Whtb re TXTIME WhiPtby Free ress Financial Planning Report Don't count on Ottawa for security of finances in retirement years By PAUL KUTTNER Many Canadians seem to have a relaxed attitude when it cornes to retirement planning. They liappily spend thousands of dollars a week in the sun in mid-winter, but if you suggest investing that money for retirement, they just smile. Next year, maybe. There may be two reasons for this. The first is psychological - until you reach 50, retire- ment seemis too far away to worry about. The second is a vague impression that "some- one else" will provide the in- corne needed to mai 'tain today's lifestyle after etire- ment. That someone else usually is the employer's pension and government programs, such as the Canada (or Quebec) Pen- sion Plan and Old Age Security. The harsh truth, however, is that if you rely exclusively on these sources, you may spend your retirement years simply struggling. Sadly, many retiréd Canadians live below the poverty line because they Are you required to file a return even if you don't have any tax to pay? Probably yes, says Revenue Canada, and there's quite a list of cir- cumstances you might have overlooked which mean you must file. You're required to file a return, for instance, if you received a child tax credit in 1989; disposed of capital property or had a taxable capital gain; if you must repay part of your family al- lowancês or Old Age Security benefits; or if you must make Canada Pension Plan con- didn't plan for their post-work- ing years when they had the chance. Let's review the government programs first. The oldest and best known is Old Age Security, a universal program that begins when you reach age 65 (you miést apply to receive benefits; they're not automat- ic). The amount is adjusted quarterly; currently it's $337.04 a month, or just above $4,000 a year. OAS payments are fully in- dexed for inflation, so their purchasing power will be maintained in the future. How- ever, it's doubtful they'll be in- creased by more than the cost- of-living increase. There's also achance some or all of ýour OAS payment may be taxed back when you reach tributions because you earned more than $2,700. You'll also have to file a return to claim a child tax credit, refundable invest- ment tax credit, provincial tax credit, or refund of over- payment of tax, CPP con- tributions or UIC premiums. Finally, Revenue Canada may be jumping the gun somewhat, but it says you must file a return to claim federal sales tax credits and "to be eligible to receive the 'goods and services tax credit' payments for December 1990 and April 1991." retirement. Finance Minister Wilson introdu ed a controver- sial "clawbackl' provision last April that will bit OAS benefits' of anyone with more than $50,000 income. Only a small percentage of older Canadians are affected immediately. But the $50,000 threshold is not fully indexed for inflation. Only increases in the Consumer Price Index (CPI) increases greater than 3 per cent will be applied. This means even though OAS is still theoretically a "univer- sal" program you simply can't count on receiving full benefit from it if your retirement is several years away. The Canada and Quebec Pen- sion Plans are designed to pro- vide a basic retirement income. Only those who have paid into one of the programs can make claims against it. Maximum benefit this year is $6,675 an- nually. As with the OAS, you must make formal application to receive benefits. The CPP is fully indexed for inflation but payments won't increase beyond that. So the current level represents the buying power you'll receive when you retire. There is some flexibility in how you receive your benefits, however. You can if you wish, split the monthly CPP pay- ments with your spouse, except in Quebec. This may save some tax dollars and also could help you avoid the OAS clawback by keeping both of you under the income threshold. The full CPP benefit becomes payable at age 65. You may apply before then (as long as you're 60 or older) and receive a reduced benefit. Or you can delay your payments until as late as age 70, in which case your benefits will be increased by as much as 30 per cent. What does it all add up to? If you receive the full CPPbenefit and can avoid havingyour OAS payments taxed back, the value of your annual retire- ment income from the federal government will' amount to $10,828 in terms of today's buying power. You're not going to live very comfortably on that. The bottom line is payments from government assistance programs will provide no more than a fraction of your total retirement income needs. You'll have to look elsewhere for most of your post-retire- ment revenue. Two million Canadians invest in mutual funds Investment Funds Institute ofCanada More than two million Canadians own mutual funds because they understand the funds are one of the best pos- sible ways to achieve personal investment, objectives. It's important for people with disposable income to identify their goals. To build assets for the future? Or do you need in- come? Are taxes eating away at your savings and you'd like.to have more to spend after tax? Do you need a hedge against inflation? Decide what-you want to ac- complish; then buy only the in- vestments that will achieve your goals. The next trick is to stick to the plan. What are mtitual funds? A mutual fund issimply an investment enterprise in which many people pool their money in a diverse portfolio of securities. They share propôr- tionately in the profits and ex- penses --and the losses; if there are any - and there's a bewildering choice of funds available to meet every objec- tive. Ail the funds are operated with thie advice of a full-time professional manager and the wide diversification po sible reduces the risks of an a 1-the- eggs-in.one-basket situation. Investors can also count on getting their money back from a mutual fund on demand. Whatyou receive is the market value of your share of the fund according to the latest calcula- tion. Many funds establish values daily. This means ,'ou don't have to wait for someone else to buy out. Most funds need a minimum investment of only $500 or* $1,000 - or less if you intend to make -purchases monthly. You can also invest a large sum for the purpose of receiving a fixed monthly income. Two per cent Ievy per year All of this variety, expert management, liquidity and convenience are available for a cost of about two per cent a year. Furthermore, each re- ports transactions on one statement and provides all tax- ation information on. one re- porting slip. After yoi've decided -which fund to buy, remember invest- ing is a long-term undertaking. Keep your timehorizon at least five years out, then exercise patience and discipline and stick to your plan. * * ** * For an information package on mutual funds with a list of funds and their advisors, write to the Investment Funds In- stitute of Canada, 70 Bond St., Suite 400, Toronto, Ont. M5B 1X2. *F FIR F • Competitive Rates • No Fees • Complete Service RRIF and ANNUITY QUOTES Talk to our RRSP specialist 7 117 Brock St. N. Whitby,Ont. L1N 4H3 668-6861 TSR: 427-7379 Must you file a return anyway? j M. 050 By KEITH A. DOUGLAS -