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Huron Expositor, 2000-01-19, Page 9ARE YOU READY FOR RETIREMENT? Generally; for the •must of us there arc three possible sewrccs of retirement income - Company. pension plans. Government pension plans., and Person l.Savings.. You may not have much • control -over a company or Government -pension. howev- • er -you do have control over -your personal savings and they can mean the difference between a stressful or stress- w.. free retirement period. - Row_then. do you ensure= that your retirement savings will he sufficient to maintain the lifestyle you envision tor. the "golden years?" . -With the onslaught ot infor- oration on Registered Retirement •Savings Plans (RRSPs) that will he commu- nicated over the next couple of months (through radio, newspaper and -television) you will be more aware than ever of the need to contribute town RRSP. But contributing an RRSP at the -last' moment: every' year is simply ,not enough .to ensure that your -.retirement nest:egg will grow to he sufficient. A `solid retirement plan' includes three key elements: - know how much you need to invest each year for your retirement; - - invest your money into your RRSP'regularly - and invest wisely • When your retirement plan -.is broken down into these -three elements. the rest is easy. :\ trip to your•, local TD Branch :to • vi<it with -an investment Specialist will. help determine how much you need .to reach your =oats. ihvcstment Specialise have the.tools avarlahle to help determine t haled un certain assumptions how much you need to save today to ensure a comfortable. secure tomorrow. instead of investing all your money. one time in the year. you can make market Iluctua- tion: work 'in your favour by investing, .t .et amount of money -on a regular basis -- regardless of what is happen- ing in the financial markets. -This approach is referred to as "dollar cost averaging." Finally, investing wisely . can he as easy as ensuring that your portfolio is diversified. : Studies have shown that more than 80% of your portfolio return is the. result of asset allocation and not the individ- ual investments held. An fnvestnient,Special.ist will ensure that your asset alloca- tion inaccurate hased•on your investor profile. To ensure that you are ready forretirement. visit your Inial TD Branch or call TD Access 1.-800-9Ta:BANIZ 11-800- '90-2265a 1 -800 -'9t;3 -2265i. WHY CONTRIBUTE TO A SPOUSAL RRSP? .A• well as contributing to your own RRSP. if -you have a spouse (married or common- law). you can contribute to a spousal: RRSP. based• on your income .feVel. For some 'cou- pie.. this strategy can save" significant taxation during. retirement: • . Use of a_spoual RRSP is:a method of income sharingat retirement. The ides i'S to build two pools of'savings, onefor each spouse, that will produce. similar income streams at retirement.. She taxes _paid on the two income `streams .will likely be Tess than those pard if the income were to be.taxed in the hands of one skiouse.,who would then he taxed in a a higher tax bracket. The more income that can he generated by the lower taxed spouse., the b-etter the savings. Income'sharing.i.S. particularly beneficial when one spouse: will have substan- tial income from pensions and other sources. and the other .spouse will have little or _no pension other than RRSPs'., If you, and: your spouse have significantly. different incotnes and/or pension plans. you may want to consider contributing some or all of your yearly RRSP contribution _ to a: spousal plan. You will still. receive the RRSP tax deduc- tion for.your.contrib.ution: Your total RRSP contribution's (personal and spousal.) are ' subject to your yearly RRSP limit•., the same limit that would apply to your personal .RRSP. Since a spousal RRSP beton_. to your spouse. the alone\ you haveanvested in.it ialso hclongs to your •spouse. and you have no .lc, al say in the future investment or itis pos•it1(01 of that . money. Although your spousal Phis . personal contribution cannot •e-xceed your annual RRSP limit. the amount •vuu con- , tribute in a spousal plan does nota atlect how much your spouse can contribute to an RRSP.: Heishc ,:an. still. con-. tribute up to their yearly limit as well • Is -it risky to Invest in a spousal RRSP'' What if `we divorce; or if my spouse dies'' Use of a spousal RRSP isnot really a risk. In most situa- tions, if .you divorce.' all ,RRSPs (spousal or personal) -and.pensions will be'split between spouses: In the event of death of pre spouse. RRSPs can be transferred tax- free. to the. remaining spouse (including