Tax expert Jamie Golombek's tips to save on tax now while saving for the future
TORONTO, Feb. 9 /CNW/ - With only weeks left before the March 1st Registered Retirement Savings Plan (RRSP) contribution deadline, the 2009 RRSP season is coming to a close and time is running out, now is a good time for investors to save on tax now while saving for the future they want.
"When investing for retirement, no other registered plan offers tax advantages as compelling as the RRSP," says Jamie Golombek, Managing Director of Tax and Estate Planning for CIBC. "Your annual RRSP contribution not only goes toward reducing the amount of tax you pay on income but your qualified investments grow tax-deferred within the plan until withdrawal, when you may be taxed at a lower rate."
To help investors further maximize the tax-efficiency of their RRSPs, Golombek offers the following tips:
Know your contribution limits
- As RRSP contributions are 18% of an individual's earnings from the
prior year, the amount of income needed in 2009 to generate the
maximum contribution room of $21,000 is $122,222. Looking ahead, the
RRSP contribution limit for 2010 has been increased to $22,000.
- While in recent years, RRSP contribution limits have been increasing
by $1,000 per year, 2011 will mark the first year that the RRSP limit
increase will be indexed to inflation, at $22,450, generated when
2009's income is at least $124,722.
Leverage a Spousal RRSP
- Higher-income earners can take advantage of their spouse or partner's
lower tax rate once they begin withdrawing from their RRSP in
retirement by contributing to a Spousal RRSP now. Higher-income
contributors receive a tax deduction for contributions made to their
spouse or partner's plan and spousal contributions do not interfere
with the other spouse's or partner's own RRSP limit.
- Remember that a Spousal RRSP does not allow an individual to exceed
their personal RRSP maximum contribution threshold which can be
allocated between the individual's own account and that of their
Remember RRSPs are for more than retirement
- RRSPs can be used to invest in financial goals other than retirement,
such as education or a first home. First-time homebuyers can withdraw
up to $25,000 tax-free from an RRSP under the Home Buyers' Plan (HBP)
and can repay the funds, interest-free, over a 15 year period.
However, failure to repay will cause the amount to be included in
- Under the Lifelong Learning Plan (LLP) investors can also withdraw up
to $10,000 in a calendar year and up to $20,000 in total from an RRSP
to help pay for training or education for yourself or your spouse or
partner. The LLP withdrawal must also be repaid, over a 10-year
period to avoid having it included in income.
Contribute early, contribute often
- If you can afford to contribute to an RRSP, do so. It's never too
early to start contributing but you might regret not doing so sooner
as with all investments, the more time you can give your plan to
grow, the better.
- Many investors find it much easier to make small but regular
contributions than to come up with large lump sums annually. Consider
setting up a regular investment plan to help make contributing to
your RRSP a priority all year long.
- After making your RRSP contribution, apply to the CRA using
Form T1213 for a reduction of payroll tax at source. By doing so, you
can benefit from your tax reduction throughout the year on each
paycheque, instead of waiting until you file your tax return in the
spring of 2011.
And finally, Golombek's most important tip this season: "Make time to discuss your options with a professional financial advisor. Remember, you're building a long-term plan so take time to sit down with an advisor, get their help in choosing the right solutions and get started today in saving for the retirement lifestyle you want."
For more information please visit your nearest CIBC branch or www.cibc.com.
CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at www.cibc.com.
For further information: For further information: Doug Maybee, Director, External Communications and Media Relations, CIBC, Tel: (416) 980-7458, firstname.lastname@example.org