# Starting to invest in Canadian instruments.



## Rox (Oct 17, 2010)

Hello everybody,....

I'll try to make this simple. I intend to put a portion of my assets into some Canadian instruments. I have targetted dividend payers, income trusts (I know about that taxation thing coming this year-end) and recently, monthly income funds.

I am a non-resident for taxation purposes currently, but will be immigrating to Canada in a few months time. I intend to use the dividends and coupons collected as my initial income when I land there officially as an immigrant (won't be going there as a tourist anymore)...

To start with, I know I need to open a brokerage account.

Can somebody help me please ?


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## Four Pillars (Apr 5, 2009)

Rox said:


> Hello everybody,....
> 
> I'll try to make this simple. I intend to put a portion of my assets into some Canadian instruments. I have targetted dividend payers, income trusts (I know about that taxation thing coming this year-end) and recently, monthly income funds.
> 
> ...


From what I've heard, I think it is difficult to open up any kind of financial account unless you live in the country.

I would suggest waiting until you move here.


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## Belguy (May 24, 2010)

Has anybody warned you about how cold it gets here in the winters??

Maybe you should think this through!!!


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## Rox (Oct 17, 2010)

Thank you, guys, I was thinking, there must be a way somewhere for me to start earlier, especially now that there is still more room for the market to go up. When I go there later, market could have peaked amd interest rates would have moved up further.

I have funds to spare, I'll just wait and see if any good advice comes along, let's see which brokerage is willing to take me in. 

No problem on the cold - I have lived and studied in Scotland for a few years.


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## humble_pie (Jun 7, 2009)

rox i doubt you will be able to obtain any kind of retail canada-based investment account while living offshore. You'd need both an address in canada & a social insurance number.

the embassy or consulate where you obtained your immigration permit can point you to a number of respected canadian financial institutions that maintain offices or representatives in your particular area, precisely in order to snag clients on their way to canada such as yourself.

yes, they will be on the expensive side. But they will be able to help you plan sensibly. It's premature imho to get side-tracked on some marginal item like bmo or its funds when what would work better is a master plan.

the normal procedure for immigrants is to prepare cash or cash-equivalent buffers, while still residing in their countries of origin, that will serve to steady themselves in the months after they arrive in canada. They also keep many of the familiar offshore investments that they already own, understand, and trust, while preparing some of these for eventual transition to canadian securities. To do the opposite - to try to buy blindly in a country where one does not even yet have an investment account - is perhaps unwise.


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## andrewf (Mar 1, 2010)

I don't see the reason for the hurry to hold Canadian securities. Canadians probably shouldn't even have a majority of their holdings in Canadian securities, so don't worry about it just yet. Better to worry about the moving process and all the paperwork and start to think about your investments once you're settled.


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## MoneyGal (Apr 24, 2009)

What Andrew said. In addition, once you move to Canada, if you buy real estate here or work here, you will have a significant proportion of your holistic balance sheet invested in Canada (through real estate and/or human capital) - so you *will* be invested in Canada from the get-go.


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## Rox (Oct 17, 2010)

Thanks to all for the advice. I have my investments elsewhere, these are currently providing me the needed income for my expenses.

What I need to do now is to pickup more financial knowledge about my future country of residence, and certainly to start putting money there. With enough knowledge about financial products there, I can start to put money in, and if everything runs well, I will be able to depend on the income for my survival there - no need to work anymore.

I believed to be able to survive, not only in Canada but for anywhere else, if of the utmost importance. Everything else falls in place if one is able to survive and she is comfortable.

In short, I am of the opinion that THE MASTER PLAN hinges on my financial knowledge about the market for the purposes of survival and comfort in the final country of residence.

The rest, as in permanent local address. SIN, moving details are, to me, mere administrative and fulfillment activities which can be achieved without too much effort.

I aim to build a steady line of income without forex risks before I set foot on Canadian soil as a resident. And no, I wouldn't mind paying taxes to the CRA too in the process.