common-law). pm- vided•that.the spouse was named beneficiary -of -the • RRSP-plan. _ Depending on your situa- , tion. a spousal RRSP can'be an effective tax planning strat- egy. . TAX TIPS TO HELP YOU 1. Medical Expenses: Keep track of all- medical expenses for the family for. the year including any premi- um; paid for private: health care ifistirance plans: -The non-refundable tax credit`is the totai of the expenses paid less 3g of net income or $1.614; whichever amount is -• less. The medical expenses, can be claimed for any !2- nionth period ending in the year (i,e. February; 1.997 to 'January `-1998 could be: claimed on the 1998 tax return). It. is possible to have a claim in one year and not in .another year and therefore it is important to keep track of the expenses each year. 2. Qhild Care Expenses: Generally the spouse with the lower net income Can deduct childcare expenses from their income. The claim is the lessor of these three amounts: the actual amount paid. two- thirds: of the individual's earned income and 57.000 per child under seven or 54.000 for other children. The child care must have been paid to enable either parent to earn income. attend a qualified.educational.pro- gram or take an eligible occu- pational training program. 3. RRSP deductions: Monthly contributions are •an excellent way to make RRSP contributions -and avoid hay- ing to find the money for a contribution in a lump sum. If your taxable income tluc- Continued from Page II choosing the right kind of investments for your Registered Savings Plan. Mutual funds. C1iCs. GSBs. bonds, stocks. etc. The choice of what is the right invest- ment should revolve around .you. your age. your tolerance for risk and where you are in the life cycle. If 'you are young in age you will want to focus on invest- ments that will produce, a great deal of growth over time. For most people this will mean choosing a growth • mutua' fund. If you are approaching the middle age point in your life you should look ata balance of your sav- ings bonds or GiCs. and a' portion in equities. usually an equity mutual fund. As you begin to reach retirement age your tolerance for risk gener- ally goes down. Therefore bonds. and GiCs (also known as fixed income products) should comprise a larger por- tion of your portfolio, and equities a smaller portion of your savings. CIBC 4 tuxes aridyou erect u to.bc higher. in- the nix[ year: con- sider Jelavrng the deduct=ion' of the contribution_ so that the c .tax 'avtns will h4rhi_her. :.For employees -that: con tribute to a RRSP. an applica- non can he made to Revenue Canada. to authorize ,your empluver to reduce the ,tax withheld from your etnploy merit. incdrne. By doing this you Bart increase. 'k ur take home.pay instead of waiting . for the tax refund cheque at the end of the year. , • - 4. File on time: If you have taxes owing on April 30,-and- von. 0.-andvou. can't -pay the balance owing. file your return with- out the payinent. Revenue Canada will Mill Charge Inter- est on the outstandtrrg amount. but you will save the, late tiling penalty. 5. RRSP withdrawals: Any funds withdrawn during the year from your RRSP will. be included in your income. The financial institu- tion is;required to withhold income 'tax and unless you have business losses orvery low income to offset the • RRSP income. the takes .withheld will -not cover the full amount of tax owing dn ApriI.30th.' 6.1• Child tax benefitt Consider setting -up a sepa- • rate hank..account: ,and depo.sia,iJig. the• money received in'this account. so that the interest earned will be the child's income and not the parent's. Since the child may. have "little or no other,: income there will be no tax to pay. . 7. Pension taxrcreiit: If 'sou are over i.` years ('1 .ige, make sure that yi'u have at, feat $1„000 0! pension • Income •to quality 1‘,(- the as credit. It you arc not eligible tura pension. hut have inter- -:est nter-:i st -income. certain invest- •ments issue by life.insur- ance companies will lcncruc income eligible the lax • credit. 