 50% to invest from the Heloc.

    I hope that’s not too confusing. You seem to be the only guy that fully understands any SM questions.

    Thanks, Riley

  16. Ed Rempel on December 31, 2022 at 1:45 PM

    Hi Oliver,

    To answer your quesitons:
    – If your Smith Manoeuvre investment pays a return of capital distribution and you leave the full amount in your investment account, the interest should still be tax-deductible. YOu don’t have to pay it onto your credit line. Just leave it in your Smith Maneouvre investment account.
    – It’s best to keep your non-deductible investments in a separate account from your Smith Manoeuvre investments. If you co-mingle them, then it’s up to you to track how much relates to your interest deduction on your credit line. If you withdraw any of it, you would need to prove to CRA that the “current use” of the remaining investments are still completely from borrowed money. If CRA asks, you have a complex proof to send them. They don’t correct it. If they are not pursuaded, they just disallow all your interest until you can prove it.
    – The infinite banking concept involves whole life insurance with large premiums, high fees, and much lower long-term returns that growth-focused investors can get. These disadvantages are far more than any benefit.


  17. Ed Rempel on December 31, 2022 at 1:36 PM

    Hi Paul,

    You can have a cash position, especially temporary, as part of your Smith Manoeuvre investments without affecting your tax-deductiblity.

    You can put cash from your Smith Manoeuvre onto your tax-deductible credit line and still have the rest tax-deductible, but not onto your non-deductible mortgage. Paying down your mortgage creates credit available in your credit line, but the “current use” of paying down the mortgage is a reduced non-deductible mortgage.

    Your first thought is fine, but you can’t use your Smith Manoeuvre to reduce your non-deductible mortgage.


  18. Oliver on December 14, 2022 at 10:44 PM

    Hi Ed,

    I was looking to get some clarification on applying the smith manoevre to a portfolio investment i.e. (fund, etf)

    If the investment were to pay a return of capital distribution but you were to reinvest the full distribution in that fund does the interest on the Home Equity Line of Credit remain fully tax deductible, Or for bookkeeping purposes are you required to make that payment on the HELOC and redeploy it back into the fund? I’ve been seeing differing takes about this.

    Also, assuming you were to place your own money in a non-registered investment along with money you pulled from your HELOC, how does interest tax deductibility work when withdrawing from your investment?
    For example if I invested $1,000 of my own money into an investment and then took $1000 from my HELOC in order to buy more units. If I were to make a partial sale/withdrawal from this investment in the future is there a way of knowing how much of the fund is considered to be attributed to the funds from my HELOC (I.E. have to pay back that on the credit line) versus how much is considered my own initial contribution.

    Also, I was wondering what your take was on the Infinite banking concept. From what I see it appears that although the CSV grows at a lower rate, it is exempt from tax, and it’s equity you can then use to further borrow to invest in your portfolio.

    Thank you so much for your time and great work!

  19. Paul on December 10, 2022 at 11:48 PM

    Mr Rempel,

    I find your site and videos very informative. They have helped me out quite a bit with setting up and implementing my Smith Maneuver.

    My understanding is that the current use of the funds invested from the HELOC is what is important for determining if it is tax deductible. When selling a position, the borrowed funds, if not being reinvested, need to pay back the borrowed amount for the debt to remain tax deductible.

    I have a readvanceable mortgage set up. My question is that when selling a position, can I take those funds and pay back the HELOC by putting the funds through with a mortgage payment as long as the full amount is going to principle, and therefore going to the HELOC?

    Thank you for your time.

  20. Ed Rempel on November 25, 2022 at 5:51 PM

    Hi Curtis,

    Good question. OSFI has posted their new rules, which would come into affect on the first renewal or your mortgage after the 2023 year-end of your bank. Most banks have a year-end of October 31 or December 31. That means if you renew for a 5-year variable next year before the bank year-end, the rules would not come into affect for that mortgage until 2028.

    The weird thing is that none of our contacts at the banks or bank management are talking about it. It’s hard to see how this will make any significant difference with the government’s objection or reducing housing demand. There is speculation that there is push back from the banks, since they have to reprogram their computers. Anyone can get around these rules by moving their readvanceable mortgage to a credit union, such as Meridian Credit Union, since these rules don’t apply to credit unions. The legislation might be amendended, but this is just speculation.

    Existing legislation already caps the credit line portion at 65% of appraised value. You can access 80% by having at least 15% in a mortgage. The new legislation, as written, would prevent withdrawing from a credit line if the total amount owing is over 65%. Amending the legislation only a bit would nullify this change, in practice.

    This legislation would affect the Smith Manoeuvre. It would mean that you can’t run a PAC or capitalize interest until your mortgage is down to 65% of appraised value.

    For example, many people buy a home with 20% down and then start a Smith Manoeuvre PAC to invest every month the new available credit. People with a larger existing Smith Manoeuvre use part of the new credit available with each mortgage payment to reborrow to pay the interest on the credit line. Both of these would not be possible until the total debt is down to 65%.

    In practice, there might be a fix by having a separate mortgage for 15% of appraised value (with a minimum payment) and then have the normal mortgage & credit line up to 65% that should readvance. That will be more work for the banks. We will see whether they will do that and whether that will work with the new rules.

    The other option is that you do the Smith Manoeuvre the same, except pay the credit line from your cash flow or by selling some investments every month. This option would not have a huge effect on the Smith Manoeuvre.

    We are talking with our bank contacts and have some time yet, but will have the best option figured out by then.


  21. Ed Rempel on November 10, 2022 at 1:54 PM

    Hi Michael,

    You asked several questions.

    1) Your mortgage to setup the Smith Manoeuvre is not correct. You get a limit of 80%, or $600,000. Your mortgage is $345,000, so you should have $255,000 to invest ($600,000-$345,000). This $255,000 is less than 65% of the value of your home,so it does not limit the amount you can invest.

    The 65% limit only applies when the credit line is above $487,000 ($750,000 x 65%). You can access 80% of your home value until the credit line is above $487,000.

    2) You cannot use RRSP or TFSA for the DRIP accelerator. We don’t use the DRIP accelarator anyway, since it reduces the benefit of the Smith Manoeuvre. You invest for dividends, which you can pay onto your mortgage any reborrow to invest. However, you have to pay tax on the dividend income, which you can avoid by investing more tax-efficiently. When I model it, your investments would have to average about 1%/year higher with dividend investments vs. more tax-efficient equities. The difference is less in Quebec, but the DRIP accelerator should really be called the “DRIP Decelerator”.

    3) I don’t have a specific CPA to recommend in Quebec. I know some good ones in Ontario, but not Quebec. However, any CPA that is comfortable with tax returns including investments should be able to do your tax return properly. It’s the same, except with the “carrying charges” interest deduction. They may not be able to advise you about Smith Manoeuvre, but they should be able to file your tax returns properly.


