The Rural Voice, 1989-12, Page 22Would you
like to discuss
Registered Retirement
Savings Plans?
PROFESSIONAL INSURANCE
REPRESENTATIVES
WATKINS, DAUGHERTY
& ASSOCIATES
LICENSED INTERMEDIARIES
FOR
s�z
IMPERIAL UFE
Estate Planning, Business
Insurance, Group Benefits,
RRSPs, RRIFs, Annuities,
Disability Insurance,
Retirement Planning,
Equity Funds
The Imperial Life Assurance Company
of Canada
305 King Street West, Suite 609
Kitchener, Ontario N2G 1B9
LUCKNOW:
LISTOWEL:
KITCHENER:
528-3514
291-5040
744-5281
•
NEW /DM LLIR:1
'To ofd
customers
and new,
our
warmest
wishes for
a very
Merry
Christmas
MULLIN'S
FARM SERVICE
Chepstow, Ont. 519-366-2325
If busy 519-366-2229
After hours 519-366-2705
20 THE RURAL VOICE
WISE MOVES
Financial Strategies for Farmers
Bob Watkins
"Wise Moves" is a series of articles pro-
vided by Watkins, Daugherty & Associ-
ates. Taking as a case study the farm of
"Martin Wise," financial experts Richard
Daugherty and Bob Watkins outline vari-
ous ways that farmers can enhance their
financial planning and security.
Your questions and comments are wel-
come: telephone Bob in Lucknow 528-
3514, Richard in Listowel 291-5040, or
Kitchener (Imperial Life regional office)
744-5281.0
RRSP SEASON
RRSP season is just around the
corner again. Mary and I are already
getting flyers in the mail. So what is
all the fuss about RRSPs anyway?
Why are they such a good investment?
According to our insurance
representative, there are two main
advantages to investing in RRSPs.
First, you are not taxed on the money
you invest in the plan.
Second, the interest on the interest
on the interest accumulates tax free as
long as you own the plan. This means
that your money grows more rapidly
and amounts to a much bigger sum
than it would in an investment on
which you paid tax every year.
For example, take a 25 -year-old
who saves $100 a month in a term
deposit at 10 per cent interest.. If his
marginal tax bracket is 40 per cent
(which means his taxable income is
more than $27,500 a year), then every
year he will pay to the government 4
per cent out of the 10 per cent interest
he makes.
His real return on investment is 6
per cent. At age 65 he will have saved
about $195,000. If he invests the $100
a month in a tax-sheltered RRSP at 10
per cent, his real return is 10 per cent
and at age 65 he will have saved about
$559,000.
We hadn't realized this. So we
Richard Daugherty
wanted to start an RRSP right away.
We wondered how much we could put
into it. Our representative told us that
since I was self-employed and did not
belong to a company pension plan, I
could put in 20 per cent of my earned
income up to $7,500. (If I had a com-
pany pension plan, the limit would be
$3,500 minus whatever I had contrib-
uted into the plan in that year.)
When you set up a Registered
Retirement Savings Plan, you can
choose to have your money invested
at daily interest, in a term deposit, or
in mutual funds. You can even set up
a self-directed portfolio of investments
such as bonds, stocks, or Canada
Savings Bonds.
You can have as many RRSPs
as you like. If you withdraw money
from any RRSP, it is fully taxable.
By the way, did you know that
you don't have to surrender your plan
in order to get the money out when
you retire? Mary and I will roll the
money we have saved into another
type of tax-sheltered plan that pays us
retirement income (either a Registered
Retirement Income Fund or a Regis-
tered Annuity).
The rollover will be tax free. Of
course, we will have to pay tax on the
income that we get from the new
plan.0