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the HERALD Wednesday February 1992 Money Matters Transfer your RRSP to get a better return By PAUL J Herald Special When the government set up the program they made it possible to transfer your to another financial institution to possibly get a better return without having to and pay tax There is a simple form you will fill out and sign called a and thats all there is to it Have you got a term deposit coming due for renewal in your Its pretty sad when you are faced with renewing it at rates from 5 per cent for one year to eight per cent for five years when the one coming due was earning anywhere from nine ITS YOUR MONEY Paul J Rockel per cent to per cent Then comes the puzzle of trying to guess whether rates will stay the same go up or go down To get the best rate you have to lock your money up for one to five years which to chose is another big guess As Winston Churchill once said you can only predict things after they ve happened The banks and trust com get you another way that many dont stop to thin about Your GIC or term deposit may be in a savings type deposit with no compounding so that your earn yield about half what he principle is earning youd be sur prised how many RRSPs that I have seen where folks have fallen into that trap Most are of the type where the return is com pounded annually and paid to the deposit at the end although some semi annual compounding term deposits are available Also available at a few institutions are term deposits that are redeemable however they always yield a smaller return RRSPs a worthwhile supplement RRSPs a worthwhile supple ment to government and employee pensions What kind of income will you have when you retire Like most people youll be get ting something from the govern ment And if you belong to an employee pension plan you know that youll also be getting regular retirement benefits from your employer Then theres the in come from your savings or in vestments as well as the money youve accumulated inside your Given all these different sources you might assume that your retirement income will be adequate even if youre not sure of exactly how much it will be And you might be right But if youre not now is the time to find out Government Pensions Chances are you ve always thought that if worse came to worse you could at least survive retirement on a government pen sion After all the government wouldnt let you starve would if Well maybe not But you come pretty close To see why let say thai youve worked for more than 20 years during which you con the maximum amount towards the Canada Pension Plan or CPP Quebec Pension Plan or if you lived in that province What would you get on retire menf In 1991 you re entitled to the maximum benefit of a month from as well as Old Age Security payments of or a total of 78 517 a year Under normal circumstances thats as much as any Canadian can expect to get But if you re really destitute youre also en titled to receive the Guaranteed Income Supplement GIS which Oil Filter PODGERS 82 Main St N Georgetown EVERYDAY LOW PRICES No HWden PERMS Start includes GST SHAMPOO CUTSTYLE 3 Includes GST 310 GUELPH ST GEORGETOWN- for a single person is currently 61 a month All in all it doesnt add up to much of a retirement lifestyle Employee pensions plans or the is for Registered are an important source of retirement income for about per cent of Canadians Most RPPs are defmedbenefit plans to which you andor your employer contribute during your years of service and from which you receive regular monthly benefits upon retirement The amount of the benefit is usually based on a formula that includes your average salary and years of service with the company Still there is no fixed rule as to how retirement benefits are calculated So two people with the same salary and years of service can end up with very different levels of retirement income simply because they worked for different employers What about you If you belong to an and if you haven t done so already you should make a point of asking your personnel office about the kind of retire ment benefits you can expect from your plan And when you do keep in mind that benefit amounts are often quoted with the value of CPPWPP payments included Unless your plan is particularly generous you 11 probably need an to generate additional retirement income And certainly if you dont belong to an your will be nothing less than essential But even if you are confident that your current pension plan and investment assets will be provide you with the in come you need it still makes sense to contribute as much as you can to your Ultimately however the value of an RRSP is that unlike government and company pen sion plans it allow s you to deter mine the amount of income 11 have at retirement For further information contact Anne Kellj Branch Manager Bank of Montreal Georgetown Edna Branch Manager Acton Fd ward is the In dependent Business Manager Bank of Montreal for the Town of Hal ton Hills The banks and trust companies lend your money out to business and for mortgages and personal loans after they have taken a two per cent and five per cent markup They calculate the in terest monthly or semi annually mortgages and naturally get the benefit of more frequent com pounding that way than you do Another reason some people are afraid of any other form of in vesting is they have a GUARANTEE If I lent my money to a bank or trust com who in turn could lend it to anybody that they pleased and who I might know boy would 1 want a GUARANTEE too The CDIC GUARANTFE says in effect that you will get your money and what it has earned back but the CDIC GUARANTEE has a limit of at each institution At eight per cent for five years will grow to 14 To day your 10 will by 10 worth of goods and services in five years at four per cent annual inflation the value of five year GIC will only buy worth of goods and services in to day dollars that a return of only 85 per cent I don need that kind of a GUARANTEE So I do not lend my money to earn in terest in a or RRSP term deposit What the alternative Why not take a look at dependently managed mutual funds In 1981 the mutual fund in had assets of about billion today there are over billion the year the management consulting firm of Emst and Young estimate that there will be over billion in mutual fund assets in Canada The banks trust and life in surance companies have seen their traditional deposits shrink so thej are jumping into mutual funds in a big wa True there are a feu of these institutions that have had mutual funds for years and even fewer of them that records of performance equal to the independth funds One of the reasons could be that the managers of man of these funds are mere employees and have no ownership interest or incentive to achieve superior performance For fans of term deposits and GUARANTEES there are mutual funds that invest in GUARANTEED investments but earn more than most people can on their own because of the way they invest Also your money is not tied up for one three or five years One income type fund that comes to mind pays per year dividend and the pnee has ranged from 9 to 10 in the last six years That ten per cent or better return The ten year average annual rate of return is 14 per cent In the big market sell off of this fund lost less than ten per cent and quickly recovered The fund has paid per year dividend since 1985 and at a recent meeting the fund manager siad that the per year dividend will continue The fund is 70 per cent m Canada and Ontario GUARANTEED bonds and A GUARATEED mortgage back ed securities and 30 per cent in equities It is the return of capital feature which will make con tinuation of the divident possible The recent price of about 30 gives yield of 10 per cent and there is no 60000 limit There are also equity balanced and international funds that can be mixed in a RRSP There are equity mutual funds that have earned as much as per cent over the long term With an an nual contribution of 4000 at eight per cent for years your value would be 183048 if a mutual fund returned 15 per cent your value would be 409774 Which would you prefer Talk to an independent finan cial planner about completing a and transferring your to get a better return For a FREE booklet on RRSP investing and a chart comparing the performance of an actual mutual fund with a ten per cent investment our the last contact Peter I MB Capital Planners Ltd 10 Drive Georgetown On tario or phone nil Paul J is the miliar of the best seller I Invest in Mutual Funds and of legal apital Planners Ltd PreSeason Savings Save 10 to Off all Spring Merchandise FOR LADIES SUITS SPORTCOATS BLAZERS DRESS SLACKS CORDUROY PANTS TOPCOATS FALL AND WINTER OUTERWEAR LEATHER JACKETS SWEATERS DRESS SPORT SHIRTS TIES SOCKS HATS DESIGNER CASUAL WEAR AND MORE Most Alterations While You Wait by Tailoring Staff of CAREER WEAR DAY TIME DRESSES PARTYWEAR COATS OUTERWEAR JACKETS SUITS SEPARATES SUCKS SKIRTS BLOUSES SWEATERS All famous 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