  22. Ed Rempel on November 10, 2022 at 1:31 PM

    Hi Unicornmoney,

    The answer to your question depends on the reason you may want to have fixed income in your portfolio. If the reason is to reduce yearly fluctuations, whole life is a possible option. If your reason is to have a guaranteed portion of your portfolio, then whole life is not a good choice.

    Whole life insurance includes a significant premium that is wasted money if you don’t really need the insurance. Most people don’t really need life insurance after they retire, if you have enough investments to support your retirement for life. Once one of you passes away, the survivor would still have all your investments.

    Perhaps 5% or so of people need life insurance after they retire, mostly if they have a large pension what would be reduced a lot once they are gone or to leave some specific bequest.

    Whole life does not normally ever go down, because the life insurance company holds on to a portion of the growth to give you in down years. The long-term returns are usually pretty low. They have been 4-5%/year in the past, but with interest rates lower now, the returns may be lower.

    To have a guaranteed portion of your portfolio, you can get a similar effect by investing in segregated funds with a 100% principal guarantee. They go up and down in value, but you are guaranteed not to lose money over the guarantee period, which is usually 10 or 15 years. You save most of the insurance premium and can still control your investments, so you could easily get a higher return.

    If your goal is to reduce yearly fluctuations, then whole life can be an option. They tend to be mainly invested in bonds, but have an equity portion that can make up for the unnecessary insurance premium.

    We find it more effective to look for investments that fluctuate less, but still have better growth. A diversified income portfolio should get a higher return over time. We often use equity strategies, such as selling options against stocks or long/short strategies to get a higher return than bonds with lower short-term volatility than stock markets. Either is highly likely to perform better than whole life insurance. Both are also far more flexible, since you can access any amount of your investment any time, which is more complex with whole life.


  23. Curtis on October 30, 2022 at 8:56 AM

    Hi Ed, has there been any news on how the OSFI regulatory update will impact those in early SM execution – what will happen to existing HELOCs with 65-80% LTV on renewal? I’ve seen lots of chatter about the regulation itself, but now how they intend to close the barn door, on what will happen to folks who are mid-Smith?

  24. Michel Rathé on September 27, 2022 at 8:54 AM

    Good morning M.Rempel,

    Thanks for a such important contribution in relevant knowledge in financial wealth building.
    I studied and modelized extensiveley on the SM in regards of my portfolios and financial structure.
    I’m looking forward implementing a SM this fall. I live in Quebec. In my context though, I have few interrogations I’d like to clear out.
    I have an Heloc since 2008 and my bank is struggling with the concept of SM, so I will change bank. I want to refinance for a higher mortgage (750kx80%) 600k (now 415k). Balance is 345k (120k mortgage/225k margin).
    The goal is to refinance with a max margin portion (65%value) because I have incoming cash that could be applied and convert faster.
    My question is: After paying the former bank (345k) can the new heloc structure (600k) balance be: reg mortgage 112.5k (750k*.8=600 – (750k*.65=487.5)) thus line of credit balance = 232.5k (345-112.5). So, 600k has 255k free (600-345). So day 1 my loc can receive lump sum.
    Also, can dividend from registered accounts be part of the drip accelerator (suspect not)?
    Finally, are there SM cpa in Quebec that would validate only my structure?
    Thank you,

  25. Unicornmoney on September 25, 2022 at 10:51 PM

    Hello ed,

    Assuming RRSP and TFSA are maxed out, what are your thoughts on using participating whole life cash value (could be better than bonds since it can never go down in value) as part of the fixed income of a portfolio? I read this white paper from Wade Pfau –

  26. Ed Rempel on August 15, 2022 at 11:48 PM

    Hi Kevin,

    Inteesting question. What your financial advisor said is genearlly true, but it’s not paid out to you as “return of capital” and the benefit is exaggerated. The modest benefit usually ends after 12 years, or so.

    To understand this, you need to understand the taxation of the different types of funds and the tax on investments in a corporation. Your question has 3 issues:

    A. T-SWP vs SWP:
    1. A “T-SWP” fund, such as a “T-8” fund that pays you 8% of the January 1 balance each year usually results in most of the 8% payout being tax-free “return of capital” (“ROC”). Mutual funds, have some taxable distributions each year, so depending on how tax-efficient the fund is, you will likely have some of the 8% payout be taxable as a capital gain or dividend.

    The amount of ROC you receive reduces your book value, since it is essentially withdrawing your original investment. If your withdrawal is 8%/year, then after 12.5 years, your book value is down to zero. At that point, the ROC poriton of any further 8% payout is considered a capital gain. You will also have a big tax bill when you sell this fund, since the book value is zero and the entire amount you sell it for is a capital gain.

    2. If you do a “self-made dividend” ( ) by just doing a “systematic withdrawl plan” (“SWP”) by automatically withdrawing a fixed amount each month, you trigger some capital gain on the sale (assuming your fund has grown), but it is small in the first year.

    For example, if you invest $1 million and it grows by 10% the first year and you sell $5,000/month to give you some retirement cash flow, that $5,000 sale in month 1 has almost no capital gain. It is almost entirely your original investment, so it is the same as “return of capital” (“ROC”).

    After your fund is up 10% to $1.1 million, you withdraw $60,000 again ($5,000/month), then $54,545 is your tax-free capital and $5,455 is a capital gain. That capital gain is only 50% taxable, so only $2,727 is a taxable gain. The rest is $57,273 is tax-free capital (same as ROC).

    In short, with a T-SWP, the entire $60,000 is ROC while with a simple SWP there is $57,273 ROC in year 1.

    The simple SWP will have more and more taxable capital gain, but never more than 25-50% of your withdrawal. When your fund has doubled, 50% of the withdrawal is a capital gain of which 50% is taxable, so then the ROC is 75% of your withdrawal and the taxable gain is 25%.

    The simple SWP (“self-made dividend”) has other advantages:

    1. You decide on the exact withdrawal, instead of the fund company.
    2. You don’t have your entire withdrawal be a capital gain afer 12.5 years, like it is with a T8 fund.
    3. You don’t get the full amount you sell taxable as a capital gain after 12.5+ years, like you do with a T8 fund.

    In practice, we mostly do simple SWPs (self-made dividends), but occassionally do T-SWPS.

    B. Corporate class mutual fund:

    Corporate class mutual funds are more tax-efficient than other mutual funds. The benefits used to be large (you could switch betweent them any time with no tax consequences), but now are more modest.

    The main benefit is that the fund company can allocate gains in one fund against losses in another fund. For example, if your growth fund grows a lot and triggers capital gains within it while a resource fund in the same group goes down and they trigger some capital losses, then the resource capital loss offsets your capital gain. This usually means signficantly lower T5 tax slips at year-end.

