megram - Index

megram - 55Ottawa - Index

additional tax, but a down payment similar to tax deductions
an employer makes.The table below shows the tax
rates that apply when you make withdrawals.
RRIF withdrawal in excess
of the annual minimum payment
Quebec Other Provinces
$5,000 or less 21% 10%
$5,001 to $15,000 30% 20%
Over $15,001 35% 30%
What registered annuities offer
A registered annuity can also be an effective option for
matured RRSPs.Annuities provide a guaranteed income for
life or for a fixed term. There are three types: single life,
joint and last survivor, and term certain.A single-life annuity
provides the highest income, is payable for as long as
you live and has no remaining value when you die.A guaranteed
term ensures that payments remaining under the
guarantee period are paid to your spouse or beneficiary if
death occurs before the end of that period.
Annuity income is determined by life expectancy, age,
gender,health,the amount invested and the interest rates at
the time of purchase, and is taxable in the year you receive
it.Annuity can offer some key features:
• Income for life or a specific term.
• No need for ongoing management.
• Payments can be based on a single life or on two lives (a
joint and last survivor).
• People are living longer and in a low-interest rate environment
so annuities could protect you from outliving
your capital.
• Guaranteeing the term or number of payments can
ensure an estate is protected for beneficiaries should the
annuitant die prematurely.
• Maximize your retirement income if there is a history of
long life expectancy in your family or if you don’t have
dependents or heirs.
RRIFs versus annuities
RRIFs and annuities have advantages and disadvantages,
so you’ll need to consider which suits your situation.
For example,a RRIF provides maximum flexibility and control
for investment, tax, estate and income tax planning.
However, it does require ongoing management and poor
decisions can affect your income and capital, as can lumpsum
withdrawals, low interest rates, market crashes, recessions
and wars.
Annuities protect you from outliving your capital by
guaranteeing an income for life.On the other hand,annuity
income is locked in based on a pre-set formula, which may
include provisions for indexing to the CPI or supply a fixed
percentage (1 to 4 per cent).
Avoiding OAS clawback
Retirement income typically includes Old Age Security
May 2008 • 32 • Fifty-Five Plus Magazine
(OAS), Canada Pension Plan, company pension, non-registered
investments that produce income, and RRSP assets.
Retirees over age 65 with an individual net income
above $64,718 must repay part or the entire maximum
OAS pension. If your net retirement income is $104,903 or
above, the full OAS pension is eliminated.
Flow-through shares are one of the few remaining taxassisted
investments available to Canadians.Their primary
benefit is to convert income that is otherwise fully taxable
in the current year into capital gains taxable at some point
in the future. For high-income seniors, flow-through limited
partnerships help reduce taxable income and avoid
OAS clawbacks. An investor with taxable income of
$100,000 who invests $40,000 investment in a flowthrough
limited partnership will benefit from additional
tax reductions of approximately $19,400 in the current tax
year, as well as full OAS restoration of about $5,292.
Whatever strategy you choose, plan early. Develop a
clear picture of how you want to live your retirement.Then
work with your financial advisor to determine the income
you’ll need and options for achieving it so you can enjoy
your retirement to the fullest.
Sheldon Rice is an investment advisor with Canaccord
Capital Corp.in Ottawa.He specializes in innovative, personalized
financial plans that are easy to understand
and simple to follow.
NELSON
INVESTMENT
GROUP LTD.
• 1 to 5 yr term
• Fixed rate
• Paid monthly
• Min. $10,000
12%per annum
Sophisticated and Accredited Investors
www.nelsongroup.ca is a related issuer of NIGL
1-877-509-8108