Retiring types should remember the taxman Michael DOLLARS AND SENSE DON’T BE retiring about piznning your retirement finances or you could find you pay more income tax than necessary. “Every retirement plan should include strategies to keep your tax bill as low as legally possible — SUSINESS BRIEFS Compiled by Kate Zimmerman North Shore business groups and individu- als wishing to submit items to Bushess Briefs can fax them to the attention of Kate Zimmerman at 985-2104. .Carson Graham grad wins McDonald's scholar- ship Colin Edwards, a graduate of like shifting income toa lower tax bracket, deferring tax and sheltering investments from tax.” sitid Elio Luongo, of KPMG Peat Marwick Thorne, chartered accountants, Luongo und colleague Ed Militzer are providing our annual summertime series of us tips. But before you make any moves, get all the details to confirm that the following ideas apply t6 your situa- tion, and talk to a professional financial adviser. Afso, rufes and the way they are administered change frequently, so check for the latest facts and figures. “Most people rise to their bigh- est tax brackets in the years leading up to retirement.” Militzer said. “So it makes sense to make maximum RRSP contributions during those years to get the maximum tax deductions.” “After retirement, people typi- cally drop into a lower tax bracket so when they eventually withdraw their RRSP funds they pay back less tax chan they saved when they contributed.” Even if you are in the same tax bracket, you will still have had the advantage of tax-sheltered growth Carson Graham secondary school and a student at Lucas Centre for Continuing Education, is the winner of a $1,000 scholar- ship available to staff at McDonald's restaurants. Edwards works part-time at the Lonsdale Quay McDonald’s as a Swing Manager and plans to attend Capilano Cellege to study business administration. He is one of nine scholarship winners from McDonald’s restau- ‘Phato submitted COLIN EDWARDS was all smiles recently when he received the news that he was one of nine $1,060 scholarship winners selected by McDonald’s in the Vancouver-Victoria area. Caring about Pa clients Retirement Counselling 8.25* 5 Year RRSP Subject to change without notice while the money was inthe RRSP Once you turn 65, if you qualify for the maximum age amauat credit “you won't pay any tax on close to the first $10,000 of your income each year,” Luongo said. And if you have regular private pension income, the first $4,000 of that will also be tax-free as long as you are in the lowest tax bracket. Even when you move into a higher bracket, the $1,000 pension income “amount” will save you about $264 in tax each year, (CPP and OAS won't get you this tax break.) “So if you are 63 or older and don't have any private pension income from a former employer, make sure you convert chough of your RRSP to an annaily or RRIF to provide $1,000 income which will then qualify for the pension income amount credit,” Militzer said. “You can also use nun-RRSP funds to buy a qualifying annuity: you may declare the interest you eum as pension income and then claint the tax credit.” If you are in the lowest tax bracket, you might want to with- draw RRSP funds (cither directly or through a RRIF or annuity) before rants in the Vancouver-Victoria market area. They were recognized for performance at school, in the community and on the job. VanCity raises funds for Coast Foundation VanCity staff are raising money * to support the Coast Foundation, an organization which provides quality housing and rehabilitative/advocacy services for the mentally ill. Two events are meant to help put money in the coffers: a Hot Dog Barbecue and Lemonade Sale on Friday, Aug. 19 from 1! a.m. to 2 p.m. and face-painting for kids by a professional make-iip artist on Saturday, Aug. 20 from 11 a.m. to 2 p.m. Participation in each event is by donation; all proceeds will go to the Coast Foundation. VanCity’s North Vancouver Branch is located at 1290 Marine Dr., North Vancouver. For information, contact Laura at 877-7213. REG. *4'79° the age of 71 deadline even if you doo't need the money “That could make sense if you will have to start taking that iicome shortly -— you must start a RRIF or annuity no kuter than the year after you turn 71 — and will then be ina higher tax bracket," Luongo sitid. When you retire or otherwise leave employment, see if you can negotiate a redring allowance (also called severance pay), in recogni- don of your lenght of service as an employee. You must declare this as income when you receive il, But you may transfer to your RRSP up to $2,000 for each year of service plus anoth- er $1,500 for each year before 1989 in which employer pension contri- butions didn’t vest. (Vesting means you are entitled to take those contri- butions with you when you Icave the company.) A retiring allowance includes sick leave but not holiday pay. If you have an incorporated business, your company czn also pay you (and family members who have worked in the business) a rea- sonable retiring allowance. A bit of planning — such ss f TRYLO aMeTivE” SERVICE LTO. reviring part way through the year — might allow you to take more of aretiring allowance and less salary, as long as you don't run gfoul of the tax rules and guidelines. “Remember, a retiring allowance will boost your net income even though you claim an offsenting deduction for your RRSP contribution,” Militzer said. “That could cut into a GST credit, for example, or cause you to repay social benefit payments you receive that year. [t could also trigger the AMT (alternative minimum tax), although splitting the retiring allowance between two tax years can be one way to avoid this.” If two spouses are 60 or older but one is in a lower tax bracket, see if splitting the CPP would shift more income to the spouse in the lower bracket. Mike Grenby is a North Shore- based columnist and independent financial adviser who works with individuals; he will answer your questions in this column as space allows — weite to him c/o 2444 Haywood Ave., West Vancouver, B.C. v7V 11. “TUNE-UP SPECIALISTS B.C.A.A. - A.R.A. - APPROVED AirCare - Gov. Certified #50222 TUNE-UPS ~ FUEL SYSTEMS ~ ELECTRICAL mo OUR 36TH YEAR 176 PEMBERTON AVE, N.VAN. U/NRO Rate Wa u US, * CONSULTATION 985-7955 THE RETIREMENT SPECIALISTS RSP / Gic Rates * Rates subject to change without notice 685-9577 925-3101 Salguard Financia! Ltd. Building better relrement incames since 1974 NOW & Citizens Trus Better than Money in the Bank 2504 MARINE DR. DUNDARAVE | West VANCOUVER Call 983-3773 North Vancouver Branch 202-1217 Lonsdale Ave, North Vancouver ae V/HOLLY-OWNED SUBSIDIARY OF YANCITY * MEMBER CANADA DEPOSIT INSURANCE CORPORATION