SPOUSAL SPLIT

Tips help choose
the best RRSP

GIVE ME an ‘‘R’’! Give me another ‘“‘R’’! Give me an
**S"'! Give me a ‘‘P’’! and give me the strength to win this
annual yet ever-changing challenge of ‘‘Who has the best

RRSP — and should I even be in the game?”’

Perhaps that describes how you

feel. Many people find the subject
of registered retirement savings
plans overwhelming. Each year,
there are more rules and more
plans. In 1987, people held almost
$8 billion in RRSPs.

Thousands of words will be

written and spoken about RRSPs
between now and the March I
deadline for making a contribution
for the 1988 tax year. Whether or
not you have an RRSP, here are
the main points you should know.

@ DEFER, DEFER: Because you
deduct your RRSP contribution
from your income, you save tax.
The higher your tax bracket, the
moore you save.

The investments in your RRSP
(guaranteed deposits, perhaps
mortgages, mutual funds, stocks)
grow tax-free — another major
advantage.

But eventually you myst
withdraw your RRSP funds. You
may do this at any time, but you
must make the withdrawal choice
(cash, RRIF —~ registered retire-
ment income fund — and/or an-
auity) by Dec. 31 of your 7Ist
year.

And then, as you receive the
money, every dollar will be added
to your income and subject to tax.

Nevertheless, the RRSP is the
best way at the moment for the
ordinary person to save tax and
save for retirement — unless, for
example, the person will be in a

sharply higher tax bracket when
the money is withdrawn. So before
you put money into an RRSP,
think about when you expect to
take it out again.

¢ SPOUSAL SPLIT: If you are
married, consider using ¢ a spousal

oat

dollars

and sense
Mike Grenby

RRSP toward providing future in-
comes as close to equal as possible.
“One pensioner with $60,000
pension income in 1988 would pay
$16,600 tax,’’ William Crawford,

| Timberline

Leasing ta.

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A RORTH WANCOGVER 967: 4458

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ference of the Canadian Tax
Foundation.

“But if two pensioners each had
$30,000, they would pay a total tax
of only $11,500. That’s a saving of
$5,109 a year.”’

With a spousal RRSP, the con-
tributor gets the deduction and
may contribute up to his or her
normal maximum, based on earn-
ed income. What the spouse earns
or contributes to an RRSP does
not affect the spousal ccntribu-
tion.

But be careful when the spouse
takes money out of a spousal plan.
If any spousal contribution has
been made in the preceding three
years, the contributor instead of
the spouse could end up paying tax
on some or all of the withdrawal.

*SAME RULES: The 1988
rules are unchanged from 1987.
Regular maximum contribution is
still $7,500, or $3,500 if you
belong to a pension plan minus
any contribution you made to the
pension plan — all subject to a

See RRSP
Page 24

43

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