RRSP FACTS

With the March 1st deadline only one week away; here are the facts: 

To see how much you can contribute to your RRSP for 2012, refer to your Notice of Assessment, which can be found on your last year’s tax return. 

Maximum Contribution for 2012

18% of 2011’s earned income; to a maximum of $22,970 

Earned Income

Earned income is income you have received for work you have done.  It includes the annual total of:

·        Net employment income

·        Net income from a business or partnership

·        Net rental income

·        Net research grants

·        Taxable disability benefits

·        Supplementary unemployment benefits

·        Taxable alimony, maintenance or child support

·        Certain royalty income 

Not Included in Earned Income

·        Investment income

·        Taxable capital gains

·        Limited partnership income

·        Death benefit (from Life Insurance)

·        Retiring allowance

·        Pension or DPSP income payments from RRSP, OAS, CPP or QPP 

Contribution Rules

·        Unused contribution room can be carried forward indefinitely (subject to age limits)

·        Contributions are deductible for the previous year if made within 60 days of year end

·        Contributions may be carried forward indefinitely and deducted in future years

·        Contributions to an RRSP may be made up to and including the year in which you turn 71yrs

·        By December 31 of that year (age 71), RRSPs must be deregistered or transferred to a Registered Retirement Income fund (RRIF) or an annuity 

Over-contribution

You may contribute up to $2000 above your contribution limit without penalty.  However, the over contributed amount will not be allowed as a tax deduction and the amounts over $2000 will be subject to a 1% per month penalty tax.  Unused contribution room can be carried forward indefinitely; subject to age limits.

Spousal RRSP

·        Contributor claims the deduction for a spousal RRSP

·        Deduction limits are based on the contributor and not the spouse

·        Plan and assets are controlled by the spouse

·        Contributor (not the spouse) pays taxes on withdrawals, if withdrawals are made within the first three years after contribution.

·        Contributions to a spousal plan may be made up to and including the year the spouse turns 71, as long as the contributor has earned income.

If you have any questions or need to make a last minute contribution, don’t hesitate to give me a call. 

Have a great weekend,

 

Tracey

 

Source:  Dynamic Funds

 

 

Investing for your Age

The March 1^st deadline for RRSP contributions is fast approaching, if you are still unsure about making a contribution; here are some guidelines to help you make an informed decision.

To start, you need to take your age, anticipated life goals and other milestones into consideration when making your investment decisions.

Here are some investing strategies for different life stages:

In Your 20s – getting that first job

·        Though you may be just starting off your career with retirement way in the future, it is not too early to establish a long-term financial plan.

·        With years to your advantage, consider taking a more aggressive approach to your asset mix by diversifying with a higher mix of stocks compared to bonds or cash.

·        Pay off your debts as soon as possible and try to save as much as you can.

 

In Your 30s and 40s – family and big purchases

·        You may be getting married, raising a family, saving for your children’s education and making large purchases such as a house, car or cottage.

·        Build a relatively balanced portfolio across all asset classes that match your risk tolerance.  Include a Registered Education Savings Plan (RESP) to help save for your child’s university or college education.

·        Establish a regular investment plan, set it up so you automatically put money into your RRSP on a monthly basis.  Investing smaller amounts regularly is easier than scraping up a lump sum at the end of the year.  This strategy also allows you to take advantage of dollar-cost-averaging, taking advantage market fluctuations.

·        Some employers will match your RRSP contributions up to a maximum, so be sure to contribute enough to take full advantage of this program.

 

In Your 50s and 60s – serious business

·        Retirement is on the horizon.  It is time to think about preserving your assets, start by altering your asset mix into a lower risk portfolio.  Consider a conservative approach that includes a good portion of fixed income instruments.

·        Create a snapshot of how much you own to help you understand how your assets will help fund your retirement.  For instance, your RRSP will be a good source of regular income; while other accounts like your TFSA can pay for vacations or other large purchases.

·        Pay off all outstanding debts.

In Your 60s and older – looking at retirement

·        Adjust your financial plan to achieve your ideal retirement lifestyle, whether that includes taking early retirement or an extended trip, or launching a second career.

·        Consider income-generating investments coupled with a conservative asset mix.

·        Maximize your RRSP contributions and consider an RRSP loan for making catch-up contributions, as you will only be able to contribute to your RRSP until the year you turn 71.

·        Review and update your Will and Power of Attorneys, as well as your beneficiary designations on your RRSPs, RRIFs, TFSAs and insurance policies.

