Author Archives: JamieList

Retirement Income Options – So Many Ways

As each year passes, the Canadian population becomes older on average.  The well documented effect of the boomer generation means that there are more and more Canadians approaching the age of 71, which is the year in which a taxpayer is forced to convert their RRSP’s into some form of retirement plan.

Let’s take a look at the variety of accumulation accounts at the average Canadian’s disposal, and then explore the different methods that can be used to access the funds in retirement.

We’ll start with accumulation, because the options you have at your disposal when you convert your accumulation plan to a income plan depends on what kind of accumulation asset you have.  There are two basic types of tax-deferred plan that you can have as you save for retirement, a personal plan, or an employer sponsored plan, or pension.

Personal Accounts

Registered Retirement Savings Plan (RRSP):  This plan allows for contributions of 18% of income up to an annual maximum.  A taxpayer must convert an RRSP into a retirement vehicle by December 31st in the year in which they turn 71.

Tax-Free Savings Account (TFSA):  The federal budget that was read in February introduced a which is designed to augment the tax deferred savings available to Canadian taxpayers.  Each taxpayer can contribute $5,000 per year into this, and there are no stipulations on withdrawal.

Locked-in Retirement Account (LIRA): This investment account is created when an employee leaves a company sponsored pension plan “rolls over” a certain portion of their pension into the LIRA.  Like the RRSP, the investor can control the investment decisions, but there are strict guidelines as to how the funds must be withdrawn.

Employer Sponsored Accounts

Many companies will have a pension plan for their employees, but these can take a variety of forms.

Defined Contribution Pension: This plan simply states up front what amount the company and the employee are each going to contribute to the plan.  Once the contribution is made, the funds are invested, and the employee has a variable pension depending on the investment performance of the pension fund.

Defined Benefit Pension: This plan uses a formula to determine what benefits are due to the employee upon retirement, based on years of service, income levels, etc.  The employee or the employer, or both, can contribute to the plan.  The corporation is liable to ensure that the plan is funded to meet the amounts that their employees are entitled to.

Group RSP: this is not really a group plan in the same manner that the pensions plans mentioned above are.  The group RSP functions just like a personal RRSP, except that the employer usually bears some of the costs of investing in the plan (i.e. account fees, lower fund management costs), and may match contributions as an employee benefit.

Commuted Pensions

Often, employees are given the option to “commute” their pension when they retire.  This means that they will be given a sum of money in lieu of an income stream from the pension fund.  This is most often made available to people given early retirement, and the funds are usually transferred a combination of a LIRA (tax free) and sometimes an open investment account (taxable).

A commuted pension can be a highly attractive option for a departing employee, specifically if they are planning to work again after they have left their current employer.  However, too often investors are encouraged to commute their pension in search of high returns.  However, when an investor commutes their pension, they often forgo other benefits that provide significant value.

For instance, an employee may have lifetime medical/dental benefits associated with their pension plan.  If the employee commutes their pension, they usually lose the right to have such types of benefits.  This leaves the investor open to significant long term risks of covering the cost of long-term care.

One final thought: the pension fund sees each pensioner as a liability.  When it commutes a pension, it pays an amount out to the employee to relieve themselves of that long-term risk.  When commuting a pension, be careful about taking that risk off the pension fund’s hands.  In this process, greed is not good.  A careful look at your risk management and tax planning options should be considered in this decision, not just the potential for big investment returns. 

Retirement Options

So what is an investor to do once they have reached the age of 71, and is faced with the choice between income options?  Well, it depends on the account you have used to accumulate your retirement income.

Registered Retirement Income Fund (RRIF): this account is created when an RRSP is rolled over into a newly formed RRIF.  The RRIF has an annual minimum withdrawal amount that is prescribed based on either the owner’s age, or the age of the owner’s spouse.  Since the minimum withdrawals rise as the age increases, it is usually beneficial to calculate the RRIF payments from age of the younger spouse.  The investment options are similar to an RRSP, and there is no maximum withdrawal amount that can be made in any given year.

Segregated Funds with Income Guarantees: these types of “variable annuities” have been available for many years in the US, but have really gained ground in recent years.  These are segregated funds that offer guaranteed income streams (usually 5% simple interest), with an account value that rises and falls with the investments selected.  This allows the investor to receive a guaranteed life income (usually available once investor reaches 65), while also participating in the upside of the market.  On the upside, there is potential for capital appreciation, and on the downside, the market value of the investment could deteriorate to nothing, leaving the investor with little value beyond the annuity-like contractual guarantee.  However, this is a powerful option for investors who wish to expose themselves to upside, without risk of losing an income stream.  

