BUSINESS Wednesday, June 3, 1992 - North Shore News - 39 RRIF move now could save tax dollars ARE YOU about to RRIF? If so, making the move before year-end could save you thousands of tax dollars now and give you a larger RRIF in the future. Michael Grenby Last February's federal budget proposed a change in the Regis- tered Retirement) Income Fund rules. (An RRIF is one of the ways to withdraw the moncy in your Reg- istered Retirement Savings Plan — RRSP. By the end of the year you turn 71, you must move your RRSP money into an RRIF or annuity, take out cash, or use a combination of the three choices.) The existing RRIF rules say you must withdraw all your money by your (or your spouse’s) 90th year. Under the new rules, which take effect Jan. 1, 1993, the age 90 deadline is removed. Under both approaches, you must make a minimum withdrawal from your RRIF each year. The new rules introduce a higher min- imum formula until age 78; after that, the annual minimum withdrawal percentage is lower than under the present rules. If you start an RRIF under the present rules, you automatically switch over to the new rules at age 78. That means until age 78, the new rules force you to take out more money and pay tax on this income. This also means you leave less money in your RRIF to con- tinue growing tax-free. Club. Join us, and we'll free you from most service charges. As a Gold Club Member, you'll earn an extra 1/4% interest bonus on Monthly Income Term Deposits. Plus, an additional 1/4% on new funds trans- DOLLARS AND SENSE So if you will soon be 71 or if you are thinking of converting an RRSP to an RRIF because you need the income — and in either case plan to make only the mini- mum withdrawals for several years — consider acting before Dec. 3! this year. Wally Rowsome, a Royal Trust retirement adviser, noted that tak- ing out an RRIF before the end of this year could produce some significant tax savings. He gave the following example: o For all you've given to your family, work and community over the years, VanCity would like to give you something back. It's a special package of financial privileges called the Gold Suppose an RRIF has a value of $250,000 on Jan. | of a given year. The owner is 71 and in the 45% tax bracket. ‘ Under the current cules, the person must withdraw a minimum of 5.26% of the plan, or $13,150. That would produce a tax bill of $5,918. Under the new rules, the person would have to take out a mini- mum $18,450 and pay $8,303 tix. That’s an additional $2,385. ff che individual continued to take only the minimum RRIF withdrawals, tax would continue to be saved until age 78. After that, the new minimum would kick in, producing a win-win sit- uation throughout. Taking out less money until age 78 leaves more to grow in the tax-sheltered plan and so will make the RRIF last longer, said Rowsome. With lower minimum withdrawals, you must also reduce your exposure to the ‘‘clawback.’’ Once you turn 65 and (for 1992) your net income passes $53,215, Ottawa starts to ‘‘claw back"’ your old age security pension. Review your present financial situation and look into the future to help you decide if moving some or all of your money into an RRIF by Dec. 3! makes sense. If you are in your younger 60s and won't need any extra income for several years, you should probably wait before converting to an RRIF. That) way, all your money will continue to grow tax- free and that additional tax- sheltered growth could more than make up for the higher taxes when you do start the higher minimum withdrawals. Your present and likely future tax brackets could also affect your decision. Taking money out of an RRSP via an RRIF now could make sense if you are in a low tax bracket now and expect to be withdrawing money in a higher bracket in the near future. Again, compare (a) the tax- sheltered growth if you leave the money in your plan vs. the higher tax you will have to pay, and {b) withdrawing funds and paying less tax now vs. leaving less money compounding tax-free in your plan. That Dec. 31 deadline is still a good six months off. But because of the various predictions and cal- culations you must make, begin your research now. Then, if you decide to transfer money to an RRIF, you can do it before the last-minute panic that is sure to come in December. {f you need help, find a finan- cial adviser with expertise in retirement income planning. If you go to your financial institu- tion, ask for the person who specializes in RRSPs and RRIFs. Library gets expansion help THE WEST Vancouver Me- morial Library has received a cheque for $166,666, repre- senting the first payment of a $500,000 award to help reno- vate and expand the library, Lois Boone, minister of gov- ernment services, has announc- ed. “The expansion will provide the necessary space to meet the projected needs of the library for the next 20 years,’’ said Boone. Boone confirmed that, with all lottery proceeds being directed into general revenue and the discontinuation of the GO B.C. program, it is not possible to accept new applica- tions for capital assistance at this time. A new community grants program will be developed, with input from the public. ferred to a VanCity Non-Redeemable, Monthly Income, or Compound Interest Term Deposit before July 11, 1992. You'll benefit from our many exclusive services too, including TeleService™ which lets you carry out most transactions by phone. And deposit insurance* which protects your savings up to $100,000. The VanCity Gold Club. If you’re 55 or older, why not get everything that’s coming to you? For details, call 877-7000. VanCity ABR * The Credit Union Deposit Insurance Corporation of British Columbia, a government corporation, protects the deposits of all British Calumbia credit union members up to a maximum af $100,000 per “separate deposit” (as defined by regulation), per credit union.