    This is really a tax-deferral, not a tax savings, since you eventually have a capital gain on all the growth. However, it can be signficantly lower tax for many years if you continue to hold the same fund.

    C. Corporate tax on T-SWPs or SWPs:

    The T-SWP fund payout (such as a T8 fund) and the SWP payout are almost entirely tax-free return of capital. When these funds are held inside your corporation, your corporation only pays tax on the taxable capital gain.

    However, the “return of capital” (“ROC”) cannot be paid out to yourself tax-free. The withdrawal is cash held inside your corporation, so it is an ineligble dividend (or salary) to you personally when you withdraw it – the same as any amount of cash you withdraw from your corporation.

    This is where your financial advisor is wrong. You can’t withdraw it personally tax-free.

    He seems to have confused it with payments from your Capital Dividend Account (“CDA”). The CDA is 50% of capital gains that are triggered inside your corporation. It does not include ROC amounts inside your corporation.

    For example, if you sell a fund and trigger a capital gain of $100,000, then $50,000 is fully taxable as pasive investment income inside your corporationa (until you pay it out yourself) and $50,000 goes to the CDA. You can withdraw the $50,000 in the CDA account personally tax-free.

    The CDA gives you a similar effect to holding the investment personally. Half of any capital gain you trigger is yours tax-free.

    In short:

    1. T-SWP has a small tax defferal advantage over SWP (self-made dividends) for the first 12.5 years or so.
    2. Corporate class mutual funds have a tax-deferral advantage over other mutual funds as long as you own it.
    3. ROC from SWP withdrawals inside your corporaiton can NOT be withdrawn tax-free by you personally.

    The benefits in 1. and 2. are unlikely to make up for a 2% MER.

    With a strategy like this, you still need your mutual fund to outperform to be worth the 2% MER. This is possible if you have a good fund manager.

    Our All Star Fund Manager portfolio manager searches for the world’s best fund managers with long-term track records outperforming their index after all fees and that he considers skill. He invests in professionally managed investments, such as mutual funds, hedge funds, private equity, etc.

    His returns have been above the major indexes, such as the MSCI World Index and the S&P500 after all fees, including our fee.

    If the corporate class mutual fund you invest in is invested this way in All Star Fund Managers that ourperform the index, then you have value that is more than the MER.

    In that case, the benefits of a T-SWP or SWP and the benefits of a corporate class structure are all value-added for you.

    I hope this is helpful for you, Kevin.


  27. Kevin Shortt on August 9, 2022 at 6:10 PM

    Hi Ed,

    Can you comment about holding corporate class funds in a holding company account for a business owner preparing to retire. My financial advisor is recommending using corporate class funds because he says these funds can be converted to T-SWP funds where the original investment portion of these funds can be paid out to me the shareholder from the holding company as return of capital. He says this will delay paying the government in taxes and result in funds available to fund my retirement in the early years with no tax bill on the distributions. I mentioned to my financial advisor that I was not enthused about paying the 2% MER on these funds, but he noted due to the tax efficiency of the corporate class funds in relation to the ROC T-SWP function that this advantage far outweighed any disadvantage related to the increased costs of the funds. Your perspective and opinion of the advantage the corporate class function and ROC would be greatly appreciated. Thanks.

  28. Ray King on May 8, 2022 at 7:02 PM

    Hello Ed,

    I have fully read Mr. Money Mustache blog and Million Dollar Journey blog and now am starting to read your blog 🙂

    Your videos on bonds and the recent bond bubble are very insightful.

    I had two questions:

    1. In my current investments I usually have a 20 to 40% Bond allocation. Bond allocation is for two things:
    a. I cannot handle the drawdown associated with 100% Equities allocation.
    b. If the Market goes down substantially, I sell some Bonds and buy more equities. Then after Market has recovered, I re-balance back to the original allocation.

    Due to Bonds having negative returns due to rising interest rates, best thing I can come up with is to leave the Bond allocation in Cash. That way I still have easy access to buy the dips and I expect cash to have less of a negative return than Bonds in the current rate hiking environment. Are there any other suitable alternatives instead of Cash?

    2. If someone is saving up for a substantial purchase and has a short time horizon, say down payment for a house in 1 to 2 years, aside from GICs, what are some other suitable alternatives?

    Thanks, Ray King

  29. Ed Rempel on April 17, 2022 at 6:17 PM

    Hi Maurice,

    Ouch! That can be a costly mistake.

    You have few options, though:

    1. Add a HELOC in 2nd position – You can invest from your equity, leaving enough to capitalize the interest until your mortage comes due. If you have quite a bit of equity, this may work without losing a lot from the full Smith Manoeuvre.
    2. Pay the penalty and get a proper readvanceable mortgage – Ask your bank for the exact penalty in writing. They might lie ot you on the phone, but not in writing. Then do the math of the expected benefit of the Smith Manoeuvre until your mortgage comes due vs. the the penalty. Math can tell you which is better for you.
    3. Wait until your mortgage comes due and then do the Smith Manoeuvre – You might lose a lot of compounding returns by delaying the start of the Smtih Manoeuvre for 5 years, if that is the term on your mortgage. How much you are losing is a math calculation, depending on how much equity you have that could be invested, your expected rate of return vs the after-tax interest cost, and the term on your mortgage.

    We offer free services of Ed’s Mortgage Referral Service and Ed’s Mortgage Breaking Calculation that can help you figure out what is best for you. Fill out both parts for the mortgage breaking calculation.


  30. Ed Rempel on April 17, 2022 at 5:59 PM

    Hi Jessy,

    Your question seems to be about how to buy your waterfront home and what to do with your 2 pensions. You actually raise many questions.

    I understand your desire for a waterfront home. We have our home plus one on the waterfront and it’s awesome! Waterfront for me is in the middle of the action – downtown Toronto – not away from the action in lake country. Is your desire to upgrade to waterfront or for it to be a 2nd home?

    Your idea of commuting a pension to make up the shortfall for buying the waterfront home is an expensive way to buy it. You will pay full tax on a penson lump sum. It’s cheaper to buy it with a mortgage and pay for it over time. Leaving your retirement investments grow over time and withdrawing for mortgage payments can add a lot to your retirement lifestyle. Also, wthdrawals from your retirement nest egg spread out over time means you can withdraw at lower tax brackets.

    Putting a lot of money into real estate when you retire can mean a significantly lower retirement lifestyle. A strategy like the Smith Manouevre can allow you to buy the home(s) you want with a minimum withdrawal from (or even adding to) your retirement nest egg.

    Commuting pension is a complex issue with major pros and cons, and it can’t be undone. It’s important to get it right. The effect on your retirement lifestyle is the biggest issue, but there are also estate planning issues.

