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Retiring to India at 37
2008-06-05 04:24:00 I found an interesting post recently on the Early Retirement forum by an Indian immigrant who is considering retiring in India at age 37. The poster asked several interesting questions, so I thought I would reproduce the post here (edited for clarity), and attempt to answer some of his questions.I am a 37 year old immigrant and naturalized US citizen. I am married, and have a 2-year old child. We have about $600,000 saved for retirement, with two-thirds of it in taxable accounts (tax-efficient index funds and low turnover funds), with roughly 75% equities and the rest in bonds/cash. About 34% of my investment portfolio is international. In addition, we have about $100K for our child?s college education, all in index stock funds, 65% US, 35% international. We hope to retire to India by end of this year. We don?t own a home anywhere in the world. However, we have investment real estate in India, which serves as a hedge against our purchase cost of a future home there. My first rea...
By: Retire To India
"Spanish Flea" Confuses Issue on Retirement Planning and Structured Settlem
2008-06-01 00:00:00 There are many things to love about Spain, the people, the culture, the food, the wine, La Primera Liga. Then we have the "Spanish Flea" Francisco Segura, a member of the structured settlement illiterati who has penned a piece of...
Generating income in early retirement
2008-05-18 05:08:00 One of the two major concerns for early retirees is how to generate enough income to live on until you are eligible to receive retirement income such as social security, pension or 401(k)/IRA distributions (The other major concern is health insurance, which I will cover in a separate post).As I show in my earlier posts on our Net worth, most of our savings are in tax-deferred retirement accounts. This is intentional, since we want to contribute as much as we can to tax-deferred accounts, to take advantage of the tax deferred growth and the tax deductions where possible. But this causes a problem: if we want to retire early, say at age 50, we have to have enough money in taxable accounts to live for at least 9.5 years, until we become eligible to take distributions from 401(k) and IRA accounts at age 59 1/2.As I mentioned in an earlier post, it is possible to make early withdrawals from retirement accounts without penalty. But clearly this is something you want to avoid, unless you r...
By: Retire To India
IRA & Retirement Planning Mistakes: Don’t F0all Victim to Bad IRA and
2008-05-04 08:19:00 Clint Eastwood playing “Dirty Harry” warns, “A man’s got to know his limitations.” This advice is particularly appropriate for financial planners and advisors who are giving advice beyond their expertise. Though I am biased because I have over 27 years of technical expertise in the IRA and retirement plan area, the lack of knowledge in this area can cost clients hundreds of thousands or even
By: Retirement
Smart Retirees - The Truth About Retirement Planning
2008-05-03 05:54:00 The issue of retirement planning has never been as important as it is today. If you're a baby boomer, then the next few years are going to be the most crucial of your life. As a baby boomer, you've already heard over and over again you're part of the largest spending group in human history. You've been responsible for more trends in the past half century than any group has before. Baby
By: Retirement
Financial Retirement Planning For Everyone
2008-04-21 17:22:00 Profuse people book neighboring they treasure themselves financially stable enough to fulcrum all their needs. Acknowledged are again some who study beginning how much they keep begun saved for them to speak that they are coeval ready for retirement. Chipper, resources matters entirely play a vital role dominion retirement and to convert financially secure alongside retirement takes clock,
By: Retirement
Retirement Planning Goes Beyond Money
2008-04-20 02:23:00 In her article ‘Multidimensional retirement planning’ independent writer Linda Stern recommends at Reuters.com: “Having enough money is crucial for a comfortable retirement; having a lot of money is not. With 401k balances in the dumpster, this might be a good time to look at the other dimensions of retirement planning. Researchers say there are specific and measurable non-financial assets that folks should bring with them into retirement: Items like an exercise habit, connection to a religious community, and a good sense of self.” “Self-awareness is highly predictive of success in retirement,” says Bill Bryan of Next Dance, a company that offers pre-retirement psychological testing and coaching. The factors that most affect how a person adapts and enjoys his retirement: 1. attitude toward aging 2. commitment to society 3. self-awareness.” A detailed checklist is offered to help you think about how little you actually have to spend in dollar...
Lifetime Retirement Planning
2008-04-17 19:01:00 Generally, the rule for saving for retirement was to set aside 10 percent of your current salary. Then if you saved diligently for 30 or 40 years you would have enough to live on for the rest of your life.
