Times-Advocate, 1999-01-27, Page 27{
Wednesday, January 27. 1998
Exeter Times—Advocate
25
RRSP
Strategies
And
Decisions
All too often, RRSP
decisions are made in a
panic to meet a deadline,
with little or no planning
or understanding of the
effects of the actions
taken.
Registered Retirement
Savings Plans were intro-
duced through federal leg-
islation in 1957 as an
incentive for Canadian
taxpayers to save for their
retirement.
The mechanics of
RRSPs are actually very
simple. Revenue Canada
sets rules as to how much
we are allowed to deposit
to an RRSP and permits a
deduction from taxable
income equal to the allow-
able amount deposited.
Any increase in value in
the plan is protected from
income tax until funds are
taken out of the RRSP.
While the mechanics of
RRSPs are simple, the
ongoing retirement plan-
ning techniques associated
with them can
be a little more complex.
It is highly recommended
that you work with some-
one experienced in the
area of retirement plan-
ning to help set up and
monitor your program.
Your financial comfort in
retirement may depend on
it.
Following are just a few
strategies and concepts to
consider for your retire-
ment plans:
1. Benefit from tax-
sheltered growth. As men-
tioned earlier, money and
its growth inside an RRSP
are not taxed until funds
are removed.
2. Start the RRSP
habit when you're young.
It's human nature to pro-
crastinate. It's so easy to
put things off. The 18 -
year -old says, "I can't save
now because I'm bur-
dened with my education
costs." The 25 -year-old
says, "We're just getting
started and our income is
low right now. Besides, we
want to have a little. fun
while we're young." The
35 -year-old says, "Our
family is growing and we
have a big mortgage. We
should be able to do more
when the kids are older."
The 45 -year-old says.
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gar
15.0% 13.3% 112%
:1kof December 31 1998, the VenGrowth Fund is the lop
peiftung labour -sponsored fund in Canada.. And, an
investmentinvestmeiit in the. VenGrowth Fund can noir increase your
foreign content limit up to a maximum of -4O% within all
RRSP and offer upto 30% in combined federal and
provincial tax credits. For more information contact:
Ralph Geiger
519-236-4784
Financial Licence sponsored by Ten Star Financial
VenGrowth Fund
BPI.Mutual
l 1 Funds
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"The kids are in college
and we just can't spare a
cent until they're done."
And the excuses go on and
on.
3.,Maximize your RRSP
contribution. In the long
run, it costs you to not
save. As RRSPs are so
advantageous, you should
make full use of them.
As mentioned, Revenue
Canada legislates how
much we can contribute
and makes it easy for us to
make our maximum con-
tributions. They notify us
after we've filed our tax
returns what our RRSP
deposit limit is for the next
tax year. This amount
appears on your most
recent tax assessment.
4. Contribute early in
the year. Many people
wait until the last minute
to make their RRSP
deposit. While it's good
that the deposit is made,
it's not the best strategy.
There is no rule that says
you have to wait until the
deadline to make your
contribution.
Your 1999 RRSP deposit
can actually be made on
January 1, 1999, and will
benefit from growth, tax-
sheltered, for the whole
year. With Revenue
Canada telling us what we
can contribute, you can
even divide the amount by
the number of months left
in the year and make the
deposits monthly.
5. Contribute to a pay-
roll deduction RRSP. Many
forward -thinking employ-
ers set up group RRSPs for
their employees. If you
have one available where
you work, you should use
it.
First, they are conve-
nient and effective. You
choose an amount to be
deposited to your RRSP
per pay period and it's
automatic. That way, the
money doesn't have a
chance to trickle through
your fingers. Second, they
are systematic. Third, they
can provide an instant tax
break. The RRSP deposit
can be subtracted from
income before taxes are
calculated. That way. you
don't have to wait for
Revenue Canada to send
you your refund.
6. Contribute to a
spousal RRSP. If married
or in a common-law situa-
tion for more than one
year, this strategy can be
used to plan for splitting
BORROW MONEY -r0 SA\ L \1c>.ti EY? ARE You KILDING
(No •e. 1 he thousands tN,ho did last %ear laughed all the way to the bank.)
it
SCOTIA RRSP CATCH-UPTM LOAN
(here's an example, Just to get you thinking)
l'i'BORROW $15,000
*(or as much as $50,000 at rates as low as ScotiaBank Prime).
2. GET BACK $6,000 ON YOUR TAX RETURN AND PAY DOWN YOUR
LOAN.
(Assumes 40% tax bracket. Yours might be different)
3. Pay Back 5170/Month
(Seem possible? If need be, you can take up to 15 years to repay.)