    Will you have a more comfortable retirement with a pension or commuting it and withdrawing from your investments? Pensions are based on a complex calculation by actuaries, but there is an underlying assumption that the investments inside the pension pay you about 4-5%/year long-term. If you are an equity investor, you can get a far higher return over time and retire much more comfortably. However, if you are a more conservative balanced or income investor, then your pension may provide as much or more over time.

    We have a detailed spreadsheet to figure this out. It shows specifically how your retirement compares with a pension or your own investments instead. And it shows what rate of your return your investments need to give you the same retirement lifestyle (taking into account all tax consequences). It is typically about 4-5%/year.

    The commuted value of your pension is the amount an actuary calculates is needed to give you the income your pension provides. Recently, commuted values have been very inflated because they have been based on very low bond returns of 1-1.5%/year. Historically, essentially the full balance of pensions could be transfered to a locked-in RRSP, even thought there are legislated maximums. With commuted values inflated, they are often closer to double the amount that can be transfered. That gives you a sense of how inflated they are.

    The amount that can’t be transferred is all taxable that year on top of your earned income, which is why commuting at the beginning of a year is smart.

    A pension gives you a guaranteed income, while commuting and investing yourself is not guaranteed. Guarantees are always massively expensive. An effective portfolio of equities has been very reliable over the long-term in history. Equity investment have long-term returns of 10-11%/year. The worst 25-year calendar return of the S&P500 in the modern stock market (last 90 years) is 8%/year. This is far higher than the 4-5% return in your pension. When you understand how reliable the stock market is long-term, you see that the guarantee is not worth much and is a guarantee of quite a bit less.

    There are also major estate issues. Pensions normally provide a survivor benefit of 60% of your pension if your spouse outlives you. Sometimes it’s 50% and sometimes you get options of 80% or 100%. We usually recommend the highest possible. This typically reduces the pension by 5-10% from what the pension provider tells you. Once you and your spouse are both gone, the pension company keeps the rest., There is nothing for your kids.

    If you commute your pension, your spouse and kids get 100% of the investments left whenver you are gone. This can mean a huge increase in your estate.

    In the end, it’s a good idea before you commute your pension to work out the options precisely for your specific case, instead of discussing generalities. That’s why we created our in-depth spreadsheet.

    For a good discussion about what to do with pensions, I recommend this podcast:


  31. Maurice Watson on January 24, 2022 at 10:43 AM

    I’m looking to implement the Smith Maneuver. I’ve recently renewed my mortgage with CIBC and unfortunately I forgot to request a HELOC with the mortgage. CIBC told me that I cannot add a HELOC to the existing mortgage. I would need to close the mortgage, pay extensive penalties and start a new mortgage with a HELOC. I don’t want to do that. Are there any other options for me to implement the Smith Maneuver using my current mortgage? If there other options, would you please summarize them?

  32. Jessy on January 23, 2022 at 4:01 PM

    My husband and I are in the enviable position of each having a DB pension. His is ON Teachers and mine is federal government. Our retirement plan includes buying a waterfront home. Our suburban mortgage is paid off. He is 48, planning to work another 5 years and I am 42 and planning to work at least another 10. I think it’s worth considering commuting one of our pensions to unlock some additional money to make up the shortfall for buying our dream home. What should be thinking about and what questions should we be asking? Thanks!

  33. Ed Rempel on January 18, 2022 at 12:15 AM

    Hi Som,

    I agree completely. Making all the retirement tax planning decisions optimally can make a huge difference to your retirement income.

    This is especially true with the 8-Year GIS Strategy. A couple can get $105,000 tax-free over 8 years, but without effect planning, you could get hardly any of it. Planning a few years ahead for the GIS Strategy, you often have to do the opposite of what is most effective without the GIS Strategy.

    In other words, you have to decide ahead of time and either commit to it and optimize it – or don’t do it at all. If you go into it without a plan, you will likely get very litte. It is so easy to get a some CPP or pension or RRIF income or trigger some capital gains or dividends, all of which reduce your GIS income.

    The beauty of tax planning, though, is that it works! You can make a perfect investment decision that does not work out. But we can very accurately predict the tax you will pay and the GIS you will get if we have all your information.


  34. Ed Rempel on January 18, 2022 at 12:01 AM

    Hi Steve,

    Commuting your pension is a complex decision with multiple factors and is not reversible. Get professional advice.

    The commuted values lately have been highly inflated, though. Pensions tend to have huge bond holdings and interest rates are super-low. The commuted value is a calculation of the dollar amount of investments needed to pay the pension you have earned, so a low interest rate means a very high commuted value.

    The have been usig 2-3% for calculating pension commuted values. If you take the value and invest effectively like in equities, it is not hard to get a far higher return and more comfortable retirement.

    To illustrate how inflated the values are, 15 years ago when interest rates were normal, you could essentially transfer the commuted value all into a locked-in RRSP (LIRA). A tax-free transfer. There are rules on the maximum you can transfer. Today, the amount you cannot transfer is usually more than half the commuted value.

    A complicating issue is that so many people were commuting their pensions, that they changed the rules to ban it once you turn 50 or 55 in most pensions. I believe HOOPP allow you to commute before age 55 only. In other words, you have to retire early to commute.

    A government pension, like HOOPP, plus CPP combined typically pay about 50% of your finally salary if you are in it for 30 years. If your final salary is $100,000, you should get about $50,000/year total from your pension and CPP. (2%/yearx30 years less spousal benefit about 5-10% = 50%).

    A pension of say $40,000/year could have a commuted value of at least $1 million. Today, you may only be able to transfer about $350,000 to a LIRA tax-free and the remaining $650,000 may be taxable. There will probably be a large tax bill the year you commute, so it is worthwhile to plan ahead and try to reduce the tax.

    We have detailed software that calculates the benefit of keeping a pension vs. commuting it after tax assuming various investment return rates, ages and tax brackets. Years ago, there was a noticeable but not huge benefit of commuting, say 30% or so. Today, if you commute and then invest effectively 100% in equities, your retiremnt income can be close to double – even after the large tax bill on day 1.

    Commuting your pension can make retiring early possible. We have helped a few clients retire early just in the last year by commuting. Teachers have to be under 50 to commute their pensions. We helped 3 teachers retire one month before their 50th birthday last year. They would have had to work until age 53 1/2 to get the same retirement income from their pension that they can get today by commuting.

    There are other big factors to consider:

    – You give up the guarantee of a pension. You have to be comfortable investing the large amount on your own of have good professional advice. With good investments over the long-term, you should be easiliy able to outperform the low return used for a commuted value, but many investors make typical investor mistakes like buying high and selling low, and end up with low returns.
    – You lose the fixed withdrawals. This can be a big benefit, since you can withdraw more one year and less the next. You have to plan your withdrawals, though, so your money lastst at least as long as you and your spouse do.
    – Spouse’ value – Pensions usually have a reduced pension like 60% that your spouse gets if they outlive you. If you commute, your spouse gets 100% of your remaining investments.
    – Estate value – Once you and your spouse are gone, the pension is usually gone with nothing to your kids or other beneficiaries. If you commute, your kids get 100% of the remaining investments.