By: Urban Frugal
Retirement Planning - Saving
2008-04-07 16:30:00 Planning for retirement is something that everyone must do, but many have not. Please do not become one of the cases where people are entering their retirement years with little or no savings. I have previously written about the insolvency of Social Security and Medicare and how we will not be able to count on ...
By: Save and Conquer
Retirement Planning Consultant
2008-03-24 16:39:00 By Alan Lim Before you enter your retirement age, it is best that you plan. Starting your retirement planning early will give you less stress and less trouble. It is better to start early with a minimum amount than starting it late and be overwhelmed with the amount that you have to save. Make an accurate assessment on what you already have. It is better that you assess with the exact figures
By: Retirement
Mar 24, retirement planning,plan for your retirement
2008-03-24 16:35:00 Retirement Planning. It is never to early to plan for your retirement.Follow these straightforward tips to plan for your retirement and have financial security in your golden years.
?Retirement Planning? What?s That??
2008-03-24 07:40:00 Baby boomers may not only be less healthy than their parents, but recent research says many could end up worse off in retirement as well. A new Employee Benefit Research Institute survey finds that almost half of today’s workers have less than $25k in savings and investments. Older workers — who should have saved the most — ...
Convert your RRSP to a Defined Benefit Pension when you retire (?)
2008-02-29 04:52:00 I think that in the DIY investor world, the propensity to convert an RRSP to a RRIF is strong. The same is probably true for those who use an advisor as well. In fact, approximately 75% of RRSPs are eventually converted to RRIF (Registered Retirement Income Fund) accounts. The title of this post isn't entirely accurate (you can't actually convert your RRSP to a defined benefit pension plan per se), but you can convert your RRSP into a structure that mimics a Defined Benefit Pension Plan through the use of a life annuity.Defined Benefit pensions are envied by some since you eliminate a lot of unknowns for your retirement income planning such as the risk of running out of money. The major counter argument is that with a RRIF account you can possibly increase the pot and potentially have a higher overall retirement income by earning a higher internal rate of return than is normally afforded by an annuity. As always, there is a tradeoff - you are trading the risk of running out of mon...
TFSA Tax Free Savings Account Strategies
2008-02-28 04:12:00 I'm trying to think of some various strategies for using the TFSA:1. If you have a non-registered account with corporate class mutual funds and they have a t-class available for ROC distributions, you could elect to start the ROC withdrawals and slowly convert the portfolio into the TFSA account. Eventually your ACB will be ground down to zero in the non-registered account, but you will also be transferring to a tax-sheltered environment without having to pay the higher fee associated with corporate class funds.2. There is a huge opportunity for estate planning as you can pass TFSA assets tax-free to your spouse, and then to your children. Assuming the children will be building up unused room then might even have the means to accept the transfer right into a TFSA of their own.3. You can maximize your RRSP and put the refund into the TFSA.4. You can contribute to an RRSP in a high-income year and make a withdrawal in a low income year (capitalizing on the differential between tax ra...
Financial Freedom Retirement Planning Starts Now
2008-02-26 04:56:00 Did financial freedom retirement planning pass you by during your 20s because you were so busy getting your first job and paying rent? Did you reach 30 and find yourself preoccupied with finishing off your education and getting out of a cubicle? Now that you are in your 40s or 50s and have your own ...
RRSPs Don't Always Make Sense
2008-02-25 06:15:00 I realized there have been a few posts within the blogosphere this past week about when using an RRSP might not be a good idea. I'll weigh in on this in a separate post, but in the meantime you can read the following posts from other bloggers who have hit on the main points:Larry MacDonald's Investment Ideas blogThe Canadian Capitalist blogAlso, for anyone who is interested in putting a face to a name, I'll be appearing on MoneyLine with Linda Leatherdale this Wednesday, February 27th at 7pm EST on Rogers Cable 15 (it might be a different channel in your neighbourhood). It's an hour long call-in show. The topic for the show? RRSPs naturally! :) Subscribe to the free Email Updates to learn more about personal finance.If you use a feed reader, you can click here to add my RSS feed.If you like this blog, you might like my book: RRSPs: The Definitive Book on Registered Retirement Savings Plans
5 Steps to Retirement Planning
2008-02-22 11:41:00 There are two important highlights on retirement planning are:1. It is very personalized process, unique to every individual.2. It is an on-going process because what we are aiming at is not fixed.Planning for retirement is a long journey but a resolute and systematic step-by-step approach makes it a lot less laborious.1. Start Early – A well prepared approach towards any goal is usually the result of an early start. Retirement planning is no different. Financial Planners always saying to start early as possible for retirement planning. That is exactly a correct approach. Starting early can identify and rectify the investing mistakes in the early stages. Also, you will be surprised with the result in the later.Even if you don’t have sufficient money to start planning early, don’t worry. The key lies in starting with what you have and making up for the deficit at a later stage. However, do not compromise with the opportunity to make an early start.2. Find a well Financial Plan...