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## Larry6417 (Jan 27, 2010)

I agree with Andrew and MG. Most investors concentrate too many of their assets in their home country. 

If you want to open a brokerage account to invest in Canadian companies (in Canadian dollars), then you may be able to do so from your present country with Interactive Brokers (IB). *Caveat*: I don't use IB, so you'd need to talk to others for their personal experience with it. You can see its web site: www.interactivebrokers.com/en/main.php

An alternative would be to buy Canadian companies listed on foreign exchanges. Most of Canada's large companies list on the NYSE. Please note that you would be buying Canadian companies in USD. However, many brokerages allow clients to transfer USD-denominated securities to CAD-denominated versions (if the shares are cross listed).

I'm a bit concerned that you seem to be chasing yield. Income trusts/ REITs are just high-yielding equities. Their distributions are not guaranteed and are only a safe as the underlying businesses.

P.S. Good luck and welcome to Canada!


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## Rox (Oct 17, 2010)

Larry6417 said:


> I agree with Andrew and MG. Most investors concentrate too many of their assets in their home country.
> 
> If you want to open a brokerage account to invest in Canadian companies (in Canadian dollars), then you may be able to do so from your present country with Interactive Brokers (IB). *Caveat*: I don't use IB, so you'd need to talk to others for their personal experience with it. You can see its web site: www.interactivebrokers.com/en/main.php
> 
> ...


Larry,... thank you for the good words. And I love Edmonton,.... 

I think I'll skip going through buying via any foreign exchanges, because then, I will be exposed to currency risks. I really don't want that, the loonie is a strong commodity currency, I would prefer to start accumulating the loonie in my coffers as soon as possible.

No, no USD for me too, reasons are obvious with recent developments.

Yield - well, yield provide me a way to generate an income without working, or rather it's an insurance to provide me a way to pay my monthly maintenance. 

I see many people doing it, sure, some end up like Derek Foster, but I'm sure if we have diversified adequately, we wouldn't end up like him.

How I intend to mitigate risks of distributions dropping would be by :-

1) researching carefully, and selecting only companies which have been paying out increasing distributions over the last 10 years, even through the recent crisis ! The recent crisis has been a GREAT ACID TEST for many companies out there, that's how I feel,....

2) putting in a proper diversification plan and not to over-concentrate my funds in one or two stocks. This was what destroyed Mr Foster's plans earlier.

3) starting with one or two companies to get the feel, and then "launch" from there.

Appreciate more advice,.... I belong to a "club" of immigrants who believe that we should bring money over to Canada, and retire there, not work there anymore,......


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## Assetologist (Apr 19, 2009)

*Canadian Investments*

Have you tried opening up a savings account at a large canadian bank?

I suspect once you have your bank accounts you will be able to open a non-registered investment account through the banks discount brokerage.

Another option, should your finances support it, is to incorporate an investment company registered in the province you plan to reside. You should be able to do this while living in the US. There are many advantages to having investment corporations but also several challenges, so seek professional advice.

You should ask for and receive 'relatively' competitive trading costs ($6.95 to 9.95 CDN) just be clear about what you desire. I pay $4.95 at Questrade and $6.95 at CIBC Investor's Edge.

I disagree with some of the other viewpoints suggesting that investing a large proportion of your dollars in your (new) home country is unwise. There are many fundamental and tax-efficiency reasons to hold Canadian investments - you should meet with a reputable fee-based advisor with respect to building the foundation for your investments.

Good Luck


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## Rox (Oct 17, 2010)

Assetologist said:


> Have you tried opening up a savings account at a large canadian bank?
> 
> I suspect once you have your bank accounts you will be able to open a non-registered investment account through the banks discount brokerage.
> 
> ...


Dear Assetologist, I really appreciated your comments, and I learnt a lot from it. Thank you.

