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THE HERALD Wednesday November 19M Page Money Matters good vehicle for retirement income By BRIAN People who are turning must make an important decision about how to convert their Registered Retirement Savings Plan RRSP into a source of in come The choice they make is crucial because the result will likely be their primary source of income during retirement Traditionally investors have had two options either withdraw all their money in cash or con vert their into a life or fix ed term annuity Withdrawing was less attractive because most people would be taxed heavily So the majority of people choose annuities life plans that guaranteed them a regular in come for the rest of their life Some annuities also offered guarantees for a fixed period so that if the investor died payments would continue to be made to hisher estate However most annuities dont protect against inflation The buying power of people who con vert their RRSPs into annuities shrinks each year Since 1986 situation regar ding retirement income options has improved dramatically with Registered Retirement Income Funds emerging as one of the best vehicles to handle in vestors retirement income needs A is a contract that pro vides periodic payments to the in vestor from the starting date un til the investor reaches age For many years were un popular because their rules were inflexible Then after the federal government loosened the rules many people began converting their RRSPs into instead of annuities Under the new rules investors can own more than one As well there is no limit on the amount investors may receive Brian Slessor Dollars and Sense from their RRIF each year However they must withdraw a minimum amount calculated by their current age subtracted see below Another RRIF advantage is that investors can begin receiving payments from the immediately after purchasing it rather than being obliged to wait until the next calendar year Also a RRIF continues to allow investors to- ac cumulate funds taxfree until they are withdrawn Here is how payments work Each payment investors received is a fraction of the value of the investors capital at the start of the year This fraction is equal one divided by the dif ference between your age and So if you have a plan valued at and you are 70 years old the payment you will receive is l20th of the fund or This is the minimum annual payment in that year It can be higher if you wish but withdrawing too much money too soon can deplete your funds and the excess is sub ject withholding tax As you get older the fractional amounts increase so that when you are 71 you receive l19th when you are when you are 73 and so on When you become 89 you will receive li that is per cent of the remainder While a disadvantage of a RRIF is that investors must ex haust all the funds money by the time they turn 90 the advantages of a can make if far more attractive than an annuity Consider two of them First a offers a wide and varied range of investment choices Unlike an annuity which is based on fixed income returns a RRIF can be invested in growth or balanced investments such as mutual funds Second a RRIF with growth producing investments will sur pass annuities in generating in come and compensating for infla tion Suppose at you bought a annuity invested at 12 per cent over years You would receive each year until you reached and your com- ulative total would be On the other hand if you had bought a RRIF with the same principal investment of 100000 also invested at per cent you would receive in the first year Since less money is withdrawn in he early years of the RRIF more money is left to compound and grow taxfree in the following years By the 10th year you would receive 9610 By the 20th year 32057 and by the 30th year over 135000 Over years you would receive a total of 2 times as much as the annuity Now lets assume that inflation remains at five per cent during the next 30 years That means the final annual annuity pay ment would be worth on ly 2870 in dollars By com parison the final pay ment of approximately would be worth in cons tant dollars With this in mind think what would have happened if you had invested your RRIF in a mutual fund that has the potential of yielding an average of per cent a year During 30 years you would receive a return of million Talk to an Investment Ex ecutive to discover how a RRIF can be tailored to fit your retire ment income needs Brian Is an Investment Executive with Questions should be directed towards Brian who can be reach ed at 41G863225 Call collect if outside Toronto The Newfie Store llvoUbsler6 Fresh Atai Satan 6fc Fresh Cod Fresh Mussels MOORE PARK PLAZA 74C Main St N Georgetown hit Shopping statesside for bargains ByDIANNEMALEY Business Analyst Thomson News Service So you shop in the States eh Dont you think thats un patriotic I could care less said Jen nifer Peterson of Thunder Bay in a recent interview with the Globe and Mail Its cheaper in the US the staff are friendlier and theres a better selection she said echoing hundreds of thousands of other Canadians Price service and selection will drive Canadians to spend billion south of the border- this year on such basic things as food gasoline and clothing a Toronto retail analyst estimates People in Thunder Bay go farther out of their way than most making a sevenhour round trip to Minn They will spend per cent more this year than they did last a local group predicts As far as the defectors are concerned it serves retailers right Retailers in Thunder Bay have ripped us off for so damn long and now its catching up to them Susan told The Globe My brother saved on a refrigerator At these prices I cant afford to be loyal to Canada High Canadian prices are not solely the fault of retailers Cana dian companies dont have the same economies of scale as their American counterparts They also have higher taxes and transportation costs From this point of view it seems unfair to buy American while enjoying Canadian social benefits Indeed Finance Minister Michael Wilson could stop this fast by doing what everyone wants him to do ease on up in terest rates and let the dollar fall This would make it more expen sive for people to buy American goods But price is not the only reason many Canadians prefer to shop in the United States Service and selection are just as important for some Surly sales clerks and limited selection make shopping a tough slog even a city the size of Toronto With retailers facing hard times the prospects for im provement seem limited Is it really unpatriotic to shop outside the country Arguing for it is the whole wave of propaganda about competition and the global marketplace Workers are told they must work harder companies that they must be more competitive Retailers are no exception Now that Canadians feel they have a choice they will force local retailers to pull up their socks It is also an international phenomenon It is no different from North Americans buying Japanesemade cars The Japanese make them better so we buy them All over the world the consumers is cracking the whip ELUSIVE END From the perspective of political theory though a world driven by man as consumer is a disconcerting thing II disrupts national policy at least as much as do global money and currency markets It changes man from citizen to shopper debasing him in the process Values Sat Nov 3rd through Sot Nov ICHh 1990 GEORGETOWN FOOD MARKET MOORE PARK PLAZA Pleasure To Serve You grope Monday to pm 000 pm HOURS CLOSED SUNDAY PONTIAC BUICK CADILLAC NEW USED LEASE 4590126 QUEEN ST E BRAMPTON SPECIAL EVERY FRIDAY RltVSTEAK DINNER INCLUDES SOUP OR SALAD ROAST POTATOES 50 MARTYS TOO RESTAURANT Georgetown Market Place Sol Nov 3rd through Sot I