By: Investinternals
Retirement Planning
2008-02-18 11:22:00 If you had purchased US$1000.00 of Nortel stock one year ago, it would now be worth US$49.00. With Enron, you would have had US$16.50 left of the original US$1000.00. With WorldCom, you would have had less than US$5.00 left. If you had purchased US$1000 of Delta Air Lines stock you would have US$49.00 left. But, if you had purchased US$1,000.00 worth of beer/wine one year ago, drank all the
By: Digitalirony
Retirement planning
2008-01-29 00:00:00 My mom retired recently, she's not old though, so she had to avail of the early retirement plan that her workplace offered. Of course my mom, like any other person who retired, would want to make sure this won’t just go to wastage and losses so she planned carefully and alloted everything appropriately. Some people...
Are you saving comfortably? Maybe it's time to up the ante...
2008-01-28 03:06:00 Usually when the new year rolls around, I will suggest to my clients who are saving through PAC plans (Pre-Authorized Contributions) to increase their regular contributions by a set percentage (usually by inflation if not more). The main reason is that they have normally gotten used to their regular savings activities, and while there may have been some "teething" problems at the beginning, maybe now it is not "cramping their style" anymore.For example, let's say someone set up a $100/month savings plan at the beginning of 2007. Come the New Year, I would ask them if they would like to try saving $110/month for a few months. The next year, we might increase to $121/month (a 10% increase over 2008), and so on. These baby steps are much easier to adjust to and over time it can make a big difference to one's retirement planning.For example, let's look at someone who saves $100/month starting at age 18 until age 65, assuming a 7% rate of return (no tax calculation...
Retirement Planning 101
2008-01-14 23:15:00 Many financially successful individuals begin retirement with the belief that their personal savings and holdings, coupled with company retirement packages and Social Security will enable them to retire comfortably. The clich "ignorance is bliss" may apply in some situations but certainly not when it comes to retirement planning. Failing to accurately calculate what your income and expenses will be during retirement can keep you from enjoying what should be one of the most relaxing and best times of your life.
Take CPP Early? Or Late?
2008-01-05 15:12:00 The Canada Pension Plan (CPP) has a maximum monthly benefit of $884.58 for 2008 (for a 65 year old). That means that if you made the maximum annual contribution to CPP for a certain number of years, then if you were turning 65 this year and elected to take your CPP pension - you would receive this maximum amount. This works out to $10,614.96 for the year.In addition, the monthly benefit is indexed to inflation every January - so if inflation (as measured by CPI) increases, so does your monthly benefit.The CPP monthly benefit that you START AT is also adjusted by WHEN you elect to start receiving it. If you are under 65, you can elect to start receiving it if you are no longer working (actually, you only need not be working for 2 consecutive months, once you start getting your payments, you can go back to work - I'll write about that some other time.) Once you reach 65, you can elect to receive it even if you are working when you make the application.For every month before your 65th...
Retirement Planning - Why Borrowing From Your 401(K) Is A Terrible Idea!
2008-01-02 22:51:00 Many view their 401(k) as their own personal piggy bank. In a financial emergency it's tempting to borrow money piling up in your 401(k). You don't have to qualify for the loan and you don't even have to give a reason for borrowing. So what's the problem?
Don't Qualify for the Lifelong Learning Plan? Who Cares...
2007-12-27 08:58:00 Mike from the Quest for Four Pillars blog commented on a post I had written about the Lifelong Learning Plan. He mentioned that if he were ever considering going back to school, he would be inclined to just withdraw the money from his RRSP since that year would probably be a lower income year and the tax hit not as bad as a "full" income year.It is an excellent suggestion. In fact, for the LLP, you almost always have to be enrolled in a full-time capacity at a qualifying educational institution. That means it is indeed likely to be a lower income year.Add to that:1. You no longer have to worry about what program you take and making sure it qualifies under the LLP.2. You don't have a set repayment schedule - you can make your repayments on your own terms, and probably in a higher tax bracket which will afford more tax refunds on your future contributions than tax paid on the withdrawal.Perhaps this is why most people don't use the LLP... Thanks for the suggestion Mike!Mik...
