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RESP ( Registered Education Savings Plan
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Further Info: http://www.cra-arc.gc.ca/E/pub/tg/rc4092/rc4092-e.html |
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Make the Educated Choice for Your Child’s
RESP |
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Nothing is more precious to a parent than a child. All parents naturally want their children to be successful and to never be in need of anything. A good education will allow children to fare better in the job market, enjoy an excellent career and earn more money. Isn't education one of the best gifts a parent can give a child? |
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The costs of post-secondary education, however, are continually rising. According to Statistics Canada, one year of university can cost up to $13,000. Moreover, these costs are currently increasing faster than the inflation rate. What would that be in 10 or 15 years? |
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A registered education savings plan (RESP) is an excellent opportunity for a service offer. Highlight the benefits of contributing to an RESP, as outlined below: |
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Government subsidies |
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- The Canada Education Savings Grant (CESG)
- Up to $7,200 per beneficiary
- The Canada Learning Bond (CLB) for low-income families
- Up to $2,000 per beneficiary
- The Alberta Centennial Education Savings Plan (ACES) (for residents of Alberta)
- Up to $800 per beneficiary
- The Quebec Education Savings Incentive (QESI) (for Quebec residents)
- Up to $3,600 per beneficiary
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Tax-exempt funding |
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Only investment income and the subsidies received are taxable, and only for the child, once he or she cashes in RESP income. |
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Contributions of up to $50,000 per beneficiary are possible. |
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Lump-sum amounts |
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Option of contributing lump-sum amounts or creating a regular savings program through a PAC to take advantage of dollar cost averaging.. |
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Annual CESGs and QESIs accumulate when not used. |
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Industrial Alliance Group offers two education savings products. This means you can choose the RESP that best meets the needs for your clients. The DIPLOMA and MY EDUCATION RESPs are outstanding tools to enable parents to immediately begin building a promising future for their children. |
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DIPLOMA, for a comprehensive solution |
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- Monthly contribution program, through pre-authorized contributions (PAC)
- Education bonus paid at the end of the PAC program (up to a maximum of 15% of contributions)
- Possibility of contributing lump-sum amounts
- Worry-free administration due to asset allocation based on recipient's age
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MY EDUCATION, for personalized management |
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- Option of selecting an individual or family plan
- Possibility of investing in a wide array of funds
- Amount and frequency of payments left to the client's discretion
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DIPLOMA and MY EDUCATION |
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- Face amount guaranteed 100% at term*
- Option of changing the beneficiary
- Possibility of obtaining an advance on RESP contract to maximize subsidies
- Option of insuring PAC payments as a protection against subscriber death (CDA) or disability (CIA)
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*75% if the subscriber is 72 years of age or older |
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Because a picture is worth a thousand words, we have provided an example below to show parents how much they can gain by contributing to an RESP for their child. |
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Example: |
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Karen and her family are Manitoba residents. Karen was born in 2007 and her parents subscribed to a My Education RESP for her in 2008. They want to contribute the minimum amount required to benefit from maximum subsidies. Their 2007 household income was $65,000. Below is a chart indicating the amounts that could be accumulated for Karen's education with an average annual return of 5%. |
Year |
Age |
Contri-bution |
CESG |
Total with return |
Year |
Age |
Contri-bution |
CESG |
Total with return |
2008 |
1 |
2,500 |
500 |
3,150.00(1) |
2017 |
10 |
2,500 |
500 |
39,620.36 |
2009 |
2 |
2,500 |
500 |
6,457.50(2) |
2018 |
11 |
2,500 |
500 |
44,751.38 |
2010 |
3 |
2,500 |
500 |
9,930.38 |
2019 |
12 |
2,500 |
500 |
50,138.95 |
2011 |
4 |
2,500 |
500 |
13,576.89 |
2020 |
13 |
2,500 |
500 |
55,795.90 |
2012 |
5 |
2,500 |
500 |
17,405.74 |
2021 |
14 |
2,500 |
500 |
61,735.69 |
2013 |
6 |
2,500 |
500 |
21,426.03 |
2022 |
15 |
1,000 |
200 |
66,082.48 |
2014 |
7 |
2,500 |
500 |
25,647.33 |
2023 |
16 |
0(3) |
N/A(4) |
69,386.60 |
2015 |
8 |
2,500 |
500 |
30,079.69 |
2024 |
17 |
0(3) |
N/A(4) |
72,855.93 |
2016 |
9 |
2,500 |
500 |
34,733.68 |
Total |
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36,000 |
7,200 |
72,855.93 |
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1) ($2,500 + $500) x 1.05 |
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2) ($3,150 + 2,500$ + $500) x 1.05 |
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3)Karen's parents chose to stop contributing, given that they had reached their objective of obtaining the maximum possible subsidies. They could nonetheless have kept up their contributions to benefit from the tax exemptions. |
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4)No other CESG is allowed, given that the cumulative ceiling has been reached. |
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Karen's parents followed all of the keys to success: |
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- Beginning to contribute early
- Contributing each year
- Maximizing the subsidies
- Taking advantage of saving exempt from income taxes
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RRSP ( Registered Retirement Savings Plans
) |
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Further Info : http://www.inalco.com/english/individual/savings/retirement-savings/rrsp/rrsp.jsp |
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An RRSP is not simply an investment. It is a government sanctioned
registered program that allows you to save for your retirement.
You are allowed to invest in a broad range of products within
an RRSP, including GICs, mutual funds, individual stocks and
bonds |
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RRSP Limits |
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Your RRSP limit for the current year is determined as follows: |
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Your unused RRSP deduction limit carried forward from prior
years |
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Plus 18 percent of your previous year’s earned income
( up to a maximum of $16,500 in 2005, $18,000 in 2006, $19,000
in 2007, $20,000 in 2008, $21,000 in 2009 and $22,000 in 2010) |
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Less any pension adjustment for the prior year ( for those
who have company pension plans ) |
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Timing |
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For an RRSP contribution to be deductible, it must be made
within 60 days of the calendar year end (i.e., March 1, or February
29 in a leap year). If the deadline falls on a weekend, it is
extended to the next business day.
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Your Options At Age 71 |
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Government legislation presently dictates that you have to
collapse your Registered or “locked-in” money by
December 31st in the year in which you turn 71. Upon doing so,
you have three main options. |
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The first option is to cash the money in. However, since the
money has accumulated tax-free, you would immediately have to
pay tax on the entire amount. This is not a tax efficient solution,
as you could instantly have to pay CCRA 50% of the total. |
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Your second option is to convert the money into a life annuity.
This may be an acceptable solution depending on your personal
circumstances. This is especially popular for people who like
certainty over what monthly or annual amounts they will be receiving
for the rest of their life, and who do not wish to participate
in potentially volatile markets. |
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The third option is to convert the RRSPs into a Registered
Retirement Income Fund. This is a popular option for those who
want to minimize the amount of income they take out in the early
years, thereby minimizing the amount of tax payable. It allows
you the flexibility to change the amount of income you receive,
and if you so desire you can continue to fully participate in
the market. For more information on this, please go to our RRIF
section. |
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