Active and retired members may
have different needs when it comes to RRSP contributions.
For our
active clients, we would like to take this opportunity to suggest that
you consider making your RRSP contribution now for 2006. The first 60
days of the year are heavily promoted as "RRSP Season", but you don't
have to wait to invest until that time - you can make your contribution
at any time during the year. Ideally, one should contribute on a dollar
cost averaging basis through a monthly contribution program. The sooner
you invest, the sooner the funds can start to grow tax deferred. Be sure
to check your 2005 tax assessment from Canada Revenue Agency (CRA-
formerly Revenue Canada) for details of your contribution limit for 2006
and make sure you don't over-contribute to your plan.
For our retired
clients, please be sure you speak or meet with us if you are turning (or
have turned) 69 this year. We are required to convert your RRSP accounts
to Registered Retirement Income Funds (RRIF) before December 31st. (f
you are comfortable with the current allocation of your funds, and the
funds match your personal risk tolerance, you do not need to make any
changes to the funds you've selected. If you would like to discuss your
risk tolerance and fund choice, please do not hesitate to call a member
of the Client Advisory Services team. You will also be required to make
a number of other decisions regarding your RRIF payment:
• What age should you use for the minimum RRIF payment calculation? You
can base the calculation on your age or spouse's age, if they are
younger. For example, if the payment is based on the annuitant's age 69,
the payment will be 4.76% of the value of the investments on January
1st, 2007. If your spouse is five years younger, the payment will be
3.85% of the value of the funds on the same date. The smaller the
payment, the smaller the tax bill the following year.
• When would you like to receive the payments? We can make monthly,
quarterly, semi-annual or annual payments directly to your bank account
- just send us a void cheque.
• Which funds should I deplete first? The minimum payment can be
withdrawn from one or all of the funds you hold.
Of course, you are at
liberty to withdraw any amount you may require for your own personal
cash flow needs. For any withdrawals over and above the minimum payment,
we are required to withhold a certain percentage of the payment and
remit the taxes to CRA on your behalf.
As with all employees at OTG Financial, our
financial planners are salaried, not commissioned and their objectives
are solely based on your personal goals and needs. If you are planning
on retiring in the next few years or wish to have an objective review of
your investment portfolio, please contact us for
a one-on-one financial planning
appointment.
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