Whether retirement is many years away or just around the corner it is important to implement the strategies that will make the most of your money.  By making wise investment decisions now, and reviewing your financial plan regularly, you will be in a much better position to achieve all of your retirement goals.

If we need to meet before the deadline, or you want to get a head start for next year, give me a call I am always here to help.

Happy Family Day!

Tracey

 

Source:  Original article posted on Advisor.ca 01-23-13.  BMO Financial Group.

 

 

Investors Buying Stocks Again

For those of you that have been opening your statements; you have been realizing we had a pretty good year.  Investments are up, and the trend continues.  Although we remain cautious, here are five signs that investors are starting to feel better and moving back into stocks:

Trading is up

Daily trades at TD Ameritrade have averaged 370,000 in January – up from 331,000 in December, according to TD Ameritrade.

Portfolios have been repaired

The Wilshire 5000, the broadest measure of the U.S. stock market, crossed over its all-time high close to 15,806.69, meaning that the nearly $11 trillion in stock market wealth lost in the bear market has now been restored.

Money is flowing to stock funds again

Net inflows to U.S. stock funds totaling $11.3 billion in the two weeks ending January 16^th were the best two weeks since April 2000, according to Lipper.

Optimism is rising

A bullishness reading of 52.3% the week ending Jan. 23rd was the highest in two years, says American Association of Individual Investors.  (Bullishness = belief that the market will go up).

Nervousness is down

The VIX, also known as the “fear gauge” on Wall Street, recently hit its lowest level since April 2007.

Most people don’t realize the stock market will recover approximately six to nine months ahead of the economy.  If you are sitting on the sidelines wondering if it is time to get back in; give me a call.   We can discuss your individual situation and determine the best time and strategy for you to re-enter the stock market.

Have a great weekend,

Tracey

 

Source:  Robert Ahrens, Jeff Dionise and Kris Kinkade, USA Today Research, David L. Fingold Blog, Dynamic Funds

Debt Reduction Top Priority in 2013

According to a study released by CIBC we Canadians are more concerned with debt reduction than retirement planning as our main financial priority in 2013.

For a third year in a row debt reduction has topped the list; according to a poll done by Harris/Decima for the bank.  Unchanged from 2012; 17% of the respondents selected debt reduction as their main priority for 2013.  Fourteen percent chose debt reduction in 2011.

However, it remains to be seen how much progress Canadians will make in accomplishing their goal, according to Statistics Canada the household debt to income ration actually increased to a record high level in 2012 to 164.6%.  In other words; for every dollar we earn in income; we have $1.64 in debt.

Second on the list of priorities was Building Savings – chosen by 10% overall and unchanged from last year.  Managing day-to-day Spending/Budgeting followed in third place selected by 8% of respondents, down from 14% last year.

Retirement planning was further down the list selected by only 7% of respondents; this is down from 11% last year, and 13% in 2011.

“A key finding of the poll is that age groups where retirement planning was traditionally a top priority have now shifted to a focus on debt reduction,” CIBC said.

Only two year ago, 24% of respondents aged 45-64 named retirement planning as their top financial priority, this year; that number has dropped to 12% among that age group.  At the same time this group’s debt management priority has increased from 14% to 18%.

“While it is important to address immediate financial needs such as debt reduction, it is equally important to keep long-term goals such as retirement in sight,” says Christina Kramer executive vice-president, retail distribution and channel strategy, CIBC.  She adds “Even small contributions today can make it easier in future years to reach your retirement savings goals.”

Still, Kramer said the survey results highlight that Canadians are “well aware of the importance of good debt management.  Having been named the top priority three years in a row, there is an opportunity for more Canadians to turn awareness of debt management into action and outline some clear steps towards paying down their debt in 2013.”

Kramer said that while it can be challenging to keep multiple financial goals top of mind “it is possible to make debt repayment a priority while still keeping up regular investments into your retirement plan.”

Among other things, she said people should recognize that their finances are all connected and that making progress on one aspect of a person’s financial goals can lead to an opportunity to improve in other areas as well.

In my experience people tend to shy away from investing when the markets are turbulent, maybe this is part of the reason why debt management has surpassed retirement savings in the last few years.   However; it doesn’t have to be a choice between reducing your debts and saving for your future, give me a call and we can implement strategies so you can accomplish both goals.

Have a great weekend,

Tracey

Sources:  Original article by Hugh McKenna published 01-02-13, Investment Executive.com