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Finance: R.R.S.P.s - Valuable Tax Shelters

By Leo Van Den Berg
President, IMAX Financial Services Ltd.

An R.R.S.P. is a tax shelter provided under the Income Tax Act to give you the incentive to save money for your retirement years. R.R.S.P.s are contracts, registered by the Minister of National Revenue, between an individual and an institution selling these types of contracts. R.R.S.P.s are available to you from banks, trust companies, credit unions and insurance companies. Within certain limits, you can claim tax deductions for contributions to your R.R.S.P.

Why should you contribute and how much?
To realize tax savings now, during accumulation and retirement. R.R.S.P.s will provide financial security for you and your family. Revenue Canada calculates your eligible R.R.S.P. contributions and reports this to you in your annual Assessment Notice. If you do not contribute the maximum amount allowed in a year, you can make the contribution in future years and receive tax deductions at that time.

When considering a plan, look at the various rates of return, security of principal (your deposits), liquidity and other costs. If you decide you need the funds before you retire, any amounts withdrawn before maturity will generally be taxed in the year of withdrawal.

When should you contribute?
Start contributions early in your career and contribute as much as you can each year.

If you contribute $1,000 for 35 years with earnings at an interest rate of 8 per cent you will save a total of $186, 102. People don't plan to fail but they fail to plan.

Van Den Berg is President of IMAX Insurance Brokers and Education Planners. He can be reached by calling (403) 946-3914 or toll-free at 1-888-383-9559 or e-mail him at imax@shaw.ca.