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Money Matters TOEHERALD Wetooby 1W1 Page Mutual Fund RESP program recommended Ive got the best plan your friend says What is the best plan you ask And you are told what your friend believes to be the best Im sure we all have opinions and human nature being what it is many people believe their plan is best and are not open to different ideas Lets examine some of the best plans Many are offered by savings institutions such as banks trust companies credit unions etc Others are offered by life insurance companies stock brokers who no call themselves investment advisors and mutual fund companies The best may be the savings institution where we feel safe our money is secure because the principal amount not the rate of return is guaranteed by the Canada Deposit In surance Corporation up to Now if I gave my money to a financial institution who was going to pay me rent interest for the money and then rent it out to someone else who I dont know at a higher rent then you bet would want an ironclad guarantee The best may be from broker investment advisor If you are a sophisticated investor and have the time to study all of the factors involved to make your own investment decisions know ing what to do and when and are usually right Then and only then should you manage your RRSP yourself You can then have dozens of stocks bonds strip bonds mortgage backed securities term deposits etc even a mortgage in your RRSP The best may be a mutual fund RRSP There are many dif ferent kinds of mutual funds but they all have one thing in com mon and that is professional management of your money The managers of these funds do nothing else they probably work longer hours at their job than most of us The way then can improve their incomes is to pro vide superior investment per formance This writers opinion is that the best is the one that gives the greatest rate of return with the element of safety that you desire And the one that best fits that description we believe is a mutual fund RRSP program either regular or for the more sophisticated selfdirected Why Well for one thing you can combine most of the benefits of all of the options in one plan For those who absolutely in sist on guaranteed security what could be better than Government of Canada Bands or Treasury Bills You can have more than invested and they are still backed by the federal government You can find this type of investment in a bond andor money market mutual fund Over the years these funds have matched or exceeded GIC returns and the money is not ITS YOUR MONEY Paul J Rocket locked in for 5 years There are real estate funds where the managers hold income producing properties leased to triple A tenants on long term leases The properties are diver sified geographically and by class of real estate You could not hope to achieve this on your own unless you had many millions to invest The value of the fund does not fluctuate as do equity funds and returns have compared very favourably with GICs and the money is not locked in Then there is my favourite equity mutual funds which over the long haul have performed bet ter than other investment types Sure they fluctuate up and down in the short term but some of the best of them still show per cent per year average returns over the long term This in spite of the fact that equity markets are at the lowest point since the recession You can be diversified and have a mix of mutual funds of all types to meet your objectives Your money is not locked up for fixed periods You can switch from one fund to another if you like You will usually be working with an independent financial planner who has literally hun dreds of different funds to choose from term deposits from as many as 40 different financial in stitutions and is also an in surance broker who can offer products from dozens of in surance companies He will prepare a written financial plan taking into account your tax posi tion financial objectives and in surance program In my view the best reason to have a selfdirected is to incorporate more international investment choices in your sav ings program The big pension managers have been lobbying the federal government for years to allow more foreign investment in Canadian pension funds Time has proved international in vestment has tended to provide greater returns than domestic with all the stalling in parliament last year the bill expanding foreign investment in pension funds and the bill included RRSP investments as well did not passed but probably will this year In spite of the bad news overload in the last months Lake Oka and the Gulf Crisis the recession the GST the stalemate in the Senate etc if you are not absolutely scared out of your wits the history of the past twenty years indicates that this is a time in the equity markets similar to and 1982 the best investment opportunities in 20 years What is your favourite RRSP investment program Does it have additional of better features Remember all save taxes but the most impor tant thing is a long term plan to maximize your retirement in come Do you rush to the nearest bank in the last week before the deadline and contribute as much as you happen to have at the mo ment or do you have an RRSP plan that works for you 365 days a year and is structured to achieve your own future- financial in dependence And what rate of return have you settled for After all a person who seta aside per year in an for 20 years at a 10 per cent rate of return will have a value of If you choose a mutual fund program and it averages 15 per cent as they have in the past youll have Almost twice as much Which would you rather retire with fot a FRE booklet on investing and a chart comparing the performance of an actual mutual fund with a 10 per cent In vestment over the last 23 years contact Peter C Regal Capital Planners Ltd Drive Georgetown On tario or phone 87772J6 Paul J fa the author of the best seller Why I Invest In Mutual Funds and President of Regal Capital Planners Ltd Make the most out of Many Canadians look at RSPs as a source of extra income at retirement You could be in for a rude awakening if you do The fact Is that the combined benefits you will receive from Old Age Security the CanadaQuebec Pension Plan and company benefits may be insufficient to meet your needs Consider that the maximum payments for 990 from OASCPP andor totalled just annually Also con sider the limitations of your com pany plan Most Canadians who participate in pension plans 94 in fact have defined benefit plans This type of plan calculates your retirement benefits according to your salary and years of service with the company The size of contribu tions to the plan depends on who contributes you the company