Life Annuity: Converting to a Life Annuity will guarantee income for life, which provides security to the individual who is receiving the funds.  However, this means that the (potential) estate value of the funds invested into the Life Annuity will be lost, should the investor die prematurely.  The annuity option can also be selected to guarantee income to age 90 (of either spouses’ age), so that if both spouses die prior to the 90th birthday chosen, there will be some estate value.

Lifetime Income Fund (LIF):If an investor elects to have a LIF, withdrawal minimums are the same as for RRIFs. LIF’s however, have a maximum withdrawal amount whereas RRIFs do not.  In some provinces, LIFs must be converted to a Life Annuity when the owner turns 80.  This means giving up investment control at age 80, which may or may not be a good thing.  Investors should be careful to manage volatility as age 80 approaches.

Locked-in Retirement Income Fund (LRIF): This is a more flexible version of the LIF, that eliminates the requirement to convert the account to an annuity at age 80 (not available in all provinces).

A note on small “locked-in” balances

If you are age 55 or older and the total value of all of your locked-in accounts is less than 40 per cent of the years’ maximum pensionable earnings (YMPE), you can request to have these locked-in funds transferred to an RRSP or RRIF, thus removing the locked-in status. The YMPE is currently $44,900, so this feature applies only to balances of $17,960 or less.

This is just a cursory look at all of the options available, but it should allow you to start to investigate the options that may or may not be available to you.  As with everything, try and determine what your objectives are before you make the decision.  Here are some basic points to consider in making your decision:

  • What kind of retirement assets do I have at my disposal?
  • Do I need a guaranteed income amount (i.e. x dollars)?
  • Do I need a guaranteed income term (i.e. for x years)?
  • Do I want to leave an estate value for my beneficiaries?
  • Do I want to manage the asset?
  • How is the asset going to be taxed if I leave a balance when I die?

For instance, an annuity might not provide the most attractive rate of return, but it will guarantee that you do not outlive your income.  For others, a prudently managed RRIF will deliver the retirement income that is needed, and maybe more.

Fall Harvest – Turn Losses into Gold?

The bad news is in, and the equity markets are up, but still down from two years ago this fall.  Investors are reeling from constant negative news, and are deeply concerned about the general state of the economy.  Some of these fears are well founded, as the world economy is going through a period where it de-leverages its market positions, and the effects will likely be a sustained global recession.  But, the prudent investor will remember that the markets will go up again, but it is still difficult to endure a portfolio loss.  It will take time to recover, but they will.

However, there is some immediate opportunity to be found, and it is not dependent on the markets.  The best way to make money right now is to take it from the taxman.  Since portfolios are generally down, you might want to take advantage of a concept known as “tax-loss harvesting.”

What is it?

Tax loss harvesting is the process of triggering capital losses to realize an immediate tax gain.  In the case where you trigger a loss in your portfolio, you have two options.

First, you can use capital losses to carry back against capital gains tax payable in 3 previous years.  So, if you have capital gains that you have paid recently, you can trigger capital losses and reclaim the taxes you have paid in the past.  At the highest marginal rate, this can mean that your current losing investments are worth as much as 23 cents for every dollar they have gone down.

Second, you can trigger capital losses and carry them forward indefinitely.  This means that you can “bank” a specific amount of capital losses and carry them forward to use against capital gains that you may have in the future.  This will allow you the flexibility to re-allocate portfolios in the future while limiting the taxes triggered upon disposition, or it could allow you the ability to take tax-free income from a portfolio through dispositions rather than through income or dividends.

How does it work?

Tax-loss harvesting can only be done in a non-registered, or taxable, account.  Transactions as described below will not work with assets held within a registered plan because you are not subject to tax on growth, and conversely, you are not able to take a benefit from capital losses.

Essentially, the point is to arrange a transaction to sell-out a position that is sitting with a significant drop in value, and then repurchase a similar holding in the same asset class.  This creates a loss, but maintains the desired asset class exposure so you don’t miss any potential upside.

