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16 - PORT PERRY STAR - Tuesday, January 25,1994 "Scugog's Community Newspaper of Choice" RRSP's Examine Your Choices ROBERT J. GOW 434-7156 or 1-800-267-1522 RICHARDSON GREENSHIELDS Investment advisors to Canadian enterprise and enterprising Canadians 111 Simcoe St. N., Oshawa, Ontario [L1G 454 Roger B. Moase CHARTERED ACCOUNTANT 175 North Street, Port Perry Tax Return Preparation DR SE a NP "Personal, Confidential Service" Bus: 985-8893 Fax: 985-4944 Res: 985-7225 The spousal RRSP plan If you're married, you already know many of the advantages of combining two sets of finances. But you may not be aware of the benefits of investing in two Reg- istered Retirement Savings Plans (RRSPs) under one spou- sal plan. RRSPs offer two significant benefits for anyone: tax deduc- tions for contributions; and tax sheltered investing. However, married couples in. which one partner earns less than the oth- er can generally further in- crease their tax benefits by in- vesting in RRSPs for each spouse under a spousal plan. The idea is to provide two streams of income during re- tirement, instead of one. This 1s because tax brackets increase with income, so the tax on one retirement income will be high- er than on two incomes totalling the same amount. Suppose you and your spouse were currently receiving a $50,000 annual income from a single RRSP. Federal and pro- vincial taxes would eat up about $20,000 of that. But the total taxes on two RRSP incomes of $25,000 each would only be about $13,000 -- putting you $7,000 ahead. What's more, tax- es are further reduced when both spouses become eligible at age 65 for the pension income tax credit. Spousal RRSPs were intro- duced in 1974 to allow married couples to take maximum ad- vantage of this opportunity, even if one has little or no in- come. Under the rules, both partners can contribute to each other's RRSPs. So, for instance, you could contribute to your spouse's plan even if he or she isn't. You can also continue to put money into your spouse's plan after yours ends when you are 71, 1f he or she is still under that age. Most couples aim to make their RRSP incomes equal at re- tirement to minimize tax pay- ments (given that other income sources are also equal). To do this, the higher income partner will generally contribute to the other spouse's RRSP. However, each partner's contribution is still limited to their maximum annual contribution for RRSPs (18 per cent of an individual's income up to $11,500), indepen- dent of how it is split between the two plans. If you own two RRSPs -- one for you the other for your spouse -- you should consider adding a level of diversification to your investments. In other words, you might choose to own a mu- tual fund investing in growth stocks while your spouse might consider investing in a Bond Fund for example. Again two RRSPs are better than one. There are some restrictions on how money can be contribut- ed to a spouse's RRSP. You can- not move money from an exist- ing RRSP into a new spousal plan. Nor can you transfer your pension benefits to your part- ner's plan (although you can transfer them to your own). However, up until the end of 1994, you can transfer up to $6,000 annually of pension in- come to your spouse's plan, un- der the phase out of an earlier government rule. Should you die before your plan matures, the money from your RRSP can be transferred without being taxed to your spouse's plan, if you named him or her as the beneficiary. Funds can also be transferred if or- dered by a court as the result of the end of a marriage. Both these situations also apply to common-law spouses, although such couples cannot contribute to spousal plans. Depending on the circum- stances, your tax liabilities vary if a spousal RRSP is cashed in. Spousal RRSPs don't allow cou- ples to shift investments to take advantage of one partner's low- er rate in the short term. If a holder of a spousal plan cashes it in within three years of when his or her spouse last made a contribution, the contributing spouse will have to pay tax on that portion at his or her tax rate. Only after three years are the entire proceeds of the RRSP taxed at the holders -- met the contributor's rate. However, given the brighter scenario of both spouses retir- ing happily together, the spou- sal RRSP can be a major finan- cial advantage. Like heads, two RRSPs are better than one. Courtesy of Bob Gow, Richardson Greenshields, Oshawa Reason #9 for not planning your retirement "I KINDA LANNED ON WINNING THE LOTTERY." Do you have a reason? We'd love to hear it. Plus, you can pick up a free RRSP Planning Guide. Al Knight, Branch Manager Bank of Montreal 1894 Scugog Street Port Perry (905) 985-8446 aa Bank of Montreal We're Paying Attention How to break the ~ GIC habit. 1 year 2.4% 3 year Industrial Mortgage Securities Fund J year since inception 13.9% 10 year them. for the right reasons. today at the number below. Our experience shows that many Canadians purchase GICs largely out of habit. Why? They've been told there are two types of investments: Those that are guaranteed and those that are risky. They've simply never had a higher yielding, GIC alternative like Industrial Mortgage Securities Fund explained to With interest rates at close to a cyclical low. there has never been a better time for you to consider a better alternative - one that could be habit forming For more information on Industrial Mortgage Securities Fund and other income building investment opportunities from Mackenzie, please call me Mackenzie The Industrial Group of Funds BOB GOW (905) 434-7156 » 1-800-267-1522 RICHARDSON GREENSHIELDS Investment advisors to Canadian enterprise and enterprising Canadians LTT Simcoe Street North, Oshawa, Ontario L1H 7M9 Important information about the offering is contained in the Fund's simplified prospectus Investors should obtain a copy and read it before investing Unlike GICs. unit value and investment return for mutual funds will fluctuate The indicated rates of return to December 311993 are the historical annual compounded total returns. including changes mune value and reinvestment of all distributions. and do not take into account sales redemption or optional charges pavable by an investor which would have reduced returns Past performance is not necessarily indicative of future fund returns From March 11993 at deast 50% of the Fund s portfolio will be mortgage backed securities. before that date government bonds comprised the major portion of the portfolio CB & : a -- oo fo at, TE a Naa he . bh - Co i Bagi --