When Not Paying Back the Home Buyer's Plan or Lifelong Learning Plan Can Ma
2007-12-27 08:21:00 If you are aware of the Home Buyer's Plan or the Lifelong Learning Plan, you know that there are ways you can get money out of your RRSP (temporarily) through tax-free withdrawals. The programs require that you pay money back to your RRSP over time and the CRA will inform you of how much of the loan is required to be paid back in any given year.There is no rule that says you have to make the repayment - only that if you don't, then the year's required re-payment amount will be included as taxable income for that tax year. So if you are in a low income year and you have a repayment required - it might not be a bad idea to skip the payment and add the payment amount to your taxable income - it won't make a significant impact on your taxes.So for example, if you contributed to a spousal RRSP for your spouse or common-law partner and used money for the HBP or LLP - if your spouse is a stay-at-home parent with no income - they won't pay tax on skipping the re-payments.Additionally, ...
You can make Spousal RRSP Contributions after Age 71
2007-12-27 07:25:00 It is still possible to make RRSP contributions after the year in which you turn 71 - just not to your OWN RRSP. If you have a spouse or common-law partner who is younger than you, then you can contribute to a Spousal RRSP set up in their name. This allows you to claim a deduction on your tax return and reduce your tax bill.Click here to read about Spousal RRSP's in more detail. There are a few catches of course. You must have RRSP contribution room in order to make an RRSP or a Spousal RRSP contribution - and this is generally harder and harder to come by when you are over 71 as you are most likely retired by now. BUT - so long as you generate EARNED income, you generate RRSP contribution room. So, if you work as a part-time consultant and earn salary, commission, etc., then you can generate RRSP contribution room - even in retirement.To sum it up: you can still generate RRSP contribution room after you turn 71 - you just can't use that contribution room to contribute to you...
You can Claim Unused RRSP Deductions after Age 71 too
2007-12-27 07:16:00 You may remember that you can make an RRSP contribution in a given year but carry forward the resultant RRSP deduction until a future year. This rule still applies even after you have matured your RRSP into a RRIF (or any of the other conversion options).The RRSP deduction will reduce your taxable income in the year that you use it. So if you think that there will be a significant tax liability a few years into retirement, such as the sale of capital property that would result in a large tax bill, you could make your RRSP contributions but delay claiming the RRSP deductions until that year. In other words, you do not lose the ability claim the RRSP deductions once you mature your RRSP. Like this article? Subscribe to Email Updates or the RSS Feed and keep up to date. Psst... it's FREE!
Free Money? Consider A RRIF before age 71 to Save Tax
2007-12-27 03:39:00 Just because most people will naturally wait until the last minute to convert their RRSP account to a RRIF account (the year they turn 71), there is a good reason to consider doing it earlier - especially if you are planning any withdrawals between ages 65 and 71 (inclusive).Recently the government announced that they had increased the pension credit from $1,000 to $2,000. This means that if you have $2,000 of pension income, you get a credit applied to your taxes. (Tax Credits are different from Tax deductions - a $2,000 tax credit will get you a savings of around $400 in tax payable depending on your province of residence.)RRSP withdrawals do NOT qualify as pension income - but RRIF withdrawals DO QUALIFY as pension income. (Note that you must be 65 to claim the pension credit). This means that if you were withdrawing $2,000 from your RRSP from age 65 to 71, you would save an additional $2,800 (approx.) in taxes if you instead received the withdrawals in the form of RRIF income.If...
Unlocking Locked-In Accounts
2007-12-27 00:49:00 First remember to check for recent changes to various Pension Benefits Acts as many jurisdictions are now proposing more relaxed rules with regard to access to locked-in funds.BUT, if you find that you still have funds that are locked in, there are a couple of strategies you can use to unlock some or all of those funds:TWO STEP TRANSFER TO A REGULAR RRSPIf you have reached the age where you can convert your LIRA or LRSP to a locked-in account that allows for withdrawals (usually 55), but you are not yet ready to retire then you may be a candidate for this strategy. You can simply elect to take the maximum permitted withdrawal from the locked-in account and then make a corresponding contribution to your RRSP account. The tax payable on the locked-in account withdrawals will be offset by the contribution to your RRSP. This will essentially unlock a portion of your locked-in account. Do this as much as you can and you will have more and more flexibility with your retirement income late...