In Canada, according to tax law, in order to take the capital loss, you must not reinvest in the same security for a period of 30 days.  So, assuming that you wish to stay invested, you do not want to be out of the market for a period of 30 days, specifically with markets as volatile as they are today.  This is why you sell one holding and purchase another similar one.

Mutual Fund Holders

So, let’s take for example that your portfolio holding, the XYZ Canadian Equity Fund, is down 25%.  The original cost of the funds was $100,000 – this is referred to as the “cost base.”  If you were to sell that fund right now, you would incur a $25,000 loss.  At the highest tax rate, this loss is be worth approximately $5,800 of taxes, either to be reclaimed from past taxes paid, or taxes payable in the future.

If you were to simply sell the fund and take the loss, you would have crystallized your loss, and if the market turned around, you would miss your gain on the upside.  Instead, you can sell the XYZ Canadian Equity Fund (“harvesting” your loss), and repurchase the LMNOP Canadian Equity Fund instead.  This will maintain your exposure to Canadian equity, but the two assets are different for tax purposes, so you will have gained a tax loss.

The good news for fund owners:  like it or not, most large cap equity mutual funds are essentially closet indexers (the secret is out).  So, it really makes no significant difference if you sell one company fund and buy another.  What does make a difference is the type of fund.  Do not sell a growth fund and repurchase a value fund – the return characteristics likely will not be the same.  So – do your research as far as the sector, but rest assured that broad market mutual fund managers are going to fall very close to the benchmark, making this a fairly reliable strategy for mutual fund investors.

Individual Stock Holders

For those who have specific stocks in your portfolio, the process is a little bit less ideal, but still viable.  You essentially have two options:

  • Replicate the strategy above, but instead of using funds that are similar, use stocks that are similar.  For instance, imagine that you own shares in Coca-Cola.  You could sell your shares in Coke and buy Pepsi instead.  These two companies are going to have very similar returns over the next 30 days: much of the risk in both stock prices is based largely on a global lack of liquidity, not whether people prefer one type of cola beverage over another. So, you can get out of Coke, crystallize your loss, move over to Pepsi for 30 days, and then repurchase Coke after the period has elapsed.
  • Or, you can replicate the strategy above, but instead of using funds that are similar, use an ETF or index fund to simulate the return of the asset class you have harvested losses from.  For example, you may have a holding in Bank of Montreal.  You could sell this holding, trigger your losses, and then purchase the iShares Financial Services ETF (XFN) to maintain exposure to the financial services sector.  While this is not a perfect replication of the BMO holding, you would still participate in the upside that the sector may experience while you are out of BMO for the required period.

In both the examples above, there may be fees involved for trading that should be factored in to the cost/benefit analysis.  Some brokerage houses have programs that will make a mass purchase of the losing assets in your account, and then resell them to you in 30 days – referred to as REPO programs.  These arrangements can help reduce the costs of this transaction if there are many holdings affected.

In all the proposed methods, you will note that I am not recommending one stock over another – in an ideal world, this is an impartial transaction.  We are simply trying to maintain the appropriate asset class exposure for the period following the transaction.

Best of all, this portfolio manoeuvre can create immediate value to your portfolio.  In the examples above, a $100,000 holding with a $25,000 loss will yield a $5,800 tax benefit.  On a holding that is now worth $75,000, that is an effective return of 7.73%, and can begin your portfolio as it works its way back to par.  The strategy is not perfect – it does mean more capital gains to accumulate in the future, but it may provide you with the ability to reclaim some lost taxes, and re-invest that money into the market to help ready your portfolio for market upside that will come in the future.

There’s No Place Like Home…

Believe it or not, there are people who believe that a home and a mortgage are too cumbersome to manage, and there are some financial experts who recommend that renting real estate is more beneficial than buying.

The advice is based on the assumption that real estate will not be the great investment over the next 40 years as it has over the last 40 years.

Regardless, look at the facts.  Make some reasonable assumptions:

  • First, assume that home prices only rise as fast as inflation,
  • Next, assume that your rent would be approximately equal to your mortgage payment
  • Then, assume that, instead of making a down payment, you take your down payment and invest in “the markets.”

If this was how you approached this decision, you would need an after-tax and after fees rate of return of 12.4% on your investment portfolio in order to have the same amount of equity in your portfolio as you have in your home!

