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biG HTT. "A Family Tradition for 133 Years" PORT PERRY STAR - Tuesday, March 30, 1999 - 17 Tax savings, deferrals the silver linings in severance packages Tax matters are of tremendous importance to anyone who's received a severance package. They should be considered right after ensuring you've received the best deal pos- sible from your former employer. Depending on your next steps, and the financial plan you've formulated to take you there, a sever- ance package can provide a real boost to your per- sonal finances. The key is to develop a plan based on paying as little tax as possible. To minimize taxes on a lump sum, con- ROGER B. MOASE CHARTERED ACCOUNTANT Income Tax Return Preparation Electronic Filing Individuals, Small Business, Farms, Corporations "Personal, Confidential Service... and a Real Person Answers the Phone" 175 North Street, Port Perry (905) 985-8893 Email: rbmoaseca@sympatico.ca sider: 0 Making your maxi- mum RRSP contribution in the tax year of your sev- erance. a Making retroactive RRSP contributions for "years since 1991, if avail- able. 0 Making retiring allowance RRSP contri- butions ($2,000 per year for years before 1996; additional $1,500 per year for years before 1989 for which employer contribu- tions to your pension plan or Deferred Profit Sharing Plan have not vested). a Contributing to a spousal RRSP. 0 Gifting funds to chil- dren over 18 whose expenses may have been coming out of your pocket. 0 Having severance paid out over two years, rather than one. You may wind up in a lower tax bracket. Other tax-saving or deferral avenues, involv- ing quite specific circum- stances and needs, include: 0 Charitable donations a Flow-through shares a Province sponsored You may be able to earn enough to pay for your child's education -- totally tax free! Put your child tax benefit cheque into a special account for the child, and use the money to buy good quality bonds or other investments. If you invest $1,000 a year, at a modest rate of 5%, your child will have almost $30,000 available at age 18. Best of all, it is your child, not you, who pays tax on the investment income as it accumulates - which means that no tax is payable unless your child has other sources of income. Now you can take the plunge into equity markets, secure in the knowledge that there's a "life saver" close at hand... and that's a comforting thought. Call today for your free brochure explaining the unique benefits of Segregated Investment Funds. Investing In Segregated Funds Is Like Having A "Life Savings Saver." f you need higher returns than you can get with traditional GICs or T-Bills, but are worried about the risk that comes with mutual funds, then you should consider Segregated Investment Funds. Segregated Funds are a unique insurance product that offer the security of a deposit guarantee of up to 100% at maturity, coupled with the growth potential of today's best mutual funds.* Investment Advisor Robert Gow at (905) 434-7156 RBC DS FINANCIAL SERVICES . (ONTARIO) INC. * Up to 100% of your investment is guaranteed, depending upon your circumstances, at deposit maturity or death of the annuitant. * Website: www.rhcds.com tax shelters And to lessen the tax bite on any income you might be receiving from a portion of your severance package, consider an equi- ty mutual fund based sys- tematic withdrawal plan (SWP). A SWP involves making an investment in a mutual fund and with- drawing a set amount on a regular basis - twice monthly, virtually when- ever the unitholder wants. Income is drawn from a SWP at a tax rate that's potentially more favourable than that on straight interest income. That's because, depending on the investments held in a SWP, each payment will consist of: | 2 principal (untaxed), a capital gains (75 per cent of growth is taxable) and may have distribu- tions consisting of: interest (taxed at your marginal rate), adividends (may be eli- gible for dividend tax cred- it), and possibly 0 capital gains (75 per cent of which is taxable) that may be paid in cash or reinvested in the fund. SWPs are an ideal investment/income arrangement for individu- als who have lost their jobs and are concerned about exhausting a sever- ance, yet need income from their package to bridge them to their next position. RBC Dominion Securities Investment Advisor Bob Gow. will you risk waiting? Are you one of those who only invest in your RRSP once each year? Every February you make a single investment, scrimping and saving to pull together as much cash as possible to reduce that income tax bill. Then you breathe a sigh of relief knowing that you won't need to think about RRSPs for another year. Each spring Revenue Canada provides you with L SCUGOG FINANCIAL SERVICES INC. GUARANTEED.INVESTMENTS. e Annual Rates e GIC RRSP 1 YEAR.................. 2 YEAR.................. 3 YEAR................... 4 YEAR.................. 5 YEAR.................. 30 DAYS casHaBLE $5,000 minimum 5.00% 5.20% 5.30% 9.35% 9.45% 5.00% 5.20% 5.30% 5.35% 5.45% Rates subject to change without notice "Serving Scugog For Over 15 Years" 250 Queen Street, Port Perry 905-985-3832 (next to Shoppers Drug Mart) B SHEPHERD & POWELL _] a. CHARTERED ACCOUNTANTS ---- Accounting, Income Tax, Financial and Estate Planning & Consulting Services INDIVIDUALS BUSINESSES « FARMS TAX 'E-Filing' at No Extra Charge RETURNS Assistance in filing Government Forms and Returns New Business Planning and Startup PREPARED Evening and Weekend Appointments available FREE INITIAL CONSULTATION Personal, Confidential Service DAVID R. POWELL, B.COMM., M.B.A., C.A., CFP 250 Queen Street, Port Perry 985-9791 (next to Shoppers Drug Mart) a Notice of Assessment. This notice accompanies the income tax refund cheque if you are getting a refund, or an income tax bill if you owe addi- tional taxes. When you receive yours for 1999, look at the top of the page for your RRSP deduction limit for 1999. Then begin immediately to make monthly installments for the upcoming year. You will be amazed at how much more growth you could receive by investing monthly. For example, if instead of investing $6, 000 each year, you invest $500 each month, you would accu- mulate an additional 6,057 over 15 years, 10,208 over 25 years, and a whopping $16,306 over 30 years (assuming an 8 per cent annual rate of return). This calcula- tion only demonstrates the effect of compounding over a long-term invest- ment. In addition you could also receive the ben- efit of dollar cost averag- ing in a fluctuating mar- ket which may improve these results further. So what are you wait- ing for? Once you know your RRSP deduction limit for 1999 start a monthly savings plan right away. You can even arrange for monthly pay- roll credits from your employer and effectively receive an income tax refund with each pay. If you are self-employed, you should also get an early start on your RRSP contribution for 1999. Let's make next year's RRSP season a non-event and boost the value of your RRSP by staring to save today. John Walhout, CMA Prince Albert, ON