8. Retiring allowance and termination payments: A payment paid to an employee upon or after_ retirement to recognize ` ling serviceor to compensate for employment. loss. must be included in income: This income can he Sheltered from tax by con- tributing it to•aRRSP. In addition to normal RRSP deduction !Units. an amount Of 52.000 per year of service before 1996 can be rolled into a RRSP. There is an additional11:500 per -year available -for years of service before 1989 in which the employee did not have vested pension lights. Brian Wightman, CGA YOUR ESTATE PLAN (.live Mole our heirs. a little less to the tax man' . -When you die. your execu-.: for will thea (Trial income tax return on your behalf. It wilt include any ineotne shit earned in the. last year of tour lite. including einployrnent earnings, dividend -payments. and interest received or accrued. Any assets you own will he treated as haying been .old at their fair market value on the day c4 your death. Your estate will have to pay any income taxes or capital gains tax Jue at that tinie. By the time your RRSP or .RRIF is cashed 10. up to 504, of your estate could end upgoing to Revenue. Canada' And that's not all: another percentate of your estate will go to the province as probate fees.. And • what's more., the • probate pnxess (court confirmation of your.will's validity) could keep -your assets. out -of your loved one's _hands for months after you die. . With a little financial plan- ning, however, you can have the last laugh. Here's how: 1. Name your spouse as beneficiary for all your RRSPs and- RRIFs. This strategy will keep these assets .wt of your will which will reduce the amount -of money you pay in probate fees. 2. Consider joint owner- ship with righti of survivor- ship of other assets, such as stocks, bonds and, if applic- able, the family home or farm. When one joint owner tires, assets pass to the other owI1CI outside (Ile C)nic a_.nn. vuu avoid probate .lee.. Note that Loll_ play trig- ger *capital gain when you :et up ioint ownership as you are "dectticd" to have dis- posed of the asset 10 then w lotil1 ownertsl. 3. Have a will that clearly outlines the distribution of all rental JSSetS. • 4. Purchase life insurance. with a death benefit at least cuual to the amount of.taxes that may be due on your death. 5. Set up a testamentary trust to.distribute your assets .to. your Survivors iti a con- trolled tnanner after -your death. • 6. Give it away. Charitable. donations can provide signifi- cant tax benefits during your lifetime or for your estate. No one knows what tomor- row will. bring. Review your estate plan today. Doug Elliott, Chartered Financial Planner The investment Centre The Rules The 'Fax AcFiiwitatge The Investments Data: Every Wednesday Commencing January 1E, 2000 to February 23, 2000 Tim.:7:00-9.00p.m Piaci*: Edward Jon.. Moe 79 Ontario Rd., Mftchsf1 !le Charge. www edwrdiorws.com • Registered Retirement Savings Plan Seminars Joy Waits 79 Ontario Rood, MftehNl, Ontario NOK 1NO (519)318.9973 Echvardjoimmi Sonia. Individual br anon Membar CIPF THE HURON EXPOSITOR, January 19, 2000-9 AFP WEALT_.1- MANAGEMENT HELEN M. HETHERINGTON. CFP Financial -Planning Consultant WHEZV CONSIDERING YOUR FINANCIAL FUTURE, RETAIN PROFESSIONAL ADVICE. Call me at 887-9964 ort -800.869-8922 Head OMce: 800-20.Erb St. W. 1 N G Group Waterloo. ON N21. IT2 519-886-8600 Estate Planning will ' • minimize taxes Sr probate fees rovide for your heirs as you intended. Give more to your heirs, less to .the tax man! Stop in for your complimentary estate planning package. Doug F111at 8. Matt, CFP • Visit our website.www.icfg.com ' rues trnerit entre � G 527-2222 26 Main St., South Seaforth. Fax 527-0810 -Ter, ntq Seal6rti, Sone 1986 DON'T KNOW A RRSP FROM A DRIP? CONFUSED BY ALL THE HYPE AND MUMBLE, JUMBLE? For clear answers and solid counsel, call Ralph Smith, B.A., LL. B. CFP, at MONEY STRATEGIES CORPORATION -Retirement, Estate & Financial Planning Money Management & Financial Services 519-527-1177: We don't sell products;only solutions!' We'd like to contribute to your RRSP • Mutual Funds • GICs • Prime Rate RRSP Loans •. Professionally Managed Accounts OPEN EXTENDED HOURS FOR RRSP SALES Feb. 24, 25, 26, 28, 29 Better advice. More Options. On your terms. 527-0100 Avoid the 10 Biggest RRSP Mistakes Read t1,is.FREE HOOkLETand you an vdr.•tap the ntajur ilitttidcr, :hut could rum rot at .you hair :tmked itard to achrar. - The benefits of RSPs are kilter of people's retirement welk,known. Not only do dreams, It will tell you why you enjoy immediate•tax most people retire'with less savings, but your money than hoped, and Will warn grows and compounds free you against the riskiest of taxation until investment decision you withdrawn, Ctsarly, the could -ever make. advantages arecompelling.. • You will also- discover how Unfortunately,- you may be . to avoid paying more tax in following strategies that are -retirement- than --you- are - exposing :you .' to legally required,• and how unnecessary risks. Worst of to guard_ against•that one all, you may not even critical Omission.. your realize it. 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