Now, to be fair, you have taxes and upkeep on your home. If you assume that taxes are 1% of home value, and assume that upkeep is another 0.5% of home value, then you would still need an after-tax and after fees rate of return of 10.8%.

These rates of return, over the long term, are unachievable.  You would have to have an all equity portfolio for the entire period, and find a way to pay no tax, and still, historical rates of return show broad market equity indexes return about 10% – not enough to get you there!

Finally, one more important issue to note.  Your home is generally considered your principal residence for tax purposes.  This means that, when you sell it, there will be no tax.  So the equity in the home is yours.  If you have found a way to pay no tax on the growth of your “invested” down payment, and if you have found a way to get 10.8% to 12.4%, you will still have to pay tax on the growth eventually.

So – if the aggressive growth rates don’t turn you off, then the tax treatment might just.  Home ownership will likely remain a worthy and profitable goal.

Bet the Farm – Or Lock It In?

I was recently asked by a client whether they should re-finance their mortgage, and if so, how should they do it.

Since there is no way to predict the future, that is a difficult question to answer.  However, the most reasonable way to approach that question is to look at it from the perspective of risk.  A simple search on the internet for mortgage rates reveals that, if an individual were to choose a floating rate right now, they would only have to pay approximately 2% interest.  That means only $2,000 interest annually per $100,000 borrowed.  Not bad.  However, the real problem comes if/when interest rates go up.

The general answer (likely denial) is that the individual will switch to fixed when rates start to rise.  This is a difficult game to play, and it involves predicting the future.  What makes it even more difficult, is that it involves not only predicting the future of interest rates, but being able to do so better than the banks.  The problem with the timing of “the switch” is that the banks set interest rates partially at their discretion.  So, when interest rates are set to rise, they are most likely to raise the long term rates first (making a long term mortgage seem less appealing), and then raise the short term rates later.  This pattern means that consumers will stay in their floating rate too long, and switch too late, once the lenders have had the chance to adjust the longer term rates in their favour.

Worse, if the homeowner is making their buying decision (and affordability) based on low interest rates, it will be unlikely that a higher interest rate later will be work.  This would be like going to a tailor and asking them to give you a pair of dress pants that do not fit because you plan to lose weight before you wear them.  That is not likely, as time tends to deliver weight gain, not weight loss (sadly).  In this market, time is most certain to deliver higher interest rates, not lower (sadly).  Locking in now might appear unappealing, might mean a smaller house and/or higher payments, but might just be the most prudent decision in the long run.

So, what is reasonable?  Right now (Weds Aug 4), a google search tells us that the 10 year rate is approximately 5.0% to 6.5%.  That is an unbelievably good rate.  If you are new to mortgages, find someone who lived through 12-15% long term rates in the early 1980’s to figure out how good that is.  My advice is to make as much of the mortgage fixed rate as possible, and for as long as possible.  Here are some tips:

  • If you think you can aggressively pay down the mortgage, then figure out how long it will take you to pay of the mortgage and match the term to that timeline.
  • If you feel your income will increase in the future and you will be able to pay down more aggressively than a fixed rate term will allow, then take a potion of the mortgage fixed, and take a portion of the mortgage floating.
  • If you are convinced that rates are going to remain low for a while, then take a look at some recent history:
    • The Bank of Canada site gives loads of information about interest rates:
    • if you could negotiate a 5.5% 10-year rate, this is lower than the average 1-year rate for the last decade – the decade with some of the lowest interest rates in history
    • As recently as 2007, the prime lending rate was as high as 6.5% dropping to 2.5% in as little as 14 months.  The reverse could also happen (and has!).

Could you afford to pay three times as much interest on your mortgage within the next 2 years?

One final point – the main issue here is not that the “average” floating rate over the next 10 years will be higher than 5the fixed rate is now.  What is conceivable is that, in that time, short term rates could rise for a period that makes it unaffordable to finance your home.  You don’t have the advantage of the law of averages: as soon as your home becomes unaffordable, you may be forced to make some tough decisions (either sell, or refinance and begin a vicious circle, now with expensive long-term debt).

So, paying a higher fixed rate right now is difficult to swallow, because rates have just been so intoxicatingly low, and it appears that taking a 5.5% mortgage will cost you something, at least in the short term.  However, it is reasonable that you will not be able to make “the switch” on time, and you might get stuck scrambling to get into a fixed rate mortgage at much higher than 5%.  Remember that mortgage debt tends to take 10-20 years to pay off, if not more.  A long-term approach (with some historical context) makes some sense at this point.