And yes, well,... not to say that I disagree with many of the other viewpoints, but whatever said, I still carry the opinion that I must focus on the Canadian market now,... I guessed this is consistent with your view at this moment. 

Yes, the first thing that must be done is we must find a way to open a bank account INSIDE Canada. Then a lot of the other things could be done, especially porting over our funds to your side.


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## Rox (Oct 17, 2010)

Larry6417 said:


> I agree with Andrew and MG. Most investors concentrate too many of their assets in their home country.
> 
> If you want to open a brokerage account to invest in Canadian companies (in Canadian dollars), then you may be able to do so from your present country with Interactive Brokers (IB). *Caveat*: I don't use IB, so you'd need to talk to others for their personal experience with it. You can see its web site: www.interactivebrokers.com/en/main.php
> 
> ...


Larry, we studied IB. It's still outside of Canada (though it's in The USA). I'm afraid we do not need anything more from The USA. A pure Canadian broker recommendation is better. 

As a matter-of-fact, outside of The USA, many countries have brokerages which are able to offer Canadian stocks for purchase. And they will deduct 25% off our earned dividends for taxation purposes.

As a Non-Resident or Resident for taxation purposes, the deduction should only be 15%. 

Hence, an extra 10% was deducted from our dividends. It's better that we go *directly with a Canada-based broker*.

Apologies for so many questions (or problems),... but I would think many "would-be Canadians" around the world will find our discussions most helpful.


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## Four Pillars (Apr 5, 2009)

Rox - I just published a comprehensive list of discount brokers in Canada - it even includes phone numbers.

http://www.moneysmartsblog.com/canadian-online-discount-stock-brokerage-comparison/

I suggest you start calling them and see if any of them will work out for you.


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## HaroldCrump (Jun 10, 2009)

Rox, in all the discussions that you have started recently about Canadian investments, I don't see you mentioning where you are moving from.
Some multi-national financial institutions allow their customers to "port" the assets to another country.
Some offer borderless, global accounts that can be accessed anywhere.
HSBC, Barclays and Citibank are institutions that I am aware of.
I have direct experience with two of these (Barclays and Citibank) and have friends that have done the same with HSBC.

Where are you moving from?


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## humble_pie (Jun 7, 2009)

harold you're starting to get slightly warm ...


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## Rox (Oct 17, 2010)

HaroldCrump said:


> Rox, in all the discussions that you have started recently about Canadian investments, I don't see you mentioning where you are moving from.
> Some multi-national financial institutions allow their customers to "port" the assets to another country.
> Some offer borderless, global accounts that can be accessed anywhere.
> HSBC, Barclays and Citibank are institutions that I am aware of.
> ...


Originally from Singapore, studied in UK syllabuses in The UK and nowadays, in The USA.


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## Rox (Oct 17, 2010)

FP,... thank you, yes, I will,.... and shall contribute to your blog too as I find out more,..


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## FPbloggerwannabe (Sep 27, 2010)

I have a question on which investments to hold in which accounts. Based on the reading I've done, I have come to this conclusion.

*This is in order of priority. ie. i would max out TFSA then RRSP then the remainder in non-registered acct.

1. TFSA - ALL U.S. listed ETFs

2. Self-Directed RRSP - ALL U.S. listed ETFs, then Canadian equity ETFs.

3. Non-registered account - Canadian stocks and Canadian dividend/REIT ETFs.


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## Rox (Oct 17, 2010)

Assetologist said:


> I disagree with some of the other viewpoints suggesting that investing a large proportion of your dollars in your (new) home country is unwise. There are many fundamental and tax-efficiency reasons to hold Canadian investments - you should meet with a reputable fee-based advisor with respect to building the foundation for your investments.
> 
> Good Luck


Have been doing some research and reading-up, and the tax-efficiency reasons are indeed well and true, as from the tables shown in the following link :- 

http://www.taxtips.ca/dtc/taxcomparison.htm

For the dividends that I may soon receive by investing in Canadian companies, I will use Table : Dividends eligible for the enhanced dividend tax credit.

