17 - Friday, February 17, 1984 - North Shore News EES B.C._business IT'S RRSP TIME AGAIN Planning for a profitable future By BILL RYAN ALMOST EVERYONE from, say, 17 to 70 should at least consider putting some of their savings or investment money into a Registered Retirement Savings Plan (RRSP). It is one of the most practical and versatile investment vehicles available to the average Canadian. Traditionally, Canadians are among the world’s great money savers. For genera- tions, from an early age we have been pouring money in- to savings accounts and life insurance. Today, the RRSP should also be rated high as a way to save and protect your future income and financial position. Here are some of the benefits an RRSP offers you: With regular contribu- tions, it becomes a forced savings plan. Your money grows, and compounds, free of income tax. (You pay tax onty when you withdraw funds or upon retirement.) It can be an emergency fund; if you need moncy urgently you can take it from your RRSP, although a percentage of the sum you withdraw will then go directly to the tax man for income tax. (This highly at- tractive withdrawal option is open to you af present. An alarming threat that Ottawa May withdraw this option will be discussed later.) (Since this column was written, Finance Minister Lalonde announced in Wed- nesday’s budget that the government would proceed with changes to the RRSP program). by | Bill Ryan You can have more than one RRSP, and so can your spouse, which gives you flex- ibility to spread. your in- vestments, or diversify. A spouse with the higher in- come can set up a spousal RRSP for the partner, which PROGRAM LEADER Hal De Grace... ITS THURSDAY Morning at 10 a.m and there are 20 people in the North Shore Family Service room. They range in age from the carly 20s to over 60 and while the group ts predominantly male, there are a few women The members of the group have one thing in common they've all been through the gut and cgo wrenching cx perience of losing ther md dic and upper managcmcni yobs. People like Hal De Grace, for instance, who lost his cx cculive position with a major drug store chain two and a half ycars ago For two hour on this Thursday momning Ox Ciracc, who used the opportunity of yoblessncss to return lo university tO carn a degree in adult cducation, will lead the group through = discussion aimed at beiping them cope with thei situation De Cxrace and his 19 “students'' are half way through an ctght week pro gram aimed at helping them cope with the past them losing the jobs and Prepare for the future results in income splitting — another very simple and most effective way of reducing your income tax. Not only does the RRSP give you long-term savings, it gives you a tax saving in the first year you contribute. The money you contnbute, up to an allowable limit, is deducted from your earned income in the year for which you made the contribution. That means, less income to be taxed, and hence a tax saving. The latter point is timely because the rules allow you to make contributions for your taxation year 1983 up to February 29 of this year, so you can start an RRSP now and reduce your 1983 income tax. RRSP’s are amazingly ver- satile. If you don’t have cash, you can contribute Canada Savings Bonds and some stocks, bonds and life in- surance policies. If you are a reasonably knowledgeable in- vestor, you should certainly consider a self-managed (or self-directed) RRSP. This enables you to invest, cither directly or indirectly, in stocks, bonds, real estate, mortgages, gold and U°S. dollars, for example. Shop around before you select an RRSP! Or if you already have one, when did you check to see if it is earn- ing you as much as it could? There are probably 200 to 300 different RRSP’s available from the various banks, credit unions, trust companies, brokerage houses and other financia! services. You will find RRSP’s which guarantee you anything from about seven percent to about [2 percent per year (including term deposits and guaranteed in- vestment certificates — GIiC’s); other funds (including real estate funds) which estimate earnings to you of about 14 to 17 percent per year; and investment funds (mutual funds) which suggest you can make 20 per- cent, or even 30 percent per year. (Keep in mind, the lat- ter are generally invested in stocks. The stock markets have nose-dived in recent weeks and if you have RRSP’s relying on stocks, you are currently a loser. On the other hand, if you feel markets are bottoming this might be the time to buy. Are you a gambler?) $$ $ Ask lots of questions! Is your money locked in? If it is, you can’t have it when you may need it. Is it transferable? You may become dissatisfied with its performance