Management Fees – Are you paying for Bondage or Advice?

Each year, Canadians decide how and where they will invest.  Other than asset allocation, the fees that are paid will likely have the largest impact on their account.  For some, fees will be paid to an advisor involved at some point in the process.  That advisor might be a planner or a broker who takes commissions or trailer fees as a result of managing a clients’ account.  Or, fees may be paid to an investment manager, either indirectly through ownership in mutual fund, or directly as a result of a discretionary or segregated account with that manager.

Outside of fees, you may also want to explore whether or not your advisor has a fiduciary duty to you, and if there are any conflicts of interest in your relationship.  Conflicts can arise as a result of the business structure (i.e. only recommending products from that company), but can also also arise out of compensation structures.

Essentially, the amount and type of fees you pay are what determines the kind of practice your investment advisor runs.  Instead of just asking “how much” the fees are, perhaps examine the types of fees you are paying, why you are paying those fees, and what incentive it gives to the recipient of those fees.

Trading Commissions

By far, the most common method of compensating advisors is still commissions.  However, all commissions are not created equal.  There are basically three types of commissions:

  • Brokerage commissions: when trading securities, a fee is charged based on the size and type of trade.  Some brokers will pre-arrange a fee schedule for their clients that provide a certain number of transactions for a fixed cost.
  • “Spreads” on Bonds:  Many investors are unaware that there is a commission paid on a bond.  That commission is called the spread, and it is the difference between the actual rate being paid on a bond, and the rate at which it is sold to you.  For most bonds the spread is between 10 and 25 basis points (0.10% and 0.25%).
  • Mutual Fund “Front End” commissions: when an advisor recommends a fund, the client is charged a percentage of their investment in order to purchase units in the fund recommended.

In all cases, the commission here is a fee paid as a result of a transaction.  Make sure that, when you are working with an advisor, you are comfortable with what those commissions mean.  The commission regimes mean that the advisor gets paid when you act on their advice.  Thus, it is reasonable to say that their bias will be to implement a portfolio solution that prefers action.  If you are an active investor, then this will compensate an advisor who continues to bring quality investment ideas to you.  However, if you are an inactive or conservative investor, you may feel that you are pressured to take action that you do not feel is in line with the objectives of your portfolio.

Deferred Sales Charges

Mutual Fund “Back-end” commissions are a contentious topic among investment professionals and the investment public.  These “deferred sales charge” occur when a client purchases a new fund within a mutual fund company.  The advisor is paid a commission by the fund company, but the client is required to remain with that fund family for a certain period of time to account for those fees being paid, usually 3 of 6 years.  After the first year, those funds pay a trailing commission to the advisor of roughly 25 to 50 basis points.

The upside is that there is no immediate cost to the client.  In addition, the commissions paid are usually either 2.5% or 5.0%, and this allows advisors to receive compensation from smaller accounts, and enables them to spend the appropriate time with those smaller clients to deliver proper advice.

The downside, however, is that the bias for a practice run with this compensation scheme means that the advisor is paid to meet and satisfy new clients rather than existing clients.  If an advisor is being paid 5% on a new client and 0.50% on their existing clients, the attention of their practice is likely biased towards the initial portfolio set-up, and not necessarily the ongoing management of your account.  If your advisor recommends the use of these charges, ensure that you are comfortable that you will continue to receive the same quality of advice into the future.  In addition, your advisor should not be asking you to re-invest in deferred sales charges again once the deferred sales charge period is over.

No Load

No load compensation schedules are generally by advisors working with mutual funds, and are intended to mimic the type of compensation schedule that investment managers receive (see below).  The no load schedule means that the advisor receives their compensation as a percentage of the assets they have under management.  This means that their bias is towards maintaining the assets they already have, as there is no extra incentive for them to attract new clients, and there is nothing stopping them from leaving if they are unhappy with their service.  These are a form of servicing commissions, as above, but are the only form of fees these advisors receive for clients invested in these funds.  Thus, their bias will be towards more inactive clients.

Servicing Commissions

Servicing commissions are fees that are paid by fund companies (generally) to advisors for maintaining the accounts that they have.  Servicing commissions vary depending on whether the advisor has recommended a front end load, no-load, or deferred sales charge fee options for their clients.  Reasonably, these are the fees that the advisor receives for maintaining your account over the long term.

