as 28 - Wednesday, January 18, 1989 — North Shore News BUSINESS Get the most out of RARSPs INFLATION MIGHT be down but it sure isn’t out. And will cost you $389,000." your retirement finances are probably suffering as a result. Higher RRSP limits? Ha. The increased maximums for next year are actually less than the limits in effect in 1976. The proposed new rules will allow you to contribute up to $10,500 to your registered retire- ment savings plan in 1990. Twelve years ago, the maximum was “But that $10,500 is about the same as only $4,050 in terms of 1976 dollars,’? chartered accoun- tant William Crawford, of Clarkson Gordon, told the 40th tax conference of the Canadian Tax Foundation. **The so-called ‘increased limits’ afe not increases in terms of real dollars,’’ he said. ‘‘All taxpayers will have to adopt every available strategy to maximize their retire- ment incomes.” In other words, your maximum contribution next year will be less in terms of real dollars (adjusted for inflation and so purchasing power) than your maximum in 1976. Also, the $1,000 contribution lost by not allowing the proposed $8,500 limit for this year will cost $17,447 over the next 30 years in a 10-per-cent RRSP, notes tax lawyer and author Arthur Drache in The Canadian Taxpayer. Remember, the RRSP contribv- tion limits for both 1988 and 1989 remain unchanged: up to $7,500 if you have no pension; up to $3,500 if. you belong to a pension plan minus any contributions you make to the pension plan — all subject to a limit of 20 per cent of your To find out about an educatio Over 175,000 courses, workshops and seminars right at your fingertips. Now you can find all the information you need to select an educational or training opportunity simply by using the Discovery Training Network's com- puterized catalogue. To tap into this information source, visit your local TAP (Terminal Access Point). TAPs may be found in your community at participating colleges, government offices, DISCOVERY TRAINING) An iniative of the Open Leaming Agency earned income. Accountant Crawford suggested several strategies to get the most out of your RRSPs and help counter these problems. dollars and sense Michael Grenby (1) Contribute early. Most peo- ple contribute in January or Feb- ruary for the preceding tax year. They are now making deposits for 1988, for example. That approach can cost dearly. Said Crawford: “If you con- tribute $7,500 at the end of the tax year, at 10 per cent interest you will lose $74,000 after 25 years compared with what you could have earned by simply contributing at the beginning of the tax year. The same approach with money earning 12 per cent over 35 years Even if you contribute only $2,000 a year earning 10 per cent, Royal Trust says the ‘‘year-ahead’’ approach will produce an extra $7,500 after 15 years, $13,500 after 20 years and $23,300 after 25 years. As a compromise, you could set up an automatic monthly con- tribution program. With either monthly or year- ahead contributions, you might be able to have Jess tax withheld from each paycheque, instead of waiting a year for your refund. (2) Take advantage of RRSP tax-shelering. Put $1,000 a year into a 10-per-cent RRSP for 25 years. You will have $108,000. Even if you cash in the plan and get $59,400 (after 45 per cent tax), that’s still more than double the $27,500 produced by investing outside an RRSP — $550 a year (that’s your $1,000 after 45-per- cent tax) at 5.5 per cent (the 10 per cent yield after 45-per-cent tax) for 25 years. ( Get the highest rate possibte on both principal and return. (For example, the interest on some compounding deposits earns only the savings account rate instead of the original deposit rate.) Crawford showed that $5,000 invested in an RRSP at 7.2 per cent for 30 years would grow to $40,000. At 14.4 per cent for 10 years and 7.2 per cent thereafter, you’d have $80,000. At 7.2 per cent for 10 years and then 14.4 per . cent, you’d have $160,000. And at 14.4 per cent throughout, you’d have $320,000. 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