The following text may have been generated by Optical Character Recognition, with varying degrees of accuracy. Reader beware!

~-p"~ i The Canadian Champion. Friday, February 6, 1998 -17 - MUS Eight Secrets to a successful RRSP Every spring, you probably tell yourself that from now on, you're going to make your yearly RRSP con- tribution early. Hasty decisions rnay flot be the riglat unes, but many Canadians feel pressured by the last- minute rush to contribute to an RRSP before the March 2 deadline. t pays to take the time to assess your fanancial position and adopt a year-long investment strategy. Remember that RRSPs are only a por- tion of a good financial plan. A per- sonal advisor can help you define your long-term goals and develop a com- plete financial strategy to achieve thern. Meanwhile, here are some impor- tant stepri you can take to get the most out of your RRSPs this year, provided by Investors G'roup, une of Canadas leading financial services companies. 1. Contribute early. Make your con- tributions as early in the year as possi- ble. Tax defenred compounding makes those early dollars gnow substantially. 2. Contnabute the maximum. To get the beat possible tax break. Take advantage of the rnagic of compound interest and contribute to your full limit. 3. Know your limit. For the 1997 tax year, you can invest up to 18 per- cent of your eamned income for 1996, to a maximum of $13,500 (less any 1996 pension adjustment and leas past service pension adjustrnents). Remember that while you can "carry forward" any unused contributions to subsequeni years (indefinitely), you can neyer replace tost growth opportu- nity. 4. Invest monthly. It may be casier to reach your annual RRSP maximum by making regular monthly contribu- tions. These can be autornatically deducted from your bank account each month, or made through payroll deduction to a company group RRSP. Its also a good idea to step up your monthly contribution as your incoînie increases. 5. Borrow to increase your contribu- tion. Athough you'll pay interest on the amount you borrowed, the com- pound growth of your money over the long terrn can far outweigh the intereat cost. Plus, you can use your tax reftond to psy off a substantial portion of the 6. Invest in a spua RRSP. t hi, strategy is good for couples who1 expect one pesons retiremelit income to be lower than the otherls. A spousal RRSP shlows the partner with the higher income to contribute to an RRSP in the name of the lower- income paroner. The contributor gets the immediate tax break, but the money in flic RRSP will be taxed in the spouses hands, usually at a lower rate, when it s withdrawn. These is an excellent way to income split in retire- ment and reduce your combined tax rate. 7. Diversify. A balanced portfolio holds a mix of investments, protecting you againat the day-to-day fluctua- tions in any une investment category. ,uchieve long-tel in gowtlr Soine 01 the different types of investments include fixed-term investments such as GICs and growth-oriented securi- tics - equities and equity mutual ftsnds. Consuit an advisor to determine the best investment mix for you. 8. Increase foreign content. Many international mutual funds spread their investments over a variety of count- tries, currencies and market sectors. Investing in other countries increases diversification and can reduce risks associated with volatility in individual markets. Youre allowed to invest up to 20% of your RRSP in foreign hold- ings. Provided by Jim Gordon, Investors Group, Milton Most of i0ianigyorRSPpa fromMAKE on page MM - 16tF n n igy u R Pp a possible payment for last year, add your tax refund to your RRSP to make up the difference. You can make up for past years, ail the way back to, 1991. Or use the money to make an early contribution for 1998. *Reduce your debts. Pay down your rnortgage. If you did maximize your RRSP, why not use your tax refund to chip away at your mortgage? Get rid of outstanding balances on your credit cards. Interest rates on these seemingly innocu- ous little bits of plastic can bc as high as 25% and you have to corne up with this money from your hard-earned after-tax dollars. Provided by Michael Bourgon, Dooaldson & Bourgon, Milton, Ontario Contributing your maximum i allowable limit to your Registered Retirement Savings Plan is a great ides... if only you hsd the extra cash. Its a common complaint. Here are six strategies frorn Royal Bank Financial Group on frecing up money towards your retirensent savings. 1. Psy yourself first. Its the best way to ensure you mccl your personal ssvings goals, no matter your other financial obligations. Financial advisors recornmend saving 10%/, of your esmings, but do whatever you can afford. 