Locked-In Accounts: LIRA, LRSP, LRIF, LIF, and PRIF accounts
2007-12-26 23:23:00 The business of Locked-In accounts is a pretty messy one because there seem to be so many different names for the same things, yet many also have subtle, but important, rules differences and regulations.WHAT ARE LOCKED-IN ACCOUNTS?A locked-in account originates from being a member of a pension plan of a company (or government) that you no longer work for, and that relationship ended before retirement. Essentially, a locked-in account is where you hold the transfer of the value of your pension plan that you had accumulated. When you start working for a company (or government) that has a pension, your pension plan "vests" (normally after 2 years) which basically means that the value in the plan belongs to you after that vesting period has expired. Instead of just getting a cheque when you leave their employ, you get some paperwork from your HR department asking you to transfer the funds into a Locked-In RRSP (LRSP) or Locked-In Retirement Account (LIRA). (Sometimes your new ...
The Spousal RRSP - One of the Most Overlooked Strategies!
2007-12-23 23:33:00 DON'T FORGET TO ENTER THE CONTEST TO WIN A FREE 7.1 MEGAPIXEL DIGITAL CAMERA - CONTEST CLOSES CHRISTMAS EVE, 2007 - CLICK HERE TO VISIT THE CONTEST PAGE!!! A Spousal RRSP is an account that is used for future income splitting purposes. If you are a regular reader of this blog, you will know that it makes great sense to equalize income between spouses in order to reduce household taxes as much as possible - this is due to our progressive tax bracket system.The lack of use of spousal RRSP's is one of most overlooked financial planning strategies I encounter on a regular basis - and it is almost imperative that you set one up if your current planning strategies do not allow for equal income in retirement between spouses. (If you are wondering about the new pension income splitting rules - don't worry, it still makes sense to set up spousal RRSP accounts and I'll explain why in a post in the next few days.)WHAT IS A SPOUSAL RRSP?A Spousal RRSP account is an RRSP account that a highe...
Retirement Planning and Your Finances Posted By : lar
2007-12-23 10:41:00 As you near your sunset years, it is time to inventory your financial resources and see exactly where you stand. Do you have a lot of equity in your home but little cash in the bank? What kind of mortgage do you have? Have you taken a look at your insurance policy to see if it is current? Here are a few things to think about as you get ready to retire. A key component of personal finance is financial planning, a dynamic process that requires regular monitoring and reevaluation.
Security Swapping with your RRSP to Increase Tax Efficiency
2007-12-22 00:44:00 DON'T FORGET TO ENTER THE CONTEST TO WIN A FREE 7.1 MEGAPIXEL DIGITAL CAMERA - CONTEST CLOSES CHRISTMAS EVE, 2007 - CLICK HERE TO VISIT THE CONTEST PAGE!!! If you read the post on "trying to hold fixed income positions inside your RRSP", you'll know that there can be a tax advantage to doing so. And that's great to know when you are starting out and making new investments as you go along. But what about if you only recently found this out and have substantial holdings in both accounts already? There can be some tax implications or transaction fees incurred in trying to re-order everything around for the maximum tax efficiency.One way to help circumvent this is through the "swapping" of securities between your non-registered account and your RRSP account. Essentially you would SWAP interest bearing securities from your non-registered account to your RRSP, and the swap would be for tax advantaged securities from your RRSP to your non-registered account. (B...
Deferring your RRSP Deductions to Higher Income Years
2007-12-20 20:06:00 DON'T FORGET TO ENTER THE CONTEST TO WIN A FREE 7.1 MEGAPIXEL DIGITAL CAMERA - CONTEST CLOSES CHRISTMAS EVE, 2007 - CLICK HERE TO VISIT THE CONTEST PAGE!!! It is important to note the difference between an RRSP "contribution" and an RRSP "deduction". You "make a contribution" by putting money (or securities) into your RRSP account. You "claim a deduction" when you want that contribution to reduce your earned income on a tax return (to reduce your tax bill and get a refund).You may already know that you can carry forward contribution room - so if you didn't maximize your RRSP in any given year, you have the ability to make up for it later. But a lesser known fact is that you can carry forward your RRSP deduction as well.The RRSP deduction is generated when you make an RRSP contribution, and the norm is to claim it in the same tax year you made the contribution. This is why you get your refund.If you make an RRSP contribution but don't use th...