    Long answer to a complex question. If you know what you are doing and can retire early, it can be a huge opportunity for you.


  35. Ed Rempel on January 17, 2022 at 11:17 PM

    Hi Shannon,

    I’m a big fan of Explore FI Canada podcast.

    The withholding tax on foreign dividends depends on the type of account and type of investment. It does not appply in RRSPs or in US-listed ETFs or mutual funds. The withholding tax is small. If you have a 2% dividend, 15% tax is 0.3%. The TSC 60 has lagged the S&P500 by nearly 2%/year compounded since 1950.

    The advice here is, “Never let the tax tail wag the investment dog.” Never start an investment decision with a tax reason. Always start with what is the most effective, reliable long-term investment. Then figure out the most tax-efficient way to own it.

    I have often seen investors make a decision to save $1 in tax with the result of losing $50 of investment growth over the next decade.

    The TSX60 is a resource & financial sector fund – not a core holding. It has lagged the MSCI World Index by 8%/year compounded the last decade (up until last year). It is an oil index. It does well when oil is high or rising last last year. It lags if oil is low like the previous 10 years.

    We have zero in fixed income and almost zero in Canada. A couple real easy ideas with a big boost to your returns.


  36. Som Anet on October 31, 2021 at 12:13 PM

    Very Insightful content. I have read (& watched) your columns on divesting RRSP/RRIF’s and 8 Yr. GIS strategy with great interest. You will be doing us all a great service if you write a book with Case Studies on Tax Planning Strategies for Baby Boomers as they near retirements. One of the biggest threats to their portfolio is not Inflation or poor returns but poor tax planning.

  37. Steve on October 22, 2021 at 12:07 PM

    I am enrolled in a good pension plan (HOOPP) and wondering what you think about commuting pensions.

  38. Shannon Hobson on October 7, 2021 at 1:42 PM

    Oops. I meant the Canadian Financial Summit!

  39. Shannon Hobson on October 7, 2021 at 1:31 PM

    Hi Ed,
    I just found you though the Money Show, and am listening to the Explore FI Canada podcast. I am a DIY investor, and mostly feel confident, but, as you mentioned on the podcast most of my stocks and ETFs are Canadian. I guess I am confused because my understanding is that if one invests in US stocks, there is a 15% withholding tax, which would mitigate any gains from a US stock? I don’t want to lose 15% when I need to start withdrawing, as I am currently retired and will be withdrawing at some point.
    Thank you!

  40. Ed Rempel on February 20, 2021 at 9:47 PM

    Hi Kalie,

    It sounds like you are new to investing. I understand the desire to feel you control your own investments. My experience is that the quiet confidence of actually outperforming is more satisfying.

    I’m a financial planner, not an investment guy. I have 2 main investment skills:

    1. Seeing through the conventional wisdom.
    2. Identifying top investors.

    The conventional wisdom investing methods that are popular today all have major flaws that seem obious to me.

    For example, in the last decade, the MSCI World Index has averaged 13.5%/year. It’s been a great decade. Most investors are using one of 5 methods that have lagged by huge margins because of their flaws.

    Here are the 10/year stats:
    MSCI World Index 13.5%/year.
    Index investing 9.5%/year.
    Dividend investing 5.9%/year.
    Couch Potato 6.8%/year.
    Robo-advisor aggressive 8.1%/year.
    Typical investment advisor 8.3%/year.

    We EASILY outperform all of these. All obviously lagged hugely for clear reasons. They rely on conventional wisdom which includes the “4 Performance Drags”:
    1. Asset allocation.
    2. Home country bias.
    3. Riding the brake (defensive outlook).
    4. One-idea investing.

    I personally invest with a few of the world’s best investors. They are All Star Fund Managers that all have 15-year to 30-year track records ahead of their index after all fees (including ours).

    While these 5 common investment methods have all lagged, our clients have been outperforming the MSCI World Index after fees. That is our benchmark.

    I don’t pick individual stocks and you would not want anything I might pick. I get a kick out of watching the world’s best investors and seeing what they invest in. It’s way better and way cooler.

    For example, 2020 was a great year with our top holdings being Chinese and Asian technology companies. I could never have picked them, but our All Star Fund Managers found them for us.

    Some general comments. The Smith Manoeuvre is a risky strategy, because it is borrowing to invest. You should have a high risk tolerance, a long-term outlook and a sound investment strategy. I would suggest a minimum commitment of 20 years. This is because the stock market has historically been quite reliable over the long-term, but not the short term.

    If you have the right growth-oriented, long-term outlook, you should be able to ban all of these terms from your investment strategy entirely: asset allocation, protecting the downside, minimizing risk, dividends, income, and Canada.

    These may sound strange, but the term “risk” is always used to mean short-term risk – 1-year or 3-years.

    You mentioned ROC and “cash bleed”. The term I use is “tax bleed”. Both ROC and “tax bleed” relate to income or dividend investing. Just avoid those methods and you should be fine.

    You mentioned choosing sectors. This is a “top down” idea that somehow you or I can pick sectors. The top investors choose their sectors “bottom up”. They search the world for the best stocks and wherever they find them determines their sectors. Investors that start by picking sectors and then trying to find the best stocks in those sectors are using an inferior method.

    Trying to predict the future is a waste of time. I find many investors worried about whether there will be a crash or recession next year. I never think about that. It’s always unlikely. Here is my insight: investors that try to predict the future have lower returns than investors that don’t.

    The worst possible source of investment ideas is the media: internet, social media, TV, newspapers and TV. If those are your primary sources of investment information, you will almost definitely underperform.

    If you really want to pick your own investments, as Warren Buffett says, “know-nothings” should stick with indexes. My view is that the fewer the better. One index might be smart. 2 is less smart. 3 or more is probably dumb. You end up picking popular areas “top down”.

    I would suggest to either work with a professional you trust or put 100% into the MSCI World Index. Don’t market-time, other than trying to buy more when it is down. With 100% MSCI World Index, you should EASILY outperform the 5 most popular investment methods.


  41. Kalie on February 14, 2021 at 10:54 PM

    I’m contemplating running the smith maneuver on my principal and have a the readvancable heloc already. I have money to kick start the investments but would like to learn and run these myself. Could you please outline specifically what types of investments you suggest. Globally diversified etfs?l or stocks? If that’s the case what do I need to look at specifically so there isn’t a ROC or cash bleed. What is the lingo I need to look out for when planning my portfolio. What shoild be the balance between sectors? Thanks!