2. Tink small. Saving $100 a month, the price of a coffee and a snack s day seems more manageable than making a lump-sumn payment of $1200. Take sdvantage of your banks pre-authorized contribution plan, which automatically deductsas set amount from your accounit. 3. If your company has a group RSP plan, use the same automatic savînga tactic through payroll deduction. 4. Have you had s regular expense thats now reduced or gone entirely, like a boan or mortgage paymcnt? Since youre in the habit of putting that rnoney aside, continue BoRR-ow moNEY TO SAVE MONEY? ARE YOU KIDDING? So you've fAlen behînd on your RRSP contributions. You know it s srnart to keep UP, but when March 2nd roils around, it seerns that the rnoney's just not there. Wbat to do! What to do! Hieres a thought: THE SCOTIA RRSP CATCHUpTm LOAN (Here's a quick math version as an çxamplejust to get you thinking.) 1. BORROW $15,000. (Or as much as $50000* at rates as low as Prime. ~ 2. GET BACK $5,000 ON TOUR TAX RETURN AND PAY DOWN TOUR LOAN. (This depends on your tax rate and other stuff Doesn't everithing?!) 3. PAY BACK $131/MONTH. (Seem possible? If need be, you can take up to 15 years to repay.) 4. WATCH YouR RRSP GROW TO $24,711 IN 5 TEARS WHEN TOUIR LOAN IS PAID OUT. IN 25 TEARS, YOU'LL HAVE 1l82,032. (SO0VWHO'S KIDDING) (Here cornes thse fine print. Thse exnIe above is based on the followng assumptions.) l a-I ine i33%margial Incorne las losclie and eZefel o a $5.000 ta. relurd. 2)-Lan lo amooirzd ove 15 yeaa aid ls soi- Wa o l tallcaifcredi aIleTt. Loan raie sur dmIe thlie Oaa W6.5%. Rate l ai d foret cliterriloil lie tbai- i1 o5 year bres avaIab. 4)-RRSP hlveslOfboiltam an Marge airrual cGnon d rtum iof10.5% In a dieeOlied prtoli. (So mucis for fine pint. Talk to us. We speak in large print.) 0f course, ou'd ratier flot borrow. But this is borrowing to save. So you can catch up and keep up. Because doing nothing is the worst idea of al. ScotiabankS What to dé- 875-2160 876-1126 854-2261 244 Main St., Milton 500 Laurier Ave., Miton 36 Maino St., Campbellvilie R ,dTm-de-muklof T he Bank of Nova Scofia. 'ftade-mnas of le Baak o f Nova Scofia. *Subetl creifclea. *'Scodalaaaks Prime rte ai efiFebnuaay 2, lIOliwas 6.5% aand t, subjet todone making the same monthly comrnitrnent, but direct the extrafands to your RSP. 5. Borrow the money. Think about tak- ing out a boan to rnaxirnize your RSP con- tribution and use your refund to pay down thc boan. Remember, the more you con- tribute the more of a tax break you get. The combined tax savinga and return on your RSP investrnent usually exceed the cost of financing your annual contribution. finance your RSP contribution, if you're expecting a sizeable tax refund. This offers greater re-payment flexibility. 6. Dont squander your tax refund. Instcad, deposit it imrnediately into your RSP, giving you a head start on next year's contribution. Provided by Angela Alexander, Royal Baak, Milton Whn ners Rte lug b«mîkch, mBA Guaranteed lnvestment Certificates, term deposits and sav- Fi"AdW ngs accounts used to be the RRSP investment of choice for security-conscious investors. The promise of a guarantee returil over a specific period of time, with no0 loss of principal, was extremely appealing. But with five-year interest rates at near 30 year lows many investors have begun to look further afield. Mutual funds can pay off. 'Ad the longer you hold quality funds, the more confident you can be that your investment will out-perform GICs pur- chased within the same time period. Inside or outside your RRSP, a well- diversified mutual fund portfolio, containing a prudent miX of growth and fixed income funds, could provide a better long-term alternative to GICs, along with the prospect of considerably better returns. When adventuring beyond GICs for the first the, the key is diversification: three to f ive carefully-selected mutual funds are better than one. International diversification within the equity portion of your RRSP portfo- lio offers you additional protection: international funds have tended to do better than Canadian funds over the past few years, and they're also a great hedge against curreucy fluctuations. One final tip: stay the course during market corrections. The value of specific mutial funds is flot guaranteed, and the market does go through short-terni lows as well as highs. Over the long run, though the U.S. market, which bas an 80-year track record, has shown a 13- 14% average annual rate of return - and that return includes the peaks as well as the valleys. Equlties have bounced back torn every single low, and so could youl MIDIANDWALWYN BLUE CHIP THINKIIOG' *Templeton B9LUE ~CHF THINING is atrdem#k of ldSidWStWyflCapitalmc. MODLANO WALWYN CAPIAL INC. IS A MEMBER Vf DM*Oztktlia 4l ffl auAeMfUi do «W Aoe. s Rnu« Ww alaCwere »Ma