The taxes payable are very low as from the first row beneath the Column Titles.

On the other hand, for the dividends received by investing outside of Canada and similarly for interests and coupons received from Canadian Mutual Funds, and certain trusts, I need to use Table : Interest income.

Which means starting from $15,000, I would need to pay taxes.

Hence - my theory holds true (till now),... that I should work on Canadian investments, and to focus on yield as a start to prepare myself, and to sustain my income when I land officially as an immigrant.

For further reading :-

http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm


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## Rox (Oct 17, 2010)

Rox said:


> FP,... thank you, yes, I will,.... and shall contribute to your blog too as I find out more,..


FP,.... have called a few of the brokers, thought I'd update here as an input as I said earlier,...

Yes, they are okay with a non-residents opening account, and though a non-resident may not have certain credentials (being that they are non-residents), accounts can still be opened provided they provide other details to SHOW that they are not doing money-laundering, and are true investors (proofs of documents from their origin countries and other countries, eg The USA or Scotland, etc), and proof of available funds to invest !

Thanks again,....


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## Eclectic12 (Oct 20, 2010)

Rox said:


> As a matter-of-fact, outside of The USA, many countries have brokerages which are able to offer Canadian stocks for purchase. And they will deduct 25% off our earned dividends for taxation purposes.
> 
> As a Non-Resident or Resident for taxation purposes, the deduction should only be 15%.
> 
> ...


Hmmm ... according to this article, some Canadian brokerages have deducted 30% from Canadians buying US stocks. So you may have to check your statements thoroughly and complain if necessary.

http://www.collinsbarrow.com/news_showArticle.asp?articleID=66&typeID=25


In any case, I believe the 15% is by tax treaty with the US, so as soon as the brokerage is not Canadian or US, I'd expect the local tax laws would come into play. So the 25% might be the correct amount. Unless they also have a tax treaty with Canada that is similar ... *grin*


Here are some tips regarding Canadians having US dividends:
http://www.theglobeandmail.com/glob...r-for-your-us-dividend-stocks/article1264266/
http://www.ctv.ca/generic/generated/static/business/article1580827.html


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## Eclectic12 (Oct 20, 2010)

FPbloggerwannabe said:


> *This is in order of priority. ie. i would max out TFSA then RRSP then the remainder in non-registered acct.
> 
> 1. TFSA - ALL U.S. listed ETFs
> 
> ...


According to this article, the Canada-US tax treaty doesn't include TFSAs or RESPs as retirement vehicles. If I understand the US listed ETF to be a US firm, then the 15% withholding tax will be deducted from any dividends.

http://www.ctv.ca/generic/generated/static/business/article1580827.html

It might be preferrable to shift any US ETFs or dividend paying stocks to the RRSP.

The other thing I'd think about is moving anything Canadian REIT to either the TFSA and/or RRSP. Actually, to be more complete, anything that pays a stready stram of Return of Capital (ROC), which most REITs do.

In a non-registered account, the ROC means the Adjusted Cost Base (ACB) will have to be reduced by the amount of ROC, for each ROC payment. If the ACB ever reaches zero or negative, then all future ROC payments have to be reported as capital gains. When sold, if the ACB is still zero (or less), the entire proceeds are reported as 100% capital gain.

I'm got enough on my plate without all the extra calculations so I've in progress of transferring to the TFSA. Once transferred it's one last set of calcuations. If you choose to do a transfer, just make sure the current ACB is in a profit position and the REIT isn't in the distribution cycle on the date it is transferred.


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## NorthernRaven (Aug 4, 2010)

@Eclectic - do you also have bonds and have you had to evaluate which should get priority for registered accounts? My RRSP/TFSA room won't hold my entire portfolio (maybe 40%), and I was planning on using the space for bonds and a chunk of non-hedged US equity ETF. I guess it would depend on how much ROC the REITs were returning, but I guess a good case could be made they should go in first, for your bookkeeping headaches and the presumably slightly bigger returns?