4. Watch your RRSP grow to $20,996 In 5 years and 4 months,
when your loan Is paid out
5. In 25 years, you'll have $72,415. See assumptions below.
Scotiabank
1-800-575-8888
www.scotiabank.ca
What's right for you? 280 Main St.S. Exeter 235-1142
Assumptions:
1) - loan is amortized over 10 years and is subject to applicable credit criteria. Loan rate over
e life of the loan is calculated based on 6.5%, Scotiabank's 5 -year average Prime rate.
ate is fixed for each term of the loan. 2) - Tax refund is used to pay down principal at the fourth month.
RRSP investments earn an average annual compound retum of 6.5% in a diversified portfolio.lIRegistered trade -marks of The Bank of Nova Scotia Trade -marks of The Bank of Nova Scotia.
xLe-IssmLtimtiassuaeam
This year it's your turn.
The Scotia RRSP Catch-up
Loan offers an affordable
way to take advantage of
unused RRSP
contributions. The idea is
to do this once, so you
can catch up and keep
up. Call us for details.
r
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r
r
u
income in retirement. By
building approximately
equal retirement funds,
the income tax payable on
the income will be much
less.
'7. Use an RRSP to save
for or make a house down
payment. Federal legisla-
tion, first introduced in
1992 and amended in
1994, allows first-time
home buyers to withdraw
up to $20,000 per person
in existing RRSP funds
towards the purchase of a
qualifying home. Income
tax will not be withheld on
this withdrawal. Payments
are required to be repaid
to an RRSP over a 15 -year
period, and if a repayment
is missed in any year, it
will be considered the
individual's taxable RRSP
withdrawal.
In essence, this is a tax-
free loan from an RRSP.
This is a very basic
overview of this strategy.
Consult your tax adviser
for a complete explanation
of all the rules governing
this plan.
Different RRSP
Plans:
There are a number of
different plans thatcan be
used to accumulate RRSP
money. They fall into four
basic categories:
• First, savings
accounts. They are simple
and safe, but provide the
lowest rate of return.
• Second, guaranteed
investment certificates or
term deposits. They are
also safe. and they provide
a better rate of return, but
the funds ,aregenerally
locked in for the chosen
term.
• Third, investment
hunts. They have plenty of
growth potential, but have
a higher risk and may be
subject to extra fees.
• Fourth, self-directed
investments. They provide
you with growth and total
control, but are high-risk
and have ongoing charges.
The rules for RRSPs are
constantly changing, but
this should never be an
excuse for not taking,
advantage of them.
Canada has one of the
highest standards of living
in the world, yet over 70
percent of Canadians over
age 65 have less than
$15,000 of annual income.
You can't count on the
government, your employ-
er or your fairy godmother
to look after you. Don't
delay your RRSP planning,
start today.
Source: Internet
MAKE SAVING
sea w*T.waa.seelrT
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ou benefit from:
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life Insurance
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RRSPs and RRIFs, GICs, Annuities
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a tal
a r
183 Main Street South
Exeter ON NOM 1S1
(519) 235-1344
R5-11 The Mutuai Group
Licensed with Mutual Life of Canada, lead company of The Mutual Group.
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Invest in Your Community With Your
CREDIT UNION RRSP
Your RRSP deposits are used to assist our borrowers who are your
friends and neighbors in the community
iP Loans at
Prime
RRIF's Also
available
Each RRSP and RRIF contract is insured individually for up to
$60,000.00. Other R.S.P. options available, inquire at branch
Index Linked Tenn Deposits
They offer the appeal of an
above-average rate of return
from participation in stock
marketappreciation, and
also have the safety of a
guaranteed return of
principal like a G.I.C.
No Fees RR?" Eligible
CLINTON COMMUNITY CREDIT UNION LTD.
118 Main Street
Exeter, 235-0640
clintoncufdodyssey.on.ca
48 Ontario Street
Clinton 482-3466
exetercu@odyssey.on.ca
165 Main St. W.
Dashwood 237-3777
Tues. 10 a.m.-3 p.m. Fri. 2-7 p.m.
OPEN: Mon to Thurs. 9:00 a.m. - 5:00 p.m. Fri. 9:00 a .m. - 8:00 p.m.
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LET US HELP YOU RETIRE
N COMFORT \ ND STYLE
dr,
trovi
Asc.."
Don Thompson t Lawrence Beane
Financial Consultant Manager
Check out our RRSP and RRIF
plans designed to meet your needs.
R.R.S.P. Deadline March 1/99
Y.I.S. Financial Inc.
YOUR INVESTMENT SHOPPERS
303 Main Street S., Exeter (519)
5 Rattenbury St. Clinton (519)
58 Ontario St. Grand Bend (519)
1x,888-235.9260
235-3368
4829924
238.5014
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