Pet ten Siuccas COLLEGE LIBS

ARCHIVES

***PERSONAL FINANCE ***

| am sure we are all convinced by
now that it is really money that makes
the world go ‘round. If you are contem-
plating contributions to a Registered
Retirement Savings Plan for tax year
1977, now is the time to act.

As you may know, an R.R.S.P. serves
two purposes:

ly

Deferral of tax to a time
when, presumably, your
personal rate will be lower
than at present;

tax sheltering of income
earned by the plan itself

Be aware of the fol lowing items:

 

t;

The last day for contributions

for tax year 1977 will be

MARCH 1, 1978 (of course, leaving
it late guarantees little, if any,
service from the selling organi-
zation).

Contributions made up to March 1,
1978 may be designated for tax
year 1977 OR 1978.

Contribution Limits:

a. 20% of earned income or $3500,
whichever is less, if you are
a member of an employer pension
plan. The $3500 is reduced by
any contribution you make to
such an employer plan.

b. 20% of earned income or. $5,500,
whichever is less, if you are
not a member of an employer
pension plan.

Interest cost incurred on money
borrowed for an R.R.S.P. is tax
deductible, i.e. pay off consumer
debt with any cash you may have,
then borrow for your R.R.S.P.

The plan must mature by age 7].
You must have withdrawn all pro-
ceeds and paid appropriate tax by
your 7Ist birthday, or at that
time, you must convert the plan
into a life annuity.

 

Se nee 4

An R.R.S.P. may be set up in your
spouse's name.

a. Retirement income can then be
split by both spouses, each
claiming pension income each
year, and each qualifying for
the pension deduction of up to
$1,000 providing the recipient
is 65 or more. Remember that
Old Age Security payments do
not qualify for such pension

 

deduction.
b. Interest cost is NOT deductible.
c. Contribution limits in (2) above

apply, i.e. the amounts indicated
could be spread over your plan
and your spouse's plan.

d. A spousal plan belongs to your
spouse (beware of marriage
breakdown) .

e. Early collapse of a spousal plan
is costly, unless the money is
used to buy a life annuity.

Self-administered plans are available
for individuals wishing to make their
own investment decisions.

When the proceeds are withdrawn from
a plan, they become taxable and are
added to your taxable income for @
that year. Therefore, if you collapse
a plan but do not need all of the
proceeds, have the trustee immediately
establish a new plan with the remainder.
You will then pay tax only on the
proceeds coming into your pocket.
Another way around this is to have
a number of small plans, rather than
one large plan.

‘
A withholding tax became effective
January 1, 1978.

10% on withdrawals up to $5,000
20% on withdrawals $5,001-$15,000
30% on withdrawals above $15,000

9. While actual retirement may seem

far away, many people use this tax |
deferral vehicle to great advantage
during leaves of absence.

If you have any questions regarding
interpretation or whatever, drop me
a note at the New Westminster Campus. 8

 

Murray Leslie
Business Division Lt