Sunday, February 14, 1999 - North Shore News — 35 Catch-up encouraged for RRSP investors Should you take out a big RRSP foan to take advantage of the unused contribution room you’ve duilt up over the years? Confirmed by personal sav- ings rates of under 2%, most Canadians: don’t maximize their RRSP every year and have accumulated $193 billion of unused contribution room, report Financial Success Strategies Inc. So does it make sense to borrow to catch up to most or all of your unused RRSP con- tribution room? “In almost all cases, rhe answer is yes,” according to Talbot Stevens, a London, Ontario-based financial educa- tor, speaker and author of Financial Freedom Without Sacrifice. Even when investment returns are lower than the interest expense on the RRSP loan, the catch-up RRSP strat- egy will generally produce a larger retirement fund because the loan forces a higher level of commitment, said Stevens. Once started, the loan becomes a forced savings plan. The approach also automati- cally invests before-tax dollars by climinating the human nature temptation to spend the refund that normally occurs when a catch up loan is not used. The most common RRSP refund strategy is to spend the refund, perhaps on 3: summer vacation. Those more committed to their retirement goals might re-invest all of the refund back into their RRSP. Another approach i isw hat Stevens calls a “pross-up” RRSP refund strat- egy. Someone in a 50% tax bracket with $1,000 to invest could temporarily borrow an extra $1,000 to gross up their RRSP contribution to $2,000. The $1,000 refund from the $2,000 contribution could immediately and completely repay the $1,000 loan. Thus, the strategy is to gross up the refund and invest Seniors’ Da Tuesday, February true before-tax dollars and get the masimum RRSP contribu- tion per dollar available to invest, without maintaining an RRSP loan. You can also “top up” your annual contribution. These loans are small and normally paid off within a year. Or you can use a larger catch-up loan that might take 10 years to repay. Let’s say that Sue is well into the 40% tax bracket and has $20,000) of — unused RRSP contribution room avail- able. If she gets a $20,000 RRSP catch-up loan, she will get an $8,000 refund which can immediately reduce the loan to $12,000. With an 8% non-deductible interest UR NEIGHBOURHOOD Seniors 65 and over hat e of $100.00! easy! Use your Safeway Club Card to receive your 10% off* Seniors discount! This Tuesday Seniors will get 10% off* their grocery bill up to a maximum of $100.00* worth of groceries. Just show your Seniors ID and use your Safeway Club Curd. It's that easy. * Yxcluding Tobacco, Prescriptions, Postage Stamps, Transil Passes, Event Tickets, Gift Certificate Sales and Custom Ordered Specialty Department items. *Your Seniors Discount cannot be contbined with any other cffer. SAFEWAY FOOD & DRUG expense, the $12,000 can be paid off over 10 years with annual payments of $1,656. Paying $1,656 a year for 10 years to pay off the remaining $12,000 of the $20,000 catch- up loan can be compared to having the same cashflow invested in RRSPs where the refund is spent, reinvested, or grosscd up. Again, even if returns are lower than the cost of borrow- ing, the catch up loan is still worth considering because it forces a higher level of com- mitment to the individual’s B.C.A.A., A.R.A., 1.0.8.0. Appro % B AYLORMOTIV / VE Pe retirement goal. While Suc may intend to reinvest or gross up her refunds obtained from contributing to her KRSP every year for 10 years, the loan locks in her commitment. Once started, the loan becomes a forced savings plan that generally results in more RRSP value than even if every penny of every refund was reinvested. “Each RRSP refund strate- gy essentially equates to difter- ent levels of commitment to your retirement goal,” said Stevens. “ i WINTER SPECIALS.. * : Lupe, On & Ficrer 3 GuBEs battery, test antifreeze, check tires & brakes, visual inspection : Super Lupe All above with written B.C.A.A., inspection report, rotate tires, top up all fluids road test & report any findings ALIGNMENT a High tech, full 4 wheel check out, - with print out & road test “Prices cover most cars & light trucks ¢All service by Govt. registered technicians TALKING YELLOW PAGES Mars aise. Govt. licenced inspection station S2564 276 Pemberton, North Van. (5 biks South of Marine Drive) 985-7455 Sorested trails Tour Spring Retreats for Gi Omen “SOMETHING FOR ME” Women’s Workshop ; Friday March 5th to Sunday March 7th 1999 - We will pamper you axd teach you bow 10. Relax your body with soothing scents... Revitalize your mitd, J using stress-relieving techniques... Refresh the Spirit by setting goals you can live with... Reawaken your taste buds with gourmet meals Seven workshops included 299 per perso: -CQUN TRY GE TAWAY Friday April 23rd to April 25th 1999 ae Friday May 9th to 11th 1999 (spectal Mother & Daughter wishend) Friday May 14th to 16th 1999 A relaxing weekend away with Fun and Crafts Glass Etching, Scented Sand Candle making and other craft activities Tranquillity — Walk by the ocean or a stroll down of Pender —A guided tour of the Island 175 per person ; COUNTRY GARDENING WEEKEND Friday April 16th to 18th 1999 . Friday May 21st to 23rd 1999 Clam Bay’s Gardeners will fill this weekend with information on Raising a vegetable garden in small areas... When, Where & What to plant using natures resources for a chemical free garden $190 per person - All weekends include late night snack on arrival, full breakfast, lunch and gourmet dinner, Sunday brunch and departing snack. Cottage or farmhouse accommodation and full use of hot tub and other facilities. Come as a walk on passenger and we will pick you up... Prices are subject io taxes Book your weekend now and bring friends Phone Dorothy Murdoch for more information 1 800 626 5955 3202 Clam Bay Road.” Pender Island, B.C. VON 2M1 . _ ‘website: www.clambay.com e-mail dambay@what.com a2