3% - Wednesday, January 13, 1988 - North Shore News Financial N Guaranteed. 4 Timely Investment Opportunities for your RRSP Dave Boulton (604) 661-2321 L. Gordon Brown (664) 661-2319 Peo) From page 37 forward unused RRSP contribu- tion room,"’ said Smith. ‘‘That’s when you might consider paying down your mortgage, for cxample, and making catch-up RRSP con- tributions later."* * Take advantage of the spousal RRSP (contributing to a lower- tax-bracket spouse’s plan but claiming the deduction yourself). it's one of the few ways left to save tax by splitting income (when you eventually withdraw the RRSP funds). © Roli over as much pension in- ian for retirement come as you can afford into your own RRSP {keep out £1,000 of private pension to claim the $1,000 pension deduction in 1987 — it will become a credit of up to about $250 in 1988). This rollover rule ends in the 1989 tax year, Smith said. © Split your Canada Pension Plan (CPP) with a lower-income spouse, of a spouse with no private pension. Through 1989, that spouse could roll over the CPP in- to an RRSP, then use the RRSP to create a pension cligible for the pension income credit. KEEPING INCOME TAX DOWN pousal MARRIED PEOPLE usually ap- preciate the value of a spouse, but some don’t really appreciate the value of a spousal RRSP. “Many people either don’t real- ize how a spousal registered Why take CHANCES? Government of Canada Bonds... “Lo : cpd.an. ‘Cali ROD CLARK © 669-6262 RoerPs retirement savings plan works, or if they do, just don't get around to using a spousal plan as effectively as they might to kecp their income tax down.” That comment came from « one of a group of North Shore Cer- tified General Accountants who had been asked to compile a list of RRSP and other tax-saving tech- niques ordinary people miss most often. A spousal RRSP can be used to save income tax by splitting in- come — shifting money into the hands of the lower-tax-bracket spouse so when the RRSP is even- tually de-registered, this income will be taxed at a lower rate, Here's an example: Let’s say a husband over the years contributes only: to his own RRSP. When he retires; his pen- sion and other investment income totals $50,000 a year. His wife, who didn’t work out- side the home, has only her Old Age Security pension, ~ Under the new Tax Reform rules, -the husband could pay around $13,200 tax a year. With a Guaranty Trust “Best Rate” GIC RSP Guaranty Trust Member, Canada Deposit Insurance Corporation TAX DEADLINE FEBRUARY 29. WHY WAIT? * Best because we'll match any major Bank or Trust Company offering a higher rate; Canadian Imperial Bank of Commerce, Royal Bank, Toronto Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canada Trust, Royal Trust, VG National Trust : Park Royal South Mall 922-0158 Garth Seymour Branch Manager ‘plan. ' : In the.past, you could take ‘out’ Smith said under the new pen- sion rules, most people will be able to put more into their RRSPs. “But if you have a generous non-contributory pension plan, you will probably find your con- tribution limit reduced from the present $3,500 maximum,"’ he said. Smith summarized four main approaches to making sure you have enough money aficr you retire: “You can put aside more money during your working years, invest more productively (diversifying and taking reasonable risks to in- crease your returns), work longer ~~ or find a good lottery.”” The only other alternative: ex- pire before you retire. . Do you have a financial or con- sumer question for Mike? Or a Story you think should be in his column? Please write to Mike Grenby, North Shore News, 1139 Lonsdale, North Vancouver, V7M 2H4. Remember to include your phone number in case Mike needs to contact you. can save taxes But now let's say the husband had a chance to relive his RRSP strategy. This time he contributes to a spousal plan for his wife; he puts the money into her plan but he still gets the deduction. Now, when he retires, she will have enough moncy in her RRSP so they can have equal levels of in- come. Instead of the husband having ali $50,000 a year, he and his wife will each have $25,000 a year. Now, their total tax bill will be only around $9,900. That means a tax saving of more than $3,000 a year — year after year. “Remember,” said the CGA, “you must make spousal contribu- tions as you go along. You cannot give part of your RRSP to your spouse when you retire to achieve this income-splitting.”” The CGA also pointed out the . Borrowing for RRSP three-year rule about making withdrawals from a spousal RRSP. “If a wife takes money out of a spousal RRSP, to the extent the husband has made any contribu- tions to any spousal plan in the year or the two previous years, that money would be taxed in his hands."’ This rule is waived when the wife converts her spousal RRSP to a special annuity or a registered © retirement income fund, but only with the minimum RRIF pay- ments. This article was prepared by the Certified General Accountants . Association of British Columbia; the province's largest professional accounting body. For further in- formation the association can be reached at 1555.West 8th Avenue, Vancouver, B.C., V6J 1T5, or by telephone at 752-1211 is a sound venture IT CAN still make sense —- and even dollars — to borrow to invest ina registered ° retirement savings an RRSP loan and deduct the in- terest. That law changed, and now such interest is no longer deducti- ble. But as long as. you pay off the loan fairly quickly, it can still be a’ good idea to borrow to make an RRSP ‘contribution if. you don’t - have the cash on hand, according to North Shore Certified General Accountants who. specialize Dj sonal financial planning ¢ tax. Concluded: the’ CGAs you save is a big incentive to make that contribution.”” ~ ' “What’s more, even though the interest on an RRSP loan is not deductible, the return on your. RRSP investment is tax-sheltered. So your borrowing costs can be See Pay Page 39 *Do you want to defer more of your income tax? ° Would you like to take advantage of Compound Interest? ~ Do you want a secured, worry free tetirement? If you answered YES to these questions — you should have pro: : fessional advice tron a member of the winning team. . The Winning Combination—You, Me, and The Manufacturers For more information call CLIFF GARRETT Office 681-5410 Residence 926-4461 Ucensing os required by law held by The Manutfactuess Life Insurance Company Established 1887 Janufacturens bite Imurance Company “Because - you. receive a deduction when you ‘ contribute to an RRSP, the tax arena mse eA Hotta A AS NTEES CEST BSE HOPELERS amg ID! ta SRE KOA TNE ET NE EERE AIEEE Ni SN ae Re HARMEN IR CAEL?