TORONTO, Jan. 29 /CNW/ - The clock is ticking for Canadians who haven't
finalized their RRSP plans. With only one month to go, now is the time to move
on those good RRSP intentions. Where should you start? Ernst & Young is
offering some quick tips to help would-be investors get going:
1. Short on cash? Consider using non-registered stocks and bonds.
Accrued gains will be taxable, but losses are not deductible.
2. Still low on funds? Consider borrowing. You can't deduct the interest
paid on the money you borrow to contribute to an RRSP, but borrowing
to make a contribution can be a wise decision in some cases.
3. Playing catch-up? If you're making a large "catch-up" contribution
that brings your taxable income into a lower tax bracket, think about
spreading your deduction over a couple of years to increase the
related tax benefit. And if 2007 was a low-income year - perhaps you
were in school, on maternity leave or not employed for part of the
year - contribute anyway and claim the deduction next year, when the
tax benefit will be greater.
4. Paired up? If you have a spouse or common-law partner who isn't
working or who has a low income, consider contributing to a spousal
RRSP. Even with the new pension income splitting rules there are
5. Excess contributions? Consider over-contributing to your RRSP by the
permitted $2,000 penalty-free amount. You won't get a tax deduction
for the extra amount, but your earnings on it will grow tax-free.
6. Making other investments? The preferential tax treatment for capital
gains and Canadian dividends doesn't apply to RRSP investments. It
might make sense to hold interest-bearing investments in your RRSP.
7. Naming a beneficiary? Think carefully about who it will be. Naming
your spouse, common-law partner or a dependent child or grandchild as
your RRSP beneficiary could permit RRSP proceeds on your death to be
tax-deferred even longer. Don't forget that you can also name a
charity as your RRSP beneficiary.
8. What's next? Plan ahead. Make your 2008 contribution now - don't wait
until the start of 2009. You'll gain another year of tax-free growth
- which, over the life of your RRSP, could amount to a significant
bump in the size of your retirement nest egg.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 130,000 people are united by our shared
values and an unwavering commitment to quality. We make a difference by
helping our people, our clients and our wider communities achieve potential.
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