Investment Counsel Fees

A direct relationship to a discretionary portfolio manager usually means a fee schedule much like the “no-load” schedule described above.  These fees are usually lower, as a result of the size and structure of accounts being managed.  In addition, it is generally accepted that these fees are tax deductible for non-registered accounts (although taxpayers are advised to consult their tax professional to ensure this is the case for them).  The fees paid to these managers can also be mixed with an incentive fee of some sort, such as a share in a percentage of profits.  This is more commonly found in managers with higher risk or specialty mandates.  There are a variety of “retail” solutions like this that are available to clients through advisors that mimic this relationship.  Two of note are offered by SEI and Franklin Templeton.

Your Objectives

Perhaps the best advice ever spoken on this topic was delivered by Upton Sinclair when he uttered the following: “It is difficult to get a man to understand something when his job depends on not understanding it.”  More specifically, if your objectives do not fall in line with the method in which your advisor receives fees, it will be difficult for you both to see eye to eye on an investment strategy.  While the fee discussion tends to raise the blood pressure of both clients and advisors alike (for different reasons), it is a discussion that should be had.

Regardless of the fee schedule, good quality advisors are likely going to give good quality advice to their clients, regardless of the fee schedule.   However, even good quality advisors are running a business, and the business decisions that they have made about their practice are going to impact how they deliver their advice in the future.

As far as I can tell, there has already been much written about fees, and a recent report suggests that Canada’s mutual fund industry may have the highest fees in the world, on average.  So what is an investor to do when faced with the costs of investing?

The Child Care Expense Derby

find out who should really claim child care expenses on their tax returns

Can't decide who should claim the child care expenses at tax time?

My wife and I earn similar (but variable) incomes, and so each year we engage in what we call the “Child Care Expense Derby.”  We have the government to thank for that.  Every year I am a bit suprised by who it goes to (“and the winner is…”), but I am glad for the opportunity to get some tax back for the money we put into child care.  I always like to go to some handy tax calculators to figure out where I stand before tax time to see if I can predict the winner.  Here are two: my website (not very complicated), and TaxTips.Ca (more complicated).

The reason for the derby is this – we are never exactly sure which income will be the lowest until we get our employers’ T4’s, and then the spouse with the lowest income is the one who receives the benefit of the child care tax deduction.  Also, thew winner of the Child Care Expense Derby will be the spouse who contributes less to their RRSP.  The child care expenses can cause a big swing: tax rules allow expenses to be deducted in the following amounts:

  • a maximum of $7,000 per year for each other eligible child who is under 7 years of age at the end of the year; and
  • a maximum of $4,000 per year for each other eligible child (between the ages of 7 and 16).

This means that a family of three children under the age of 7 has deductions of up to $21,000 – nice work.  You could notice significant savings on your taxes, approximately a $7,000 tax savings for the average Canadian, who earns income at approximately a 30% tax rate.  The eligible child care is defined by CRA as on their website follows:

  • an eligible child care provider;
  • a day nursery school or day-care centre;
  • a day camp or day sports school;
  • a boarding school or camp (including a sports school where lodging is involved); and
  • an educational institution for the purpose of providing child care services.

Note that this is not an exhaustive list expenses, and other expenses, such as advertising for a care worker, or agency fees to find a care worker are also included.

The downside here is for a family that only has one income, or when the incomes are far apart (i.e. one high income and one low income), the deduction may not be as great that two mid- or high-income earners.  But it is still powerful.  Imagine a family with one income of $75,000 and one income of $45,000.  (Let’s say there are two children under 7, so $14,000 of eligible expenses).  The lower income spouse at $45,000 would reduce their taxable income by $14,000, using the childcare expenses as a deduction against income.  This would be a tax savings of approximately $3,300 for the year.

You should also note that this deduction gives you the exact same tax relief  as an RRSP deduction, so if you have to make the choice between who does what, don’t let the lower income spouse do any RRSP deduction until the higher income spouse has maximized their RRSP contribution.  This will ensure that the higher income spouse gets more deductions against their income, and that the lower income spouse does not put RRSP contributions in at an exceedingly low rate.  Some planning should help you avoid this.

This should help when it comes to deciding what to do about care for your kids, to help and reconcile the finances at the end of the year, and to generate some other tax benefits while you are at it.