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HomeMy WebLinkAboutThe Citizen, 1992-02-05, Page 8PAGE 8. THE CITIZEN, WEDNESDAY, FEBRUARY 5,1992. Bigger tax break makes RRSPs a better investment Canadian taxpayers are getting a break in at least one direction this New Year - on their Registered Retirement Savings Plans (RRSPs). Described by financial planners as “the most generous tax incentive in the world,” RRSPs permit Cana­ dians to defer income tax on the money they invest, up to allowable maximums. In the case of people who are not in a company pension plan, the ceiling for RRSP contributions made up to February 29, 1992 is $11,500, or 18 per cent of earned income - whichever is less. The sum invested can be deduct­ ed from 1991 earned income before income tax is calculated. The result is a smaller tax bill or, for those who pay tax via payroll deduction, a larger refund. RRSPs can be purchased through mutual fund or investment compa­ nies, bank, stock brokers, insurance companies or registered sales repre­ sentatives. Wayne Walker, Vice-President, Marketing of Investors Group Inc., Canada's biggest mutual fund com­ pany, says Canadians put more than $11 billion into mutual funds in 1990. The amount is expected to be even greater for 1991. “The average contributor will find that their tax saving will repre­ sent anywhere between one-quarter and one-half of the amount they're investing,” Mr. Walker says. This year's maximum of $11,500 will be increased by $1,000 each year until 1995, when the maxi­ mum will be $15,500. Last year, the limit was $7,500. Revenue Canada has been mail­ ing out notices to taxpayers who are enrolled in company pension plans, advising them of the allow­ able contribution they can make in a personal RRSP. Introduce your kids to money matters, says CA BY LORRAINE BELL, CA Sweating under the collar - both blue and white - seems to be the order of the day for Canadians edgy about the economy. As plants shut down and corporations slim down, more and more families are facing financial problems. There are tough money decisions to be made. In the course of making those decisions, most families keep their children in the dark. If, instead, parents would take the time to shed a little light on the family's finan­ cial situation, their children would not only feel more secure, they would learn valuable lessons about handling money. Next time you sit down to pay the family bills, try including your older children. Give them an over­ all idea of the family's monthly expenses and point out some specific expenses, such as groceries or cable television, which affect them directly. Also show them what portion of your monthly or NDP aware of municipal tax burden, says Klopp THE EDITOR, Many municipalities in Huron County have tightened their belts. Some have frozen wages of elected officials and held the pay raises for employees to one or two per cent. I am pleased that the message which Premier Bob Rae sent last week is being listened to rather closely. Many followed the province's example by freezing wages as the Premier has done for cabinet and MPP's. The Trustees of the Huron County Board of Education rolled back the four per cent they had received. East Wawanosh cut back both employees and elected mem­ bers wages five per cent. Brussels and the Townsnip of Grey froze the council wages. The municipalities were told that unconditional grants will increase one per cent this year. Uncondition­ al grants are given by Ontario to the municipality. They are not ear­ marked for specific projects or provincially mandated programs. Each municipality decides where to use the money. While this increase is less than last year's increase and despite the tough times this govern­ ment has not frozen the amount as the Liberal government did in 1989. There will be one per cent increase this year and two per cent for the next two years. This will allow municipalities to plan better. The New Democractic govern­ ment is aware of the municipal tax burden and has not offloaded any new program responsibilities to municipalities. Municipalities are being hit by higher welfare costs because of the recession. The gov­ ernment is extending special wel­ fare relief which it introduced last year. The government will pick up 90 per cent of the cost instead of the 80 per cent when 3.5 per cent of the municipality's population is on welfare. This will allow more municipalities to receive extra funding. The reassessment to market val­ ues of 1988 has placed a large increase on the urban property tax payer. The farm property tax payer had their assessment go up several years ago. I have been told by sev­ eral town residents that their taxes will go up as much as 26 per cent without any new taxes. The Minis­ ter of Municipal Affairs David Cooke has been made aware