  42. Ed Rempel on January 31, 2021 at 9:51 PM

    Hi Kevin,

    If you are buying a balanced portfolio, that normally includes bonds. You improve your returns a lot more by avoiding fixed income than by reducing fees.

    The other option for you is to buy outperforming mutual funds. 🙂 There are some. I am a believe in active management and invest with outperforming fund managers.

    It’s hard to answer this question specfically for you, because I don’t know your situation or your risk comfort. RESPs are a bit different because they are a medium-term investment, not long-term. Most likely in your case, all the money will be withdrawn over the next 7 years, when your youngest finishes her first degree.

    If you don’t need every dollar and can tolerate a decline, you are far more likely to gain the most being in equities over 7 years.

    In general, my view from experience is that people who try to predict market corrections have lower returns than people that don’t. We just had a long 11-year bull market and there was not a single day I didn’t read an article from someone predicting a market correction.

    The first of the 2 secrets to outperforming with equity investing is to get at least 100% of the growth during the bull markets. That means staying fully invested through the entire bull market, not trying to guess.

    I’m a math guy that looks at the stats. In the last 150 years, if you had delayed part of your investment until a market correction, you would have been better off 20% of the time and worse off 80% of the time.


  43. Ed Rempel on January 31, 2021 at 9:18 PM

    Hi Lauren,

    The answer to your question is yes. Interest is deductible based on the investment you buy, not based on what you use as colateral.

    A mortgage or credit line on your home used to buy a rental property is tax-deductible, the same as if you used the rental property as collateral.

    In general, you should pay the same interest rate either way, so either can work.

    My insight here is that in my view, rental properties are generally only good investments when they are highly leveraged. A paid-off rental is like a GIC – low return and rent is fully taxable. A rental with a huge mortgage gives you leverage on the moderate growth, which can make it a good investment.

    If you have a paid off home and don’t plan to use the equity for anything, my suggestion would be to borrow the 25% down for the renta property against your home and then mortgage the rental for the rest. This way, you have none of your own money in it. Any growth in value of the property is highly leveraged and a good gain for you.

    This is also a good measure of a good rental property. A good rental property should have enough rent to pay all expenses, including the credit line used for the down payment.


  44. Kevin on January 14, 2021 at 9:22 PM

    Hi Ed,
    I’m in the process of moving the funds in my teens (15 and 16) RESP out of their under performing mutual funds to a few low fee ETF’s. I have done a lot of research, and have picked ETF’s that will give me a balanced portfolio that should at least beat what they are currently doing. I was originally going to throw bonds in the mix but after listening to you and Tommy chat in the Maple Money podcast I have changed my mind.

    I’m moving approx. $40,000. I keep thinking that we may be in for another market correction. Would you recommend that I go all in, or take a slower approach and leverage dollar cost averaging over a couple months in the case that I hit a correction and take advantage of buying in at a lower price?

    Thanks a bundle,

  45. Lauren on December 20, 2020 at 4:43 PM

    Hi Shaun,

    Thanks so much for the thoughtful response! Also, That’s a good point you bring up re. frontloading the interest/deductions with a traditional mortgage – I hadn’t thought of that.



  46. Shaun on December 14, 2020 at 10:25 PM

    Hi Lauren,

    I’ve been looking around to do something similar with stock market investing. From my understanding, you should be able to deduct the interest because the current use of borrowed funds is for generating income. This shouldn’t be any different than using an empty HELOC to purchase a rental property, then convert the HELOC balance into a traditional mortgage.

    By setting up a traditional mortgage for this purpose instead of a HELOC, you get larger deductions early on because of the front-loaded interest in a traditional mortgage. One drawback could be for those locking into a closed term. If you had to break out of that term, you’d have to pay a potentially large penalty. I’m not sure if that penalty would be a tax deduction though.


  47. Lauren on December 11, 2020 at 6:01 PM

    Hi Ed,

    First off – thanks for all of the great info you share via podcasts and blogs!

    I am wondering if you can help me clarify something re. tax deductions on a mortgage.

    If you were to take out a mortgage on a principal residence that has clear title (paid off, no liens), and use that money to purchase an investment (specifically a rental property), could the interest on that mortgage be tax deductible, given that it was taken with the principal residence (paid off) as security, rather than the investment property as security?

    Trying to hypothetically compare purchasing a rental property with money from a HELOC vs. a Mortgage taken out on a paid off home. I recognize that it is a unique and happy situation to be in – but cannot find many/any examples of this particular scenario in my internet searching! * I recognize that each scenario has nuance, so this is more of a general inquiry!


  48. Ed Rempel on September 15, 2019 at 10:31 PM

    Hi Mark,

    Pension splitting is allowed for “eligible pension income”, which includes any periodic payments from a RRIF, but not lump sums from an RRSP. Whether or not there are funds left in the RRIF does not matter.

    I’m not sure what you mean by “the RRIF must be a source of an annuity”. A RRIF has a minimum withdrawal each year, so it requires you to take some income. An annuity is one type of investment that you could buy in a RRIF, but is rarely used.

    I hope I have answered your question, Mark.


  49. Mark on September 11, 2019 at 7:46 AM

    Assuming the annuitant is at least 65 (but not yet 71) can partially collapsed RRSP funds still be income split even if the full amount of the funds transferred into a RRIF are withdrawn in the year of transfer?Doing so leaves no further funds in the RRIF Account until a future partial or mandated full collapse occurs. While I believe it can be done I’m concerned with the requirement that the RRIF must be a source of an annuity. Withdrawing the full amount would leave no additional funds available to be withdrawn in subsequent years.

  50. Alan Brooks on June 23, 2019 at 2:11 PM

    Hi Ed, thanks so much for your insightful information. My wife and I are interested in hearing your point-of-view on an issue we’re struggling with. We are retired (I’m 72, wife is 63) and we just joined the Keyspire Real Estate Group for a $25,000 membership fee to invest in real estate initiatives (paid for on credit cards). We’re trying to grow our income. We only have a nest egg of $300,000 in registered funds from which we withdraw $1300 each month and need to work part-time to supplement our income. Keyspire is suggesting we collapse some of our registered funds to pay off our credit card debt (now $40,000 with the Keyspire membership), then transfer our registered funds to a self-directed portfolio and invest in rrsp-eligible mortgages, earning around 12% annually. Seems like a good strategy, but what do you think?

