HomeMy WebLinkAboutThe Citizen, 2000-02-09, Page 7THE CITIZEN, WEDNESDAY, FEBRUARY 9, 2000. PAGE 7.
Understanding the basic ABCs of RRSPs
Suffering from Registered
Retirement Savings Plan (RRSP)
information overload? Uncertain as
to why, when or how much you
should contribute to your RRSP?
Before making your RRSP
decisions this year, be sure that you
understand the basics of RRSP
investing.
Here is some information to help
you get started.
Why should you contribute to an
RRSP?
RRSPs help reduce your taxes
because you can deduct the amount
of your RRSP contribution from
your taxable income. As well, your
RRSP will grow in value, without
attracting tax, allowing you to save
for retirement.
The theory is that by the time you
need to draw funds from your
RRSP, your income will be lower,
and the withdrawals will be taxed
at a lower rate.
What is the deadline to
contribute to an RRSP?
The deadline for RRSP
contributions is 60 days after the
end of the year. Since 2000 is a
leap year, the 1999 deadline is Feb.
29, 2000.
How large can your
contribution be?
“As a general rule, you can
contribute up to 18 per cent of your
earned income in 1998, to a
maximum of $13,500,” explains
Sam Zuk, chartered accountant.
However, adds Zuk, this amount
They make sense
A Registered Retirement Savings
Plan (RRSP) can play a key role in
your retirement plan.
“RRSPs help reduce your taxes
because you can deduct the amount
of your RRSP contribution from
your taxable income,” explains
chartered accountant Deborah
Stern. “As well, your RRSP will
grow in value, without attracting
tax, allowing you to save for
retirement. The theory is that by the
time you need to draw funds from
your RRSP, your income will be
lower, and the withdrawals will be
taxed at a lower tax rate.”
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will be lower if you have any
pension adjustment and past service
pension adjustment, and it will be
higher if you have any unused
contribution room from prior years.
“The best way to find out how
much you can contribute is to
check your 1998 tax assessment
notice from Revenue Canada,”
advises Zuk. You can also confirm
the amount with Revenue Canada
directly by calling the Tax
Information Phone Service
(T.I.P.S.)at 1-800-267-6999.
What if you don’t contribute the
maximum amount?
“If you can’t contribute the
maximum, the unused amount will
be carried forward and can be used
in any future year,” says Judy
Moore, CA. “But you should try to
contribute the maximum allowed,
particularly if you are in a high-
income tax bracket.”
Should you always deduct your
RRSP contribution the year you
make it?
Not always, says Zuk. “For
example, if your taxable income is
very low, it might make more sense
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When You Invest With Us
You Invest In Your Community.
Your RRSP deposits are used to assist our
borrowers who are your friends and
neighbours in the community.
Choose from a variety of options.
•Fixed Rate GICs
•Regular RRSP Deposit Plans
(Weekly, Bi-weekly, Monthly)
•Index Linked Term Deposits
•Mutual Funds
Each RRSP & RRIF contract is insured
individually for up to $100,000.00.
RRSP Loans at Prime
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DEADLINE for your 1999 contribution is
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48 Ontario Street
CLINTON 482-3467
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to defer your deduction to a year in
which your income and tax rate are
much higher, meaning you will
save more,” he explains.
Meanwhile, the funds you put into
your RRSP will continue to
compound, tax-free.
Can you use withdrawals from
your RRSP to buy a home or fund
your education ?
If you have previously
withdrawn money from your RRSP
to finance a home purchase, you
may be able to do so again, under
changes made last year to the
RRSP Home Buyers’ Plan. The
Plan, which allows you to make
tax-free withdrawals of up to
$20,000 from your RRSP to
finance the purchase of your home,
previously could only be used once
in an individual’s lifetime.
“But as of Jan. 1, 1999, you
could participate in the Plan more
than once, providing neither younor
your spouse have owned or lived in
a house as your principal residence
within a specified period, and
providing your previous Plan
withdrawal has been repaid,”
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explains Moore. “The specified
period began Jan. 1 of the fourth
year preceding the year of
withdrawal and ends 31 days
before the withdrawal.”
Moore says that you can also
make tax-free RRSP withdrawals
of up to $20,000 (maximum of
$10,000 per year) to finance
eligible education or training for
you or your spouse.
Your 1999 RRSP decisions
depend on your individual
It’s RRSP Time
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