of the 'impact of market value assessment of the urban municipalities in Huron County. Several municipal councillors told me their concern is that they must pay for police budgets but do not have control of them. In answer to this the government has referred this to the Disentanglement Com­ mittee for resolution within the next few months. The Ministry of Municipal Affairs and the Associa­ tion of Municipalities are looking at ways where joint savings could be made. PAUL KLOPP MPP FOR HURON annual paycheque goes into sav­ ings, giving them a percentage, rather than a specific dollar figure. The point of the exercise is not to worry or bore them, but to inform them. After all, one of the reasons that many adults are not good at finances is that no one ever took the time to teach them. Younger children can learn about money in a number of ways. If your 10-year old thinks he can't live without a particular brand of run­ ning shoes but you are unwilling to pay the $100 bill for them, try working out a deal. If you kick in half, he could earn the other half through doing extra chores around the house or the neighbourhood. When you help your children estab­ lish goals, they will learn about planning. If your child receives a gift of money, take the time to discuss options. If the money is spent now, what will it buy? If it is put in the bank, perhaps along with allow­ ance, earnings from chores or other gifts of money, what will it buy later? Explain how savings earn interest. Another option might be for your child to take a portion of the gift money or earnings to spend now while also putting a por­ tion of it in the bank. Let your child make his or her own decision. If she decides to save her money, have her deposit it in the bank herself so that she learns to fill out deposit slips, deal with tellers and up-date her passbook. Feeling confident at the bank and knowing how to make smartmoney decisions will pay off throughout her life. Moneycare is general financial advice by Canada's chartered accountants. Lorraine Bell is a self employed financial consul­ tant Most Canadians entrust their RRSPs to an established financial institution. Mr. Walker says, although self-administered plans are permissible. A growing number of Canadians - at least one in five taxpayers - invests in RRSPs as a retirement supplement to company or govern­ ment pension plans. “The addition of an RRSP to . existing pensions can ensure one of being in a very comfortable finan­ cial position at retirement time,” says Mr. Walker. “But those depen­ dent on government pension alone will be in difficult straits,” he pre­ dicts. “Even now, government pen­ sion levels barely match the poverty line, and who knows how much they’ll be worth in the future.” While many taxpayers will be making RRSP investments in Jan­ uary and February so as to make the deadline for a 1991 tax benefit, financial planners recommend making regular contributions, such as once a month or with every pay cheque. The maximum ceilings are now so generous that few people will be able to take advantage of the tax benefit through one-shot invest­ ment. By investing on a regular basis, one can increase their tax savings and enjoy an earlier return on their investment. Mutual funds continue to be the most popular RRSP vehicle, according to Mr. Walker. A variety of funds are available to meet the individual needs. These include equity funds that invest in the shares of public companies, and funds with guaranteed rates of return such as money market, bond and mortgage funds. A Gallup Canada survey spon­ sored by Investors Group conclud­ ed that Canadians will have to start investing more if they intend to realize their expectations for a secure, comfortable retirement. TS R.R.S.P. TIME AGAIN We represent over 20 Trust & Life Insurance Companies G.I.C.'S - NO LOAD FUNDS For your convenience & personal, professional service call AITLAND ALLEY FINANCIAL CONSULTANTS LIMITED MURRAY SIDDALL C.L.U. For an appointment 887-6663 - G.I.C’S - EQUITY FUNDS - LIFE INSURANCE -R.R.I.F.’s - ANNUITIES 7 Things You Should Know About CREDIT UNION R.R.S.P 1 - 5 YEARS BEST RATE 8 3/4% NO LOAD EQUITY FUNDS CARDIFF & MULVEY REALESTATE & INSURANCE LTD. 1) FLEXIBILITY - Within one credit union RRSP contract, you can invest in a van- ety 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 legislat­ ed 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 an RRSP Loan. You will probably find that the tax deferral benefits more than cover the borrowing cost. 6) DEADLINE: - Feb. 29, 1992 - This is the last day for RRSP deposits which can be used as deductions from 1991 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. BROKER Credit Union 48 Ontario St. CLINTON - 482-3467887-6100 Clinton Community CREDIT UNION 374 Main Street, South EXETER - 235-0640