  51. Rick Muir on December 28, 2018 at 3:06 PM

    Hi Ed, the information you provide certainly gives much food for thought. However, as I was reading about the 4% rule and the comparison of the consistency in return between stocks, bonds, and T-bills over time, I became confused by the standard deviation measurement. What does 18% standard deviation mean? I can understand a one sigma or 2 sigma standard deviation, but I can’t get my head around what a 4% standard deviation indicates compared to an 18% standard deviation. I assume you mean that the 30 year period shows less volatility for stocks than a one year period, but the term % standard deviation doesn’t work for me. Can you enlighten me? Thanks

  52. Pete on December 17, 2018 at 4:14 PM

    What is the best strategy for tax purposes once you start cashing in on your non-registered account at retirement if the investment was bought with borrowed money? We know that you can claim the interest on an investment loan ( as long as there is an expectations of earning INCOME from the CRA’s perspective) on your tax return during the year the interest was paid, but what happen once you start using the proceed of the investment for cash flow during retirement. You can’t claim the full interest on the loan, if part of the investment is now use for personal reason. How do you calculate what you can claim for interest deductibility for tax purposes?



  53. Ed Rempel on November 11, 2018 at 9:45 PM

    Hi Tim,

    Avoiding any risk of margin calls is critical for effectively borrowing to invest. Margin calls can force you to sell at a low. If that happens even once in the next 20 years, you can wipe out most of the benefits. You should be very careful with any use of margin accounts.

    No Margin Call loans will hold your investment as collateral, but are based on your credit, income & ability to pay the loan (TDSR), and your net worth.

    They are harder to qualify for than a margin account, but far more valuable.

    For example, you pledge $100,000 and borrow $300,000 for a total of $400,000 of investments. You pay interest only. If there is a big market crash, you just continue to pay interest-only.

    No risk of a margin call means it is truly a long-term investment.


  54. Tim on October 25, 2018 at 9:46 AM

    Hello Ed,
    Can you tell me what the approval process is for 3:1 no margin call loans. Is it the same as a regular margin account where it is easy to get approved as the securities act as your collateral. With the no margin call loan how is the loan protected. Do they look at the persons income or ability to pay back the loan?

  55. Ed Rempel on September 27, 2018 at 1:09 AM

    Hi John,

    The “cash buffer” is rule of thumb #5 that I tested here: .

    It seems to make some sense, because you can live off the cash whenever your investments are down, giving them time to recover. You can avoid selling when prices are low, right?

    Sorry. History does not support the Cash Buffer at all. “No cash” has consistently been the safest.

    In fact, I have been unable to find even a single example where holding any amount of cash was safer than no cash. I found studies using global stocks and UK stocks with many different strategies of how to use the cash. No study I found had even a single example of a benefit of cash.

    The drag on your returns from holding cash sometimes caused you to run out of money, but holding cash never protected you from running out of money.

    In addition, if you held cash, you died with a significantly smaller estate to pass on to your loved ones.

    This might be counter-intuitive. The reason is that retirement is long – say 30 years. Stocks usually recover from declines. Holding cash for 30 years means you lose out on a lot of income, plus the loss of purchasing power due to inflation.

    Many advisors use a cash buffer for retired clients, but there is no actual benefit. The only possible benefit is emotional. If it makes you feel safer and you are okay with a significantly lower return on your investments during your retirement, then it can be fine.


  56. John on September 24, 2018 at 10:07 AM

    Hi Ed,

    Just wondering what you thoughts are regarding a “Cash Cushion” for retirees.

    Should they keep a portion of cash in a savings or money market account in case of emergency’s, or keep the money invested and rely on a line of credit to fall back on?


  57. Ed Rempel on September 18, 2018 at 10:54 PM

    Hi Jason,

    Yes, it can count as an RRSP contribution. However, it is not a good idea to do it that way.

    If you contribute “in kind” to your RRSP an investment that has gone down, you will be denied claiming the capital loss. You would get the RRSP contribution, but can’t claim the loss.

    I better idea is to sell the investment, contribute the cash to your RRSP, wait 30 days, and then buy the investment back inside your RRSP. This way, you can both claim the capital loss and the RRSP contribution.

    You need to wait 30 days because of the “superficial loss rules”. If you sell an investment to claim a loss, you need to wait 30 days before buying it back. This is necessary, even if you are buying it back inside your RRSP.


  58. Jason on September 18, 2018 at 9:03 PM

    Dear Sir

    Grateful if you could kindly let me know if, in principle, a stock outside an RRSP can be transferred into an RRSP account and have it count as an RRSP contribution? Thank you.

  59. Ed Rempel on September 17, 2018 at 11:36 PM

    Hi Mat,

    In general, I agree with you. If you can borrow at 4.25% and that is 2.84% after tax in your case, then using that to either pay down a higher interest rate debt or invest for a higher return over time is probably an obviously good idea.

    You need to keep in mind that you are increasing a debt by capitalizing. From month-to-month, this may not be much, but over many years you could add up to quite a bit. As long as you are comfortable with the higher debt, will be able to make the payments in the future, and have a long-term plan on what to do with the debt, then it should be fine.


  60. Mat on August 30, 2018 at 11:23 AM

    Hi Ed, does it always make sense to capitalize the interest on a HELOC (used to create income)? If I have a HELOC interest payment of $300/m @ 4.25% (2.84% after tax) I’m assuming it would always be better to capitalize that $300 and put it towards something with a higher return like my 3.19% principal mortgage or invest it at +5%?
    Thank you

  61. Ed Rempel on June 19, 2018 at 12:08 AM

    Hi Hiren,

    Good question.

    If you invest tax-efficiently, the Smith Manoeuvre should be able to give you a tax refund most years. This is because the capital gain from the investments can mostly be deferred for many years until you eventually sell the investments. Meanwhile, the interest is fully tax deductible every year.

    The Smith Manoeuvre is most effective if it is part of your retirement plan. That means you can plan to trigger the capital gains after you retire and are in a lower tax bracket.

    The key to tax-efficient investing is deferred capital gains. They are are the lowest taxed type of investment income. This article is helpful to understand this: .


  62. Hiren on May 30, 2018 at 5:26 PM

    Hi Ed,

    I was wondering if Smith Manoeuver can be used with TFSA. We have $80,000 of equity and HELOC is available at Prime + 0.2% (3.65% as of today). Annual interest cost to borrow all of equity ($80,000) would be $2920. I am in 36% marginal tax bracket, so tax refund would be $1051. Let’s assume 8% return on borrowed money of $80,000. So annual return is $6400. Half of that is taxable. $3200 will be taxed at 36% costing me $1152. So taxes on investment ($1152) exceed tax break on borrowed money ($1051) in this case. I think this will be even more pronounced as difference between return on borrowed money and tax break on borrowed money increases.

    I am wondering if it is better to deposit the borrowed money from HELOC into TFSA and invest inside TFSA account. Yes, I won’t get the tax break on interest but I won’t have to pay taxes on return generated from borrowed money either. Since the taxes on return works out to be larger than tax break on interest, isn’t it better to go down this road?

    I am very curious to know your thoughts. Thanks you so much for your help.