You can base the RRIF Withdrawal on a Lower Aged Spouse to Reduce the Minim
2007-12-20 08:49:00 DON'T FORGET TO ENTER THE CONTEST TO WIN A FREE 7.1 MEGAPIXEL DIGITAL CAMERA - CONTEST CLOSES CHRISTMAS EVE, 2007 - CLICK HERE TO VISIT THE CONTEST PAGE!!! If you find that you are in the enviable position of not NEEDING to make withdrawals from your RRIF account in order to cover your regular living expenses, there is a way to reduce the minimum required withdrawal each year. You can elect to have the withdrawal minimums based on the age of a lower aged spouse or common-law partner.If you recall from the previous post on RRIF withdrawal minimums, the younger you are, the less you have to take out.Let's say you are 71 and converting your RRSP to a RRIF account. You don't have to make any withdrawals in the year you make the conversion, but starting the following year, when you are 72, you will. If you have a RRIF of $500,000 you will need to make a withdrawal of $37,400 - all of which is taxable as income.BUT, if you happen to have a spouse who is 50, and you elected to bas...
RRIF Withdrawal Minimums
2007-12-20 05:11:00 DON'T FORGET TO ENTER THE CONTEST TO WIN A FREE 7.1 MEGAPIXEL DIGITAL CAMERA - CONTEST CLOSES CHRISTMAS EVE, 2007 - CLICK HERE TO VISIT THE CONTEST PAGE!!! A RRIF account (Registered Retirement Income Fund) is what most people turn their RRSP accounts into once they turn 71. The main difference between an RRSP and a RRIF is that you can only withdraw funds from a RRIF account - you can no longer make contributions. While you are not required to mature your RRSP until the year you turn 71, the many people who choose the option of maturing their RRSP into a RRIF will make the conversion before this time (i.e. if they retire earlier than that). But regardless of what age you hold a RRIF account at, you are required to withdraw a minimum amount each year known as the prescribed minimum withdrawal amount. Any RRIF withdrawals are fully taxable as income in the year you receive them (just like an RRSP withdrawal).The methods for determining how much you need to take out is shown below: I...
Contributing Investments (as opposed to cash) to your RRSP
2007-12-20 02:36:00 DON'T FORGET TO ENTER THE CONTEST TO WIN A FREE 7.1 MEGAPIXEL DIGITAL CAMERA - CONTEST CLOSES CHRISTMAS EVE, 2007 - CLICK HERE TO VISIT THE CONTEST PAGE!!! While the norm is to deposit money into an RRSP and then purchase the investments once the money has been deposited, it is also possible to contribute to your RRSP in the form of already-held investments. This in known as an "in-kind" contribution. (Think of it as shifting your investments from one account to another without having to sell them.) If the source of the "in-kind" contribution is NOT from another RRSP account that you own, then you can use this contribution as your RRSP contribution for the year, just like the normal cash contributions. For example, you can contribute stocks, bonds, mutual funds, GIC's, etc. directly into your RRSP and the Fair Market Value (FMV) of those securities (as of the previous day's close from the date of the transaction) will count as your RRSP contribution...
You Don't Have to Take Your RRSP Loan in February
2007-12-19 08:21:00 DON'T FORGET TO ENTER THE CONTEST TO WIN A FREE 7.1 MEGAPIXEL DIGITAL CAMERA - CONTEST CLOSES CHRISTMAS EVE, 2007 - CLICK HERE TO VISIT THE CONTEST PAGE!!! If you happen to be one of the many Canadians who take out an annual RRSP loan every year right before the deadline in order to make your contribution, AND you happen to be a higher risk-tolerant investor, here are a couple of ideas for you to consider:GET AN RRSP LOAN WHEN THE MARKET HAS A CORRECTION If you are able (i.e. have paid off your previous RRSP loan, or have the ability to take on another one), then there is no law that states you have to wait until February to get an RRSP loan. The reason this might be of interest is if you believe that you can take advantage of "dips" in the market (kinda like the "dip" we're having now!). If the market goes up between now and the RRSP deadline, it would be to your advantage to get your loan NOW as your cost base will be lower.BUT... Unfortunately-...
