Weekend reading: RRSP mistakes, perfect portfolio, and more

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Hi everyone and welcome to weekend reading, where we share some of the best posts we read over the past week. We hope you enjoy them as much as we did. If you haven’t already, please consider following us on TwitterFacebook, and Google+, where we share the latest in personal finance, debt, retirement, insurance, tax and investments.

Personal Finance

Ian McGugan looks at factors that will affect whether or not your retirement cash will last for your lifetime. It all depends on your retirement and estate goals and risk tolerance. For example, retirees who want to leave an estate for their children will have to withdraw less from their funds during retirement.

Dan at Our Big Fat Wallet writes about some RRSP mistakes to avoid. Among the most important is spending the tax refund on a frivolous purchase. Remember that you will be taxed on all RRSP withdrawals in the future, so what you’re actually doing is spending your future tax dollars when you buy something with your refund. You’d be much better off financially if you used the refund to help reach your goals, such as paying off your mortgage or contributing to your RRSP.

Investments

Jason, the Dividend Mantra, explains why having 0% allocation to fixed income is not as crazy as it sounds. One of the reasons why he prefers dividend paying stocks to fixed income securities is the taxation of the payments. Dividends receive beneficial tax treatment compared to fixed income, so the overall tax bill is much lower with a pure dividend-paying stock portfolio.

Ben at A Wealth of Common Sense searches for the perfect portfolio. He shows that although it is impossible to attain a perfect portfolio, it is actually quite easy to invest in a terrible portfolio. You’d just have to buy the top performing asset class from the previous year. This is called chasing returns and is common among investors without a plan.

Insurance

Here at AAFS Insurance, we looked at the criteria necessary to qualify for preferred underwriting. There are typically two classes of preferred underwriting for non-smokers and one class for smokers, with only the healthiest of applicants eligible for the highest class. These individuals lead a healthy lifestyle and are rewarded with up to 30% off their insurance premiums.

We guest posted on Roadmap2Retire and discussed the pros and cons of a life annuity. While a life annuity provides a guaranteed stream of income for life without volatility, it may return less than stocks, and you lose control of the funds when you purchase one.

LSM Insurance asks if homeowners are properly insuring their mortgage debt? Low interest rates have made debt more manageable, but that doesn’t mean it doesn’t have to be insured. Their advice is to lower debt levels while interest rates are low, and have a financial planner advise on the best way to protect against this debt.

We hope you enjoy the reads this weekend and be sure to check back next week for a new post. Subscribe to our weekly newsletter on the right side of the page so you don’t miss a single post!