Oh, for a larger RRSP umbrella...


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## Eclectic12 (Oct 20, 2010)

NorthernRaven said:


> @Eclectic - do you also have bonds and have you had to evaluate which should get priority for registered accounts? My RRSP/TFSA room won't hold my entire portfolio (maybe 40%), and I was planning on using the space for bonds and a chunk of non-hedged US equity ETF. I guess it would depend on how much ROC the REITs were returning, but I guess a good case could be made they should go in first, for your bookkeeping headaches and the presumably slightly bigger returns?
> 
> Oh, for a larger RRSP umbrella...


I've got a small amount in a bond mutual fund in a LIRA but that's it. So at this point, no - I haven't had to look at room to move bonds into a registered account.

If you are considering the TFSA for the US equity ETF, make sure it's not subject to US withholding taxes as apparantly, the TFSA is not recognised as a retirement vehicle like the RRSP. The result is that the US withhold tax is taken without the ability to claim it on your tax return.

As for the Trust Units and REITs, a good chunk of my current ones are converting to stocks so it's becoming easier to move a shortened list over. However, it's not so much the amount of ROC as it is the effort to get the ROC amount, figure out how the specific company reporting it and how to adjust the cost appropriately. For example, the Capreit link 
http://phx.corporate-ir.net/phoenix.zhtml?c=124438&p=irol-tax indicates
that 99.78% of the $1.08 distribution has be deducted from the adjusted cost base (ACB). So starting with the latest ACB, calculate the amount the 99.78% is and recalculate the ACB.

As I say, I'm much happier with the regular dividends where I only have to watch for rare special events. 


As for a larger RRSP umbrella - make sure you have planned out how long the money will be in the RRSP and how you are getting your money out of the RRSP. Some of the features are that taxes are deferred, in exchange for giving up the ability to write off losses and withdrawals being taxed as income (higher than capital gains). 

If your RRSP has time to grow to compound beyond the additional taxes, all is well. If not, it may be better to skip the RRSP. 

As well, if there are pensions adding to income at the time of withdrawal, it's not too hard to end up being forced into a higher tax bracket than expected.


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## NorthernRaven (Aug 4, 2010)

@Eclectic - The TFSA has $10K of bond funds right now, and I hadn't planned on using it for US equities.

Towards the end of my northern time*I was on the edges of the 26% marginal bracket, I believe, and used what RRSP room I had (most was eaten by the pension adjustments from the DB pension plan). Assuming similar tax rates 25 years from now when I would have to start taking RRIF withdrawals, I'd likely be in the 22% bracket. The whole "when is RRSP maxing not good" issue seems murky and makes my head spin, but it is on my list to look into over the next few months.


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## Eclectic12 (Oct 20, 2010)

NorthernRaven said:


> @Eclectic - The TFSA has $10K of bond funds right now, and I hadn't planned on using it for US equities.
> 
> Towards the end of my northern time*I was on the edges of the 26% marginal bracket, I believe, and used what RRSP room I had (most was eaten by the pension adjustments from the DB pension plan). Assuming similar tax rates 25 years from now when I would have to start taking RRIF withdrawals, I'd likely be in the 22% bracket. The whole "when is RRSP maxing not good" issue seems murky and makes my head spin, but it is on my list to look into over the next few months.


That's good for the TFSA - though depending on your time horizon and amount of risk you are comfortable with, in future you may want consider some risk with the TFSA. One of the nice features of the TFSA is that any growth is tax-free as opposed the tax-derred RRSP. 

I mentioned the US equities as like many others, I thought that the TFSA would be like the RRSP, where US dividends wouldn't be taxed. It seems that unless the Canada-US tax treaty is amended, the TFSA will still be subject to US withholding tax.

