WEALTH Matters — WINTER 2009

RRSPs TFSAs and your Personal Assessment

It happens at this time every year: the radio, TV and print media are chock full of advertising for RRSPs and now also TFSAs (tax-free savings accounts). The choices seem more bewildering each year as more new products and tax options are introduced. A new trend this year is advertising from various large banks promoting a ‘Personal Assessment’ or some other review process as a way to help you decide what to do.

We think it’s about time! As a financial planning firm, we’ve promoted the benefits of a planful approach to financial decision-making for over 25 years. Our Initial Assessment and Evaluation and the resulting financial forecasts have been our way of helping our clients make sound choices since we started our financial planning business in the early 1980s. So we have often been amazed at the product-focused promotions from the large financial institutions which seem to ignore the unique goals and needs of the individual client.

Page and Associates ltd:

Phone:    905-884-5563

Fax:         905-884-3365

E-mail:     experience@askpage.com

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RRSP TFSA and your Personal Assessment

Investment Market Commentary

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Important Dates For Tax Planning

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If you have engaged us for financial planning services, you’ll already know the benefits of this approach. If you haven’t yet been through the Initial Assessment and Evaluation process with us, or if it’s been a while since we last worked through this process with you, please give us a call. We’d be glad to review your situation with you and help you understand your options so you too can make informed financial decisions. We’ve been using this process for many years, and it has become the basis for the Advocis Best Practices Manual, a guide for over 15,000 financial planners in Canada. So, rather than going to the bank for their new process, call us to get the benefits of a proven process that has been perfected over our more than 25 years of practice.

This year, the importance of planning ahead will be even greater. If you are planning to make an RRSP contribution before the deadline, DON’T DO SO until you review your situation with us. While RRSPs are great for generating current tax deductions, the withdrawals required later and the taxation of withdrawals, or remaining balances on death, may offset any tax savings you will currently enjoy. In contrast, withdrawals from TFSAs are not taxable, nor does the balance create a tax liability for the Estate. RRSPs are still a powerful tool for many people, but for an equal number, the TFSA will be a better tool. Both offer tax-free growth in the plan.

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RRSP

TFSA

From Age

18

18

Maximum Contribution

18% of prior year earnings, less PA.

$5000 per year since 2009 incl.

Taxation of Contribution

Deduct contribution from taxable income. Refund = contribution x marginal tax rate.

No deduction for contributions.

Taxation of Earnings

No tax on earnings/growth in the plan.

No tax on earnings/growth in the plan.

Required Withdrawals

Starting at age 71, must withdraw 5%, increasing.

Entire balance is considered withdrawn at death.

Never need to withdraw capital or earnings/growth.

Taxation of Withdrawals

Add amount of withdrawal to taxable income. Pay tax at your marginal rate on both original capital and earnings/growth.

No tax on withdrawals of capital or earnings/growth.