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RESP ( Registered Education Savings Plan
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Further Info: http://www.inalco.com/english/individual/savings/education/education.jsp |
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Make the Educated Choice for Your Child’s
RESP |
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As a caring parent, you want your child to enjoy a successful
life. Today, that means a post-secondary degree or specialized
training is a necessity, not an option. |
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A Registered Education Savings Plan (RESP),
created by the Federal Government to help parents provide full
education opportunities for their children, allows you to save
up to $4,000 per year per child, to a lifetime total of $42,000
per child in a tax-sheltered plan. |
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Your savings will grow
with the help of special plan features: |
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Get an additional 20% free.
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You’ll benefit from the Canada Education Savings Grant
(CESG), a government grant that provides an amount equal to
20% of your RESP contributions. It’s extra money that
can add up to $400 per year for each child, to a maximum grant
of $7,200 over the life of the plan. The grant money will grow
with interest, too. |
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Enjoy tax-sheltered growth. |
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RESPs offer tax deferral on the interest earned on your savings
over the years. If you were to save outside an RESP, your interest
earnings would be subject to tax, greatly decreasing the money
available for your child’s education. When you save in
an RESP, your contributions and your CESG enjoy compound growth
that is tax-sheltered. |
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When the time comes to withdraw funds from your plan, the
money is paid in your child’s name to reduce taxes. Since
students have generally low income levels, little or no tax
is payable. |
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An RESP is the Best Overall Choice |
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No other savings option provides as many advantages as an
RESP. For example, if you were to save in your RRSP and then
withdraw it to pay education costs, you’d have to pay
income tax on the full amount you withdraw at your tax rate.
With an RESP, the interest earnings are paid in the name of
your child. Students have generally low income levels, so little
or no tax is payable. |
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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 69 |
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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 69. 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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