HomeMy WebLinkAboutThe Citizen, 1990-02-07, Page 20PAGE 20. THE CITIZEN, WEDNESDAY, FEBRUARY 7, 1990.
Saving baby bonus can lead to tax gains
By GLENN AGRO, CA________
It may seem like no big deal.
But saving the monthly baby
bonus cheque can add up to a
nest egg of $27,000 by the time
your child is 18.
Just as important, it can also
save you a tidy sum in income
tax along the way — in spite of
tax reform.
Although family allowance
(baby bonus) payments have
always been taxable, tax
reform has tightened the
screws a bit. Payments must
now be included in the income
of whichever parent earns the
higher salary. No exceptions.
That means tax on the baby
bonus (now $32.28 a month)
could easily swallow about a
third — almost $130 a year. On
top of that, any interest the al
lowance itself earns is taxable
too — to the tune of $10 to $12
a year. And growing.
But— and this is a significant
but — that only happens if the
baby bonus is put into the
savings account of one or other
of the parents. Put it directly
into a savings account for the
child, and the whole scene
changes.
Presumably your child has no
other income. Or a least not
enough to attract tax. There
fore, tax savings all around.
So the child’s account just
keeps growing, and the inter
est keeps compounding safely
Provide happiness for old age
beyond the clutches of the tax
man.
Keep it in
child’s name
Naturally, as the child’s ac
count increases (say to $1,000
or more), then that money
could be transferred to a higher
interest investment like a
Canada Savings Bond or a cer
tificate of deposit. The same
tax savings would still apply —
as long as the investment is
made specifically in the name
of the child.
The only time the higher-in
come parent rule doesn’t apply
is in the case of a marriage
break-up where the parents
are permanently separated. In
this case the parent who
Old age pension now
pays $337.04 a month
The federal Old Age Security
pension (OAS), Guaranteed In
come Supplement (GIS) and
Spouse’s Allowance have all
been increased for the last
quarter of 1989, adjusted to
recognize the ever-rising cost
of living.
As a result, people 65 and
over now draw $337.04 a
month in OAS benefits, up
from $330.43; the GIS for
needy oldsters has increased
from $392.68 to $400.53 for
single people and those whose
receives the family allowance
payments must show them as
income whether his or her in
come is higher or not.
Another tax reform complica
tion arises when it comes to
claiming the credits for de
pendent children if the parents
are separated; for example,
where one parent is claiming
the dependent children’s tax
credits while the other is being
paid the family allowance.
In this instance, the parent
claiming the tax credits (but
not showing the baby bonus as
income) must attach a letter to
his or her personal tax return
explaining why.
Glenn Agro is with BDO Ward
Mallette.
spouses don’t receive OAS or
Spouse’s Allowance; and for
those who do, from $255.76 to
$260.88.
The maximum Spouse’s Al
lowance, paid to low-income
people between 60 and 64 who
are married to GIS recipients,
increased from $586.19 to
$597.19 a month; and the max
imum Widowed Spouse’s Al
lowance, for low-income wi
dows and widowers aged 60 to
64, increased from $660.11 to
$647.17.
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With the ever-changing tax laws, many Canadians are
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524-8658 45 Huron St.
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357-3006 396-7088
By JOHN WITHROW, CA
When we retire, we all have at
least an additional 2,000 extra
hours a year to spend, hours
that weren’t available when we
worked 40 hours a week, 50
weeks a year.
While many of us are well
versed in financial planningfor
our retirement years, how
many really know how to plan
the effective use of those 2,000
extra hours?
One key is to realize that on
retirement you’re not changing
yourself, but extending your
self. Therefore, plan to reward
yourself for years of hard work
by doing the things you really
want to do. And more impor
tantly, enjoy doing them!
Only do it
if you like it!
Volunteer work for a hospital
or the United Way may be your
choice. Or you might want to
become involved in political or
church work. WTiile your ef
forts will be valuable, you
should resolve to contribute
only as long as it’s rewarding
for you.
Many of us have hobbies and
retirement is a golden oppor
tunity to finally reach new
heights of accomplishment,
whether it’s in photography,
gourmet cooking or golf. Bear
in mind, however, it’s always
better to have more than one
hobby — 2,000 hours of any
thing can simply become a
grueling endurance test rather
than an enjoyable pastime.
Continuing education.
UAMADS
ALL THE TIME!
whether through universities
or community colleges, is also
a very rewarding way to
develop expertise or simply
satisfy curiosity. And, many in
stitutions offer courses free, or
at reduced rates, for retired
students.
Putting yourself on the mail
ing list for catalogues of course
offerings will bring thousands
of opportunities to your door —
you can earn an MBA or even
become a teacher yourself.
And don’t rule out thoughts of
a second career. If you’ve al
ways loved to read, you many
want to work part-time at a
bookstore. For something more
exotic, you could follow the lead
of a retired banker who signed
on as the purser of an ocean
liner and cruised the world.
R.R.S.P.
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Start a part-
time business
Or, you may want to start
your own business. If you do,
spread the risk a little by bring
ing others onboard. However,
agree at the outset that if you
tire of the venture or become so
involved in it it’s no longer en
joyable, then it’s time to quit.
Over the years, most of us
develop the habit of saying “no”
to the many invitations both
formal and informal, that come
our way. In retirement, a key
element to success is learning
to say “yes”. At worst, you’ll
identify those things you don’t
want to spend your time doing.
At best, you’ll discover whole
new worlds of interest.
John Withrow is a retired
chartered accountant.
TOP RATE TO
1-2-or 3 year
7 Things You Should
Know About
CREDIT UNION
1) FLEXIBILITY — Within one credit union RRSP contract, you can in
vest in a variety of options: variable interest rate savings (withdrawable
anytime) and fixed-rate terms of 1-5 years.
2) COMPETITIVE RATES — Call us for up-to-date interest rates.
3) NO FEES — There are no application or trustee fees, administration
charges or withdrawal penalties (unless you withdraw funds within 90
days of deposit).
4) SECURITY — Every credit union RRSP contract is deposit insured
to the legislated maximum of *60,000 (You may have as many separate
RRSP contracts as you need.)
5) COMPETITIVE RATE LOANS — If you do not have enough cash
on hand to make an RRSP deposit this month, ask us about a RRSP
Loan. You will probably find that the tax deferral benefits more than
cover the borrowing cost.
6) DEADLINE: MARCH 1st, 1990 — This is the last day for RRSP
deposits which can be used as deductions from 1989 income (We can
serve you better if you come in before then!)
7) BUILDING THE COMMUNITY — Everyone who lives or works in this
community is eligible to join the credit union. Your retirement savings
are used to fund our lending program, helping your friends and
neighbours to boost the local economy and build our community
VARIABLE RATE PLAN
now paying
00%
■ effective Thursday,
February 1
Credit Union
70 Ontario Street,
CLINTON - 482-3467
Clinton Community
CREDIT UNION
374 Main Street, South
EXETER - 235-0640 ■flares subject to change