Why Wait for your RRSP Refund?
2007-12-16 02:55:00 We've seen that if you plan on saving for retirement by using an RRSP, you can really knock multiple years off your working life if you do something productive with the tax refund. That can be anything from paying down the mortgage, to saving to a non-registered investment account, plowing it right back to the RRSP (if you don't maximize your contributions), etc.No matter the case, if you have a tax refund that is owing to you IT DOESN'T EARN INTEREST while it's sitting with the government waiting for you to fill out your tax return. To counter that "problem", you could always fill out a form that tells the payroll department to withhold less income tax from each pay cheque. Now, your take-pay will be slightly higher per pay cheque and if you do your math right you will have neither a refund nor a balance owing once you file your taxes.EXAMPLEJohn lives in Ontario and earns $50,000 per year and contributes $500/month to his RRSP. His normal take-home pay is based on hi...
Unused RRSP Contribution Room at Death
2007-12-15 20:53:00 What happens if you die with unused RRSP contribution room?Naturally you would be inclined to think that your legal representative would file an RRSP contribution for you for your final tax year, thereby reducing your terminal tax bill... But there is a slight problem with that. Your your legal representative cannot make RRSP contributions to your RRSP after the date of your death! It just isn't allowed by the CRA.What IS allowed, is for the legal representative to make a contribution to your spouse's Spousal RRSP up to the first 60 days of the year following the year of your death. This has the same effect on your terminal taxes. The only caveat is that you had the room prior to the year you died as NO RRSP CONTRIBUTION ROOM IS GENERATED BY INCOME YOU EARNED IN THE YEAR THAT YOU DIE. All I can say is "BOO to that!". Like this article? Subscribe to Email Updates or the RSS Feed and keep up to date. Psst... it's FREE!
The Two Types of RRSP Meltdown Strategies Part 2 of 3
2007-12-15 03:30:00 Continuing from Part 1, I mentioned that I would look more closely at leveraging a meltdown. I already stated that I think it would be pretty rare for someone to want to completely meltdown their RRSP and focus on offsetting the withdrawals with deductible interest since the risk involved in doing so would be fairly high, and the loan value enormous. From the calculations I made below (which don't even factor in variance of actual returns in the real world!) the risks in this strategy are too great for all but the most speculative investors.(SIDE NOTE: My post got so long that I'm deciding to increase the series to three parts - it was originally penned for two parts.) COMPLETE OFFSETLet's look at what would be involved in completely offsetting the RRSP withdrawals with interest on an investment loan. First we need to make a few assumptions:1. Our investor is 55, will retire at 65 and will live to 90.2. He has $350,000 in his RRSP.3. All his investments grow at 8%.4. His loa...
The Two Types of RRSP Meltdown Strategies Part 1 of 2
2007-12-13 00:52:00 I've written before that there are some situations in which you would want to avoid saving too much to your RRSPs. In one way or another, the reason comes down to taxes. The most common reasons cited for monitoring the value of your RRSPs:1. Withdrawals are subject to your full marginal tax rate.2. Registered withdrawals add to your earned income.2. If your income is too high it may trigger clawback of your Old Age Security benefit.3. You are required to make minimum annual withdrawals from age 72 onwards even if you don't need the money.4. Non-Registered assets can be taxed much more preferentially (while living and at death).Because of these main reasons, strategies have been developed to shift assets from registered accounts to non-registered accounts - these are known as meltdown strategies. Before I continue however, don't forget that many people would be envious of your problem! :)There are actually two basic ways to melt down an RRSP. One involves simply withdrawing m...
The Two Types of RRSP Meltdown Strategies Part 1 of 3
2007-12-13 00:52:00 I've written before that there are some situations in which you would want to avoid saving too much to your RRSPs. In one way or another, the reason comes down to taxes. The most common reasons cited for monitoring the value of your RRSPs:1. Withdrawals are subject to your full marginal tax rate.2. Registered withdrawals add to your earned income.2. If your income is too high it may trigger clawback of your Old Age Security benefit.3. You are required to make minimum annual withdrawals from age 72 onwards even if you don't need the money.4. Non-Registered assets can be taxed much more preferentially (while living and at death).Because of these main reasons, strategies have been developed to shift assets from registered accounts to non-registered accounts - these are known as meltdown strategies. Before I continue however, don't forget that many people would be envious of your problem! :)There are actually two basic ways to melt down an RRSP. One involves simply withdrawing m...
