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Canadian RRSP Figures...
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Deadline is 60 days after the end of each Calendar
year. Typically this is March 1 of each year but is February 29 in any leap
year..
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Annual contribution limit is 18 per cent of earnings to a maximum of
$16,500 for 2005 and $18,000 for 2006.
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Ways to get around the foreign content restriction include clone funds,
labour-sponsored investment funds, and foreign index funds.
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In the 50 per cent bracket, putting $10,000 into an RRSP, and leaving the
money for 25 years at an annual compound rate of 10 per cent equals $108,347.
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The same amount left outside an RRSP (and taxed) would equal only $33,863.
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Investing $2,500 per year from age 20 through age 35 (and making no
further contributions from 35 onwards) will accumulate $1.5 million at 10 per
cent compounded annually!
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Investing the same $2,500 from age 35 for 30 more years equals less than
$500,000.
RRSP Tips
► DO IT! Only about 1/2 of Canadians who
are eligible have taken advantage of RRSP's to reduce taxes and secure their own
retirement.
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Don't rely on carry-forward rules. Maximize your RRSP each year even if you have
to borrow to do it, especially if you can repay the loan within one year.
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Maximize your RRSP before paying down your mortgage unless the mortgage
rate is at least 3% higher than your average RRSP return (ROI).
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Contribute to a spousal RRSP if your spouse will have a lower income at
retirement.
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Put most of your high-tax investments inside your RRSP.
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Deduct your RRSP trustee fees by paying them outside your RRSP.
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Annual Contributions |
Total Contributions Over 30 Years |
RRSP Value in 30 years |
| |
Years 1 to 15 |
Years 16 to 20 |
Years 21 to 30 |
5%
return |
10% return |
| Case 1 |
$1,000 |
$1,000 |
$1,000 |
$30,000 |
$
69,761 |
$
180,943 |
| Case 2 |
zero |
$2,000 |
$2,000 |
$30,000 |
$
45,315 |
$
69,899 |
| Case 3 |
zero |
zero |
$3,000 |
$30,000 |
$
39,620 |
$
52,594 |
|
Case 4 |
$1,000 |
zero |
zero |
$15,000 |
$
47,103 |
$
145,993 |
| Case 5 |
zero |
$1,000 |
$1,000 |
$15,000 |
$
22,658 |
$ 34,950 |
In cases 1 to 3, a total of
$30,000 was contributed to RRSP's, earning either 5% or 10% per
year.
In Cases 4 and 5, only $15,000 was contributed in total.
Note the huge difference by contributing earlier.
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