or both The other factor that will in fluence the benefits you receive at retirement is how your com pany interprets average salary Definitions can range from an average of all your years with the company or an average of the last five years Obviously the latter definition is more favourable You can see how with a defined benefit plan you could do quite well or you could earn only half of your current salary On the other side of the coin is the defined contribution or by Brian Stessor moneypurchase plan With this type of plan contributions from the employee andor employer are fixed and the benefits at retirement are determined by the pension plans performance and the level of interest rates at retirement This type of plan is less secure than a defined benefit because benefits are not guaranteed If your investment grows at less than the rate of in flation you are actually losing purchasing power Next contrast your projected income with your needs at retire ment Experts estimate that most people between the ages of 40 and 60 will require between and 80 of their current income to live satisfactorily at retire ment However if your plans in clude travel or expensive hob bies you could need more Theres a good chance your needs Attracting buyers There arc a variety of options available lo the vendor us he goes about selling his home tonus advertising llul generate buyers have staliMiis that might surprise you A major broker reported thai less than one third all buyers conic from classified advertising and lawn signs traditional way to market properties lor sale Deciding to go the private route means that the vendos are liniiliug themselves to this third Ihe market Its a large risk to take especially in a recession when arent as many people tint there eager to purchase Actually a surprising SO cent ol all buyers arc iclerred via Krsonal coiilacls friends or rc- lerrals generated by the through other anil departments in the I REAL ESTATE AND YOU Jamie Johnston company Other lomis advertising account for the final 1 percent For the selling effort to be sticcessliil it is crucial that the vendor broker analyzes their market correctly One the key questions for a broker lo determine the source of his buyers channeling his and allocat ing his dollars toward this source he will increase sales most Itisicall when you can pinpoint the potential it helps you direct accordingly eliminating added hassle and expense will exceed your income and thats where the RSP fits in By fully utilizing your you can build a defense against inflation and taxes and ensure the maintenance of your lifestyle at retirement Two facts of life which many people fail to take into account when planning for retirement are the effects of inflation and taxes Although inflation has averaged over the past 30 years and this doesnt sound like much com pared to the doubledigit inflation we experienced in the even 5 can have a disastrous ef fect on your income re quirements in the future By way way of example if you earn today in just twenty years you will need to enjoy the same standard of liv ing This is almost triple your current income Clearly your in vestments must perform better than the rate of inflation for you to have a comfortable retire ment The other factor you must con sider is the effect of taxes on your savings Invested outside an RSP the rate of return you earn on your investments is cut by as much as fifty per cent depending on your tax bracket After ac counting for the effects of infla tion some of your investments may even be earning a negative rate of return Sheltering your in vestments from tax within an results in increased growth The key to insuring the maintenance of your current lifestyle at retirement is plann ing By determining what amount of income you can expect and by contrasting this amount with your requirements now you will likely be able lo make up any shortfalls using your For more ideas on how to make the most of each and every RSP call Brian Slessor for your free copy of ScotiaMcLeods RSP booklet The 10 Ways You Could Be Cheating Yourself at time Brian Is an Investment Executive with ScotiaMcLeod Any questions should be directed to Brian who can be reached at If outside Toronto please call collect Tax breaks help students and their parents By Larry Bookman CA With university costs for tuition and residence nudging a year hardpressed students and their parents can stand all the financial breaks they can get And major tax breaks this year could mean as much as 1300 in both credits and cash for each student First theres a credit for tuition fees of more than paid to a postsecondary educational insti tution in CanadaThis credit which amounts to 26 per cent of total fees amountto 450 or more forasludcnt A worthwhile saving Next theres the education credit of a month for every month a student is in fulltime attendance at university Bui the 26 per cent rale applies here as well This means that if a student attends lectures foreightfull months in the 8 480 per cent Another break for students is the federal sales tax credit The only qualification here is that the student must be at least years old this year The maximum FST credit is paid in cash but is 5 per ccntof any income over This is thelast year for the FST credit which is due to be replaced in by the GST credit which must beappticd for If you havent applied yet pick up Form T- 1GSTC at any Revenue Canada office complete and file it right away The basic GST credit is which is paid by quarterly instal ments with the first cheques due to theres a supplemental credit of up to 100 paid to single individuals But the supplement is geared to income On income of between and 25000 a year however the full GST credit and supplement will apply There are also two Ontario pro vincial credits that students are entitled to The first tax credit which is paid to students who arepaying rent for an apart ment or a room off campus and amounts to the lesser of or the occupancy cost Students in residence are treated In their case the prop erty tax credit is a flat The other provincial tax break is a provincial sales tax credit Combined with the property tax credit this means a total credit of a student might claim But again this credit is reduced by percent of net income So that means if a students net income is say 10000 then the credit would be reduced by If a student receives a scholar ship bursary research grant fel lowship or other academic prize then the first is tax exempt ForCAsadviceonTV see Your Wealth available on broadcast channels in Ontario and on satel lite across Canada or sec Money in the Bank on your community cable channel Moneycare fa general financial advice by Canadas chartered accountants Larry Bookman is with