and want to transfer to another company and/or fund. $$ $ is there a fee to start the RRSP (A ‘‘front end load’’)? It should be a very successful fund, and you should have great confidence in it, if you ... lends economy's victims... By NEWS STAFE By the cnd of the process, says Dc Grace, they tl not on ly understand why they lost ther yobs but what the ncw world uw ike and how can fit into tt De Grace says his own ca perience and has initial reac ton to the loss of his own job have prepared him lead the group “Twas told at 4pm that! was through and advised al 4 Wito be gone," he says of his own lay off cl didn't quite understand some of the chings Uhat had takcn place | wondered why they would Iect a good man go " they well to De Grace, who now runs a private adult education firm and does contract work for tus former employee. says tt took aght months for him to understand how has situation came about The group he's leading now an North Vancouver. by vcompanson, will bave a full understanding of thei situa trons and be in a position to deal with them at the end of the ciaght weeks of sessions The fest three mectings of the group have dealt’ with changes in the worid, iden Ufication of individual necds and an attempt (o dctermine actions to take tn light of the first two are paying a hefty fee ‘‘up front’’ before it starts earn- ing for you. Is there a management fee? Some self- directed funds charge $100 a year, others charge a fraction of 1% depending on the amount you have in the fund. Shop and compare. $ $ §$ ls your RRSP covered by the Canada Deposit in- surance Corporation? If it is, the safety factor is high, an important consideration for inexperienced investors. $ $ §$ How long will it take to withdraw or transfer your RRSP? When many institu- tions can arrange it within a few days, a month seems ex- cessive. Are there penalties if you withdraw or transfer? These are sometimes unfair. If in doubt do not hesitate to ask where in the fine print the answers to your questions are spelled out. Is the name of the com- pany or trustee offering the fund familiar to you? If not, perhaps you should have a chat with your bank Manager, an accountant or a relative or friend who is more worldly wise than you about money. $ $ §$ As mentioned, af present you can withdraw moncy from an RRSP or collapse it entirely to meet an emergency need for funds, take a trip around the world, return to university/college to raise ... into the future. Help for white collar jobless Working with Alvin Tofier’s The Third Wave and Megatrends by John Nausbitt as textbooks, De Grace has pushed the ‘‘reahsm'" that society is changing from an industmal base to an informa thon base and the need for “plain, sense'' Thus Thursday. for caxaam ple. the schedule called for a look at what actions the tn dividual members could take and how they can get back in to the community and better about themsclives De Cirace say volved tn the prowess are beginning to respond to the sCaSIONA ordinary Common feel those in “Two of them as a mattict your educational status; whatever. However, a pro- posal now has been made to Ottawa to replace the very popular RRSP with what is called a Registered Pension Account. You could not withdraw funds from such an ‘‘account’’, and uw would be nothing more than a locked- in pension. Such a move would be a harsh blow to millions of Canadians, par- ticularly young Canadians who do not wish to tie up their money until they are 60 or 65. $ $ $ Such a legislative change would drastically alter the financial plans of many Canadians, and you might want to write your Member of Parliament to oppose it. At feast one hopes such legislation would not be ap- plied retroactively; that is, money in an RRSP prior to change could be withdrawn as wished, and only money contributed after the change would be locked in. $$ $ Next week — more about RRSP’s, because the deadline for 1983 contnbutions is February 29: How to take your money out of an RRSP. AND we will shed some new light on a recent question which has arisen about RRSP’s — the naming of a beneficiary so as to avoid ex- posing it to the tax man’s heavy hand if you should Pass on to green pastures. at at IT of fact, have tid for projgects at Expo ‘86 and one of them should get a.) De Grace says The acceptance of the pro gram may also be indicated by the leap in the number of parthipants from ft at the start to the current 19 De Gsrace, who leads two sumilar groups. and works under contract for three cor porations, shares tor the success of the pro gram with participants and with) North Shore Fasnity Set vices “Thcy the cred (Family descive a lot of what Sct vice) credit. for stuck thea Dre Crrace they ve nevhs out says to do.”