November/December - 2005
you very much for your help and support.
Because this communication is to thank you and to wish you a MERRY CHRISTMAS AND A HAPPY NEW YEAR, I'm enclosing the current issues of LIFE LETTER and LIFE LETTER MATURE without my usual commentary.
LIFE LETTER MATURE - Designed for people over 55, please pass LIFE LETTER MATURE on to someone you know. The subjects covered November and December deal with Redefining Retirement and How to recognize the symptoms of a stroke.
THE STOCK MARKETS - Canada's major index, the S&P TSX, is up more than 17% from Jan.1 through Nov.30, 2005. Because over 95% of our clients are invested in funds with 100% Canadian content, your return for 2005 will be very good. Only the indexes of Japan, Germany and France marginally outperformed Canada the first 11 months of this year. A more detailed performance outline will be published in the next issue of our Newsletter.
THE ANNUAL REVIEW CHECK LIST: For the past many years, you have received this paper with the December mailing of our Newsletter. A large number of our clients use this feature as an Annual Reminder to update their affairs.
You now can access the Annual Review Check List on our web site, print the page off, complete it and forward it back to me.
If you would rather have it mailed or faxed to you, call us and we will make sure you recieve it. We could even take your information over the phone if you prefer. I would be happy to to do the best I can to help you update your affairs.
Once again, MERRY
CHRISTMAS AND A HAPPY
NEW YEAR TO YOU AND YOUR LOVED ONES.
RRSPs aren't just for retirement
Registered Retirement Savings Plans (RRSPs) were introduced by federal legislation in 1957 to encourage Canadians to save for their retirement. Since then, there have been many changes that affect how money can go into and come out of them. Two programs that allow funds to be withdrawn from RRSPs for purposes other than retirement income are the Lifelong Learning Plan (LLP) and Home Buyers' Plan (HBP). Here's how they can benefit you:
Lifelong Learning Plan (LLP) - Sam and Linda have raised their children to school age with Linda as a stay at home mom. She wants to re-enter the workforce, but needs to upgrade her education so she can get back into her previous profession. Linda will be a full-time student.
While raising their children, Sam and Linda contributed to RRSPs both in Sam's name and in a spousal RRSP in Linda's name. They can withdraw up to $10,000 each per year from their RRSPs, to a maximum of $20,000 total, to help pay for Linda's education. They cannot make any withdrawals from Linda's locked-in RRSP.
Sam and Linda will be able to withdraw funds from their RRSPs without having to pay taxes on them as long as Linda participates in a qualifying educational program at a designated educational institution. They will have to pay back the funds within 10 years (sooner if the person who made the withdrawal dies, becomes a non-resident or reaches the age of 70). Sam and Linda will be required to re-pay a portion of the original withdrawal each year. If all or part of a repayment is not made, then the unpaid amount will be fully taxable.
Home Buyers Plan (HBP) - Glenn and Jayne started RRSPs as soon as they entered the workforce. They are now ready to buy a home and may withdraw up to $20,000 each from their RRSPs toward the purchase. They cannot make withdrawals from a locked-in RRSP plan.
The home must be in Canada and they must intend to occupy it as their principal residence within one year of buying or building it. Glenn and Jayne must also qualify as first-time home buyers in order to withdraw funds from their RRSPs without having to pay taxes on them. This means that neither could have owned a home and occupied it as a principal residence "at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal."
If Glenn and Jayne make any RRSP contributions within 89 days prior to making a withdrawal for HBP purposes, they will not get the tax deduction.
Glenn and Jayne will have up to 15 years to repay their withdrawals (sooner if the person who made the withdrawal dies, becomes a non-resident or reaches the age of 70). A minimum payment must be made each year. If all or part of the required annual repayment is not made, then the unpaid amount must be included as income for tax purposes.
This article is intended to provide a brief overview of the Lifelong Learning Plan and the Home Buyers' Plan for Canadian residents and is not intended to provide specific advice. For a free copy of the Canada Revenue Agency (CRA) guide for either plan, please contact Mathisen Financial, Inc.
Copyright © 2003 Bowen Financial Inc. All rights reserved
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CPP is intended to provide basic financial protection for the contributor and his or her family in the event of death, disability or retirement. Benefits, which are taxable for income purposes, must be applied for. They do not start automatically.
Retirement Benefits - Carl, age 65, is about to retire. He has the option of applying for CPP benefits right away, or he can delay them until as late as age 70. The longer Carl waits, the more his CPP benefit will be. His monthly benefits will increase by .5% (one half percent) per month he delays.
Caria, on the other hand, wants to retire early. She can receive reduced CPP benefits as early as age 60 as long as she meets certain criteria:
1 - She can stop working before the end of the month before she receives benefits and not work in the whole month she first receives benefits, or
2 - She can have earned income that is less than a specified amount in the month before her CPP pension benefits begin.
Even if Caria does not need the income, she may be better off taking it early. After taxes, she will have extra money to invest or she can choose to give it to her favorite charity and get a nice tax reduction.
Disability Benefits - Brian has applied for a disability benefit from CPP. It may take up to four months before he receives benefits. The CPP defines disability as "a condition, either physical or mental, that is severe and prolonged. 'Severe' means your condition prevents you from working regularly at any job, and 'prolonged' means your condition is long-term or may result in death". Brian will also have to meet age and contribution requirements.
Brian has two children under age 18 and one child who is 19 and a full-time student at university. There is also a monthly benefit for dependent children of parents who are receiving a CPP disability benefit.
Survivor Benefits - There are three CPP survivor benefits. They are:
- a one-time payment to, or on behalf of, the estate of a deceased
Jill's husband recently died. Like the CPP website says, she must "apply for CPP benefits. If you do not apply, you will not receive them."
This article is intended to provide an overview of the Canada Pension Plan and is not intended to provide specific advice.
Copyright © 2003 Bowen Financial Inc. All rights reserved
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