megram - Index

megram - 55JulOttawa - Index

Retirement…continued from Ottawa 16
income. Here are some of the most
common mistakes that a financial
advisor would help you to avoid:
with investments. Many investors
don’t think in terms of after-tax
returns. But the taxman may take up
to half of the money you earned
from your investments. Different
types of investments are taxed differently.
Ignoring penalty-free
mortgage payments
A mortgage usually includes an
opportunity to prepay up to 10 per
cent a year of the outstanding principal
without penalty. Not enough
Canadians take advantage of this. If
your mortgage is at eight per cent,
that extra annual payment is equal to
an after-tax gain of the same percentage.
Regulatory changes
Some mistakes are made because
the individual is unaware of shifts in
government policy. The lowering of
capital gains tax rates, for example,
has made investing outside an RRSP
more attractive for Canadians in certain
situations.
Exceeding foreign
content restrictions
Think of a financial advisor as
your automatic re-balancing mechanism.
Every year, Canadians make
investment errors that cost hundreds
of millions of dollars in lost opportunities
and additional retirement
Saving while not retiring
credit card debt
Too many Canadians put money
into savings while maintaining credit
card debt. High credit card interest
consumes more of your disposable
income on a monthly basis than net
returns on investments put back.Using
your savings or deferring RRSP contri-
July/August 2008 • Ottawa 17 • Fifty-Five Plus Magazine
butions to pay down your credit cards
will give you a tax-free return equal to
the interest you no longer have to pay.
For example, at 10 per cent interest, a
$1,500 balance on your bank credit
card will cost you $150 a year (interest
on department store credit cards can
be as high as 28 per cent). In comparison,
10 per cent interest on a $1,500
investment provides after-tax earnings
of approximately $75 — only half as
much as you would have earned by
paying down your debt.