Reverse Mortgages ? Retirement Planning?s Missing Numbers
2007-12-11 22:07:00 The Credit Union National Association(CUNA) has some interesting numbers regarding retirement: * Less than half of Americans have planned for retirement. * Americans reaching age 65 can expect to live into their early 80s. * After you retire, experts say you will need at least 70% of your preretirement income each year to sustain your current lifestyle. (Other ... read more
Estate & Financial Planner Glen Janken Announces Retirement Planning
2007-12-06 11:07:00 Forbes - Before establishing his estate and financial planning firm 22 years ago, he practiced accounting and served as a controller for a large architectural and engineering company. About Janken... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
By: Engineers Voice
The Preet Principle Calculator
2007-12-06 06:35:00 I'm providing a spreadsheet that allows you to play with some assumptions for the Preet Principle - this calculator is not perfect by any means, but it will allow you to examine how the Preet Principle might work for your own situation.It allows you to adjust:1. Monthly Savings Amount2. Timeframe of the Strategy3. Long Term Rate of Return on your Portfolio4. Long Term Interest Rates5. Your Marginal Tax RatePlease, please note: the calculator was literally whipped up without the intent of providing a throrough analysis - it was more to provide a general tool for comparing strategies and to see how various variables can affect the strategies.Further, it assumes that you liquidate all your investments on the last day of the time period specified and taxes all investments at the top tax rate for your province. It DOES take into account your marginal tax rate up to that time, but another fault is that it cannot tell when you drop a tax bracket.I'm sure you'll have fun with it, but und...
Retirement Planning - 2 Options To Consider For Successful Retirement Poste
2007-12-05 03:36:00 There are several great options to consider as part of your retirement planning. The tax laws can be incredibly complicated to understand, especially for the Small Business Owner like yourself. How can you be expected to run your business AND keep up with all the tax rules and regulations? That's why over the years I've discovered many tax-saving strategies that will reduce your tax bill each and every year. These "strategies" are not difficult to understand, nor are they hard to implement.
Retirement Planning - 2 Options To Consider For Successful Retirement
2007-12-04 00:00:00 If you’re coming up to retirement age and worry about maintaining meaning in your life once you exit the work force then don’t. There are several great options to consider as part of your retirement planning. Today, people are living longer thanks to modern medicine and advances in nutritional research and while this is great in ...
The Preet Principle: Leveraging to Invest the Right Way! Part 4 of 4
2007-12-03 17:34:00 Continuing from Part 1, Part 2 and Part 3 in this series we now actually come to what was named the "Preet Principle". The name actually doesn't make too much sense, it was more because my colleague wanted to come up with a name to describe this strategy similar to the "Smith Manoeuvre" or the "Singleton Shuffle". There really isn't any "principle" - except perhaps taking advantage of piggy-backing refunds... which will become clear as you keep reading.Nothing in the strategy is uniquely mine. I simply took existing strategies and put them all together, created a more formalized step-by-step process, and then ran it all through a probability calculator to quantify the risk-return of the strategy.The BackgroundThe strategy is not for everyone, which I think I've made clear in the previous parts to this series. It was originally developed for high tax-bracket investors as a means to both accelerate the growth of their net-worth through levera...
The Preet Principle: Leveraging to Invest the Right Way! Part 3 of 4
2007-12-03 00:18:00 Continuing from Part 1 and Part 2 in this series, this part will deal with looking at why most leverages fail.Lack of Experience with InvestingIt is a big No-No in my books to even consider leverage without having been actively investing for AT LEAST a few years. Even better would be for the investor to have actually experienced a full market cycle (or two!) before looking at leverages. This is simply because if you have not experienced the ugly side of the markets, you really can't prepare yourself for it. But even more importantly, if you HAVE been through a major correction or a bear market, then you'll have also noticed that the periods following the dark times are among the brightest times. It would certainly help psychologically to have witnessed the rebound so that when your leveraged investment goes south, you will not be so easily tempted to bail on your strategy (i.e. exactly at the wrong time).Leveraging at the Top of a MarketIf you ever pay attention to the business me... |
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