    Best Regards,


  63. Ed Rempel on April 22, 2018 at 3:00 PM

    Hi Mark,

    Whether or not to include utitlies and how much to own would be different for different people. There isn’t a correct answer.

    I leave this decision to my portfolio managers. I work with All Star Fund Managers and an Index Plus portfolio manager that are much smarter, more knowledgeable and more experienced at stock selection than I.

    High dividend stocks, such as utilities, are often called “bond equivalents”, because they typically are purchased for their dividend, not growth. Yes, Utilities can include pipeline companies and some large infrastrucure companies.

    In general, I don’t see them as safer than a broad equity portfolio for providing for a 30-40 year retirement. You can suffer a permanent loss of capital during periods of rising interest rates or high inflation. Broad equity markets have more reliably provided returns over long, 25-year or more periods of time in the last 150 years.

    You are correct in that utilities tend to be more conservative. Then tend to be less volatile in short or medium-term periods of time, although more volatile than bonds. They make sense for people with a lower risk tolerance and/or shorter time horizon that would not be able to stay invested for the long-term with a broader equity portfolio.


  64. Mark Lennox on April 18, 2018 at 10:42 AM

    When you are diversifying your investments in retirement and look at the different categories, utilities is always stated as one that is conservative. What percent of your total portfolio would be appropriate in utilities – right now the yield on utilities is very enticing.
    Also, besides power generation, would pipeline companies such as Enbridge be considered a utility or more in the resource sector?
    Thanks very much for your help.

    Best Regards


  65. Tim on April 12, 2018 at 2:07 PM

    Hello Ed,

    Can you tell me how Flow Through Shares and Super Flow Through Shares work. Do you ever use these? What are the advantages and disadvantages. Under what conditions would you want to use them.


  66. Etta on April 19, 2017 at 11:47 PM

    The post has actually peaks my interest. I will bookmark your site and keep checking for new info.

  67. Ed Rempel on March 21, 2017 at 12:57 PM

    Hi Carole,

    Glad to help.

    With a mortgage, you get a lower interest rate than theh HELOC, which saves you money but is also a smaller tax deduction. Saving money is good, though.

    However, your overall payment is higher, because you also pay some principal.

    If you are investing 80% of your home value, you have to have at least 15% as a mortgage.

    It can be worth having more as a mortgage, because you can get the lower interest rate and borrow back the extra principal amount to invest. That gives you the best of both worlds – lower interest rates and the extra cash flow is invested.

    Without knowing details and your goals, it’s not a all clear to me what is best for you, but you have some interesting options, Carole.


  68. Carole on March 21, 2017 at 12:10 PM

    Hi Ed,

    thanks for the quick response and you understood my question perfectly. I was concerned about being able to deduct the principle and you have clarified that that portion would NOT be tax deductible. That is what I feared and I will need to work the numbers to see if it makes sense to go that route.

    Thanks again,


  69. Ed Rempel on March 21, 2017 at 11:58 AM

    Hi Carole,

    I’m not completely clear on what you are asking, Carole.

    Are you using the HELOC and the additional amount you want to borrow all for investment purposes?

    To be clear, it is the use of the money that determines whether the interest is tax deductible, not whether you have a mortgage or HELOC.

    If you are borrowing 80% of your home value for investment purposes, you can only have 65% as a HELOC. The remaining 15% must be a mortgage with principal plus interest payments.

    In this case, the interest on the mortgage should still be deductible. The principal portion of the payment is not deductible. It is not an expense. You are paying down the mortgage.

    Does this answer your question?


  70. CaroleQuestions on March 20, 2017 at 10:09 AM

    Hi, I would like some clarification on your Million Dollar Journey comment (May 21, 2013, 9:18 pm): “… Converting the tax deductible credit line back to a mortgage portion once the mortgage is gone or nearly gone sometimes makes sense anyway. The interest rate is lower on a mortgage and a small increase in the payment will actually pay off everything over time. The downside is that your tax deduction is smaller.”

    My questions is specifically related to that last sentence.

    I have paid off my mortgage and am using the maximum of HELOC that I had negotiated at the time. I would now like to increase it the HELOC as my home has increase in value but have run into to the HELOC rules. The banks have generously offered to create a new mortgage on my house but I am hesitating… If I understand Mr. Rempel’s statement correctly only 65% of the value of my home would be a true HELOC where the interest would be tax deductible. The additional 15% would be regular mortgage payment consisting of principal (not tax deductible?) and interest (maybe tax deductible???).

    Am I understanding this correctly?

    Thanks, CaroleQuestions

  71. Ed Rempel on October 27, 2016 at 2:17 AM

    Hi Penelope.

    I can feel your worry. Why don’t we talk privately to see how I can help? I’m concerned about your privacy, since this is a public page intended for general discussions.

    Without knowing your situation, here are some general comments.

    Based on many other seniors I have worked with, there are some common strategies that often help.

    Many seniors have a very low income because they invest too conservatively. For example, they might have mainly GICs or bond mutual funds. Their investments don’t make enough money. Often, this is due to lack of understanding about investments. With some education about investments, it is possible that you will feel comfortable with different investments that can better support your lifestyle.

    Sometimes guarantees can help invest more effectively. Some seniors feel more comfortable with investments that offer more growth if they have guarantees.

    There are 2 main types of of guaranteed investments:
    1. Investments with principal guarantees.
    2. Investments that pay a guaranteed income for life.

    Many seniors also have much of their government benefits “clawed back”. In your case, you may qualify for GIS, which is clawed back by 50% of taxable income. If you can invest more tax-efficiently, you may qualify for significantly more government benefits.

    If you go to “Contact” on my site and give me a phone #, I’ll call you to see if I can help you figure out what to do, Penelope.


  72. Penelope Cumas on October 26, 2016 at 12:02 AM

    I am truly confused. I thought the comment was above. Just don’t know how to use this site.

  73. Penelope cumas on October 25, 2016 at 4:40 PM

    I have no private or work (except for $125 monthly) pension. 1 have about $320,000 in investments and cash through a bank investment officer (clerk?). I am in good health (fingers crossed) and don’t know how to handle my money so that I can live decently without raising money. Right now, my rent is $850 but the landlord is planning on selling and I may be facing a $1000 monthly. I live alone.

    I’m giving too much information, but I hope, this is just a beginning towards financial sanity? What do I do?

  74. Penelope cumas on October 25, 2016 at 4:39 PM

    I have no private or work (except for $125 monthly) pension. 1 have about $320,000 in investments and cash through a bank investment officer (clerk?). I am in good health (fingers crossed) and don’t know how to handle my money so that I can live decently without raising money. Right now, my rent is $850 but the landlord is planning on selling and I may be facing a $1000 monthly. I live alone.

    I’m giving too much information, but I hope,this just a beginning towards financial sanity? What do I do?

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