RRSPs are no

Over $16 billion withdrawn
from funds over four years

By Sheree Butler
Contributing Writer
RRSPs were established
in 1957 for one reason:
. to encourage Canadians
” to save for their retire-
ment. But since then,
people have exploited
the savings vehicle to
pay for many things.

Between 1990 and 1994,
RRSP holders withdrew more
than $16 billion, or about $1
for every $5 invested. They
used it to pay for everything
from maternity leave and set-
ting up a_new. business, to
retraining for a new career or
taking a sabbatical from the
rat race.

While some financial advis-
ers steadfastly say you should
never redeem an RRSP until
retirement, meeting interim
poals sometimes outwsighs

aving the largest nest egg.
- Here are some possibilities

~7 and pointers you might con-

sider:

: Use an RRSP to help you
take’ the. year off with the
baby. Some women icel pres-
sured by finances to return to
work soon after a baby's birth.
To help you through leaner
times, you can redecm ‘an
RRSP and use the proceeds to
maintain 4 reasonable lifestyle
while off work. You'll be taxed
the following year for remov-
ing money from your RRSP
but at a lower rate than if you
were working full-time.

A word of caution though
before withdrawing your
RRSP: calculate how much
you have earned dunng the
year in question, including

maternity benefits from your
employer. The total amount
earned will determine how
much tax you will pay the fol-
lowing year for redeeming
your RRSP.

Use an RRSP to help you
survive the first year in your
own business. Setting yourself
up in business can be expen-
sive.

In the first lean year of a

“ the advantage
of lending your
child a
mortgage held
in your self-
directed RRSP
is that you can
be more liberal
than a loans
officer...”

business you could consider

redeeming your RRSP to help

defray expenses. Your tax rate

probably will be lower in the

first year, compared to later

ears as your business
comes established.

As with everything, there
are qualifications to these sug-
gestions. The money you
withdraw from your RRSP is
not a windfall and you must
report it as part of your

_ income for the year.

You'll also want to think
about the “true cost” of with-
drawing from your RRSP.
That cost is greater if you tap

your RRSP when you are
young and stand to benefit
the most from compounded
returns. Say you withdraw
$5,000 from your RRSP at
age 35. Assuming an 8%
annual compounded rate of
retura on your RRSP, by the
time you retire at age 65 your
nest egg will be worth
$56,000 less than if you had
not withdrawn the money.

Some financial consultanis
advise against using RRSPs for
anything but retirement. But
if used wisely, your RRSPs can
be an ongoing source of
money to get you through
life’s tougher moments, which
is another, good reason to
invest in them.

While RRSPs help you
weather those trying times,
they can also help you meet
other needs.

The following pointers are
approved by Revenue Canada,
but to ensure you comply
with tax regulations, seek help
trom a qualified financial
adviser.

You can use an RRSP to

urchase your first home. This
is a once-a-lifetime privilege.
If you or your spouse are firsr-
time home buyers and have
RRSPs, you can cash in up to
$20,000 cach to purchase or
build a home. (First time buy-
ers are interpreted as not hav-
ing owned a principal resi-
dence for the last five years.)

You must repay the money
over the next 15 years with
the annual payment equaling
at least one-fifteenth of the
total principal.

The money you withdraw
from your RRSP must be
applied to the home purchase
by October of the following
year. The home must be your
principal residence and you
must occupy the home within
a year of building or buying it.

Use an RRSP to help your

~Hollyburn hosts workshop

LOCAL business representatives will be shar-

ing information on cost-effective marketing

strategies on Monday, March 3.
The event begins at 6:45

Hollyburn Country Club in West Vancouver.
The workshop panel will include:

EB Dean Rohrs, owner of Pr. Grey Cruiseshi

Centre, who markets successfully throug!

direct mail;

@ Moe Somani, president of Soho Business

Group;

pam. at the Smarter;

W@ Sue Kaffka, marketing manager at the
Capilano Suspension Bridge;
@ Barbara Densmore,

irector of Working

@ Diane Jackson and Lesley Barre, owners of
the fashion store Diane & Lesley;

@ Jacqueline Gijssen, curator for the District of
West Vancouver.

The event is sponsored by the West

Vancouver Chamber of Commerce. Order

tickets by calling 980-7850.

Add 75% To

Your RR

SP

~-Tax Savings*

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WORKING
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FUND

children buy their own home.
This is a method for helping
your kids buy their first home
without straining your own
financial resources. The
advantage of lending your
child a mortgage held in your
self-directed RRSP is that you
can be more liberal than a
loans officer in evaluating
your child’s job history and
credit rating.

The RRSP loan also means
you are keeping the “interest”
in the family rather than pay-
ing a financial institution. The
strategy is somewhat more
complex than the first option,
however, and you should
enlist help from your financial
adviser.

Use an RRSP to hold your
own mortgage on your home.
This entails putting your
mortgage within your own
self-directed RRSP. It can be
an attractive option for those

t just for retiring

who want more RRSP growth
than offered by guaranteed
investment certificates but

- want a Jess risky investment

than the stock market. There
are costs, however. On an
$80,000 mortgage for
instance, you can expect to
pay 1.5% to 2% for administra-
tive, insurance and legal fees
plus administrative fees of

pes |

berween $200 to $300 each
year.

Sheree Butler passes on these tips
ta North Shore Credit Union
members at the Marine Drirz
and Edgemont Village branch-
es she manages. For mure infor-
mation on these and ether
RRSP ideas, please call the
Teleconsulting Line at 713-

NEED MORE CASH
TO GROW YOUR BUSINESS?

Ideally suited for companies with
Receivables of $20,000 to $200,000

Call the Pyx Financial Group at

921-7334, Ask for Bari 7
FUNDING FOR SMALL BUSINESS GRO'

lf you have

Canada Savings Bonds,
- you've already saved
for your RRSP.

you already:

wn Compound

~ EANADA SAVINGS BONDS

Canada

cis-pec.gce.ca