CONTRIBUTIONS

DEADLINES

The deadline for RRSP contributions to be eligible for 2011 tax deductions is WEDNESDAY FEBRUARY 29, 2012. This is a leap year and therefore the 60 day limit is the end of February, NOT March 1.

 Please consult your Notice of Assessment for your contribution room. Consider spousal contributions if income splitting might be applicable for future income needs from RRSPs before age 65. Spousal contributions can also be made by income-earning seniors (with eligible contribution room) who have had to convert their own RRSPs to RRIFs, but who have a younger eligible spouse with an RRSP account.

 Consider if you made contributions already for 2011 when you review carry-forward RRSP room from prior years. (This could have occurred in an employer's defined contribution pension or Group RRSP plan, for example).

 NEW LIMITS: Note that the maximum new RRSP contribution room for 2011 is the lesser of 18% of earned income or $22,450.00, less a pension deduction where employees are members of pension plans. This amount is $22,970.00 for the 2012 taxation year for those who like to make contributions as early as possible - where eligible earned income exceeds $127,611 in 2011 earned income

 CONTRIBUTIONS TO TFSAs (Tax Free Savings Accounts) have no time limit. However, the earlier funds are deposited, the earlier they escape taxation! Many clients like to get their 2012 contribution taken care of early in the year.

 Please refer to our January Investment News for further TFSA contribution pointers.

 For many couples in a family unit, TFSA accounts have now accumulated to $40,000 plus investment and income gains. TFSAs are beginning to be a more significant factor in investment and retirement planning.

 TAX RECEIPTS 

Receipts for RRSP contributions in the last ten months of 2011 are now being mailed. Watch for these in your mail box.

 You may also wish to open a new shoebox or folder for income tax receipts and information, much of which will start to appear in mid to late February.

 For most tax preparers, however, we generally recommend waiting until April to finalize and file your tax returns since some