While it's great that you know the tax rates, I may not have explained the potential issue well. A key point in the two articles about the RRSPs was that most people were considering part of their total income when planning. The total ended up being Company Pension + Canada Gov't Pension + investment income + required minimum withdrawals from the RRSP. 

The sum total did a couple of things - bumping up the tax rate paid on all income and triggering reductions in some of the Gov't benefits/pensions. The analysis was that the reductions plus the additional taxes was pretty much the same as paying taxes of 70% on the RRSP withdrawals.

Forgive me if I'm repeating myself but also bear in mind that investments outside of the RRSP also tend to have a mix of capital gains (least amount of tax), dividends (middle amount of tax) and interest/income (most amount of tax). The RRSP withdrawals are treated entirely as interest/income. So for example, $10K from a mix of investments will likely be taxed less than $10K withdrawn from an RRSP - the amount will depend on the mix that generated the income and the tax bracket.

Without the type of planning that you appear to be set to look into, the results that surprised the authors was that some who invested money outside the RRSP once they were within 10 years of the last date to contribute, in their scenario, ended up with more money. They did note that investigating options or changing the scenario would affect what made sense.

It sounds like you've got time to investigate and see what makes sense for you.


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## kcowan (Jul 1, 2010)

Eclectic12 said:


> The total ended up being Company Pension + Canada Gov't Pension + investment income + required minimum withdrawals from the RRSP.
> 
> The sum total did a couple of things - bumping up the tax rate paid on all income and triggering reductions in some of the Gov't benefits/pensions. The analysis was that the reductions plus the additional taxes was pretty much the same as paying taxes of 70% on the RRSP withdrawals...


And many people are unaware that the reductions start at below $32k total income when the age credit start getting clawed back at 15 cents on every dollar that exceeds that amount. And the provincial credit gets clawed back at varying rates but generally are more aggressive clawbacks than the federal one.


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## Eclectic12 (Oct 20, 2010)

kcowan said:


> And many people are unaware that the reductions start at below $32k total income when the age credit start getting clawed back at 15 cents on every dollar that exceeds that amount. And the provincial credit gets clawed back at varying rates but generally are more aggressive clawbacks than the federal one.


I wasn't aware of the provincial one.

For me, it reinforces the need to keep learning and think through options.


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## Belguy (May 24, 2010)

Much too complex a problem for my little brain.

All that I do know is that, for years, my dad sacrificed much to maximize his RRSP contributions. Then, he passed away too soon to see mom having much of her OAS clawed back as a result.

I often wondered, if he were still alive, what he would have made of the fact that his zealousness maximizing his RRSP contributions resulted in much of mom's OAS being clawed back!!

While he sacrificed to contribute the maximum to his RRSP, some of his friends did not and instead bought new cars every few years, and boats, and took trips and basically spent most of their money.

Now, they are the proud recipients of their full OAS pension which they put towards a new car every few years, and boats, and trips.

Due to the clawbacks, mom has less OAS money to spend.

Such is life!!!


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## HaroldCrump (Jun 10, 2009)

Belguy said:


> While he sacrificed to contribute the maximum to his RRSP, some of his friends did not and instead bought new cars every few years, and boats, and took trips and basically spent most of their money.
> 
> Now, they are the proud recipients of their full OAS pension which they put towards a new car every few years, and boats, and trips.


Come on, OAS doesn't pay *that* much.


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## Eclectic12 (Oct 20, 2010)

HaroldCrump said:


> Come on, OAS doesn't pay *that* much.


The link below indicates the max is $521.62 a month or $6259.44 a year.

http://www.servicecanada.gc.ca/eng/isp/oas/oasrates.shtml


I leave it up to whomever to decide if this would pay for a car, boat or trip.


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## Rox (Oct 17, 2010)

Might help to fill-up the tanks of the car or boat every weekend for the drive out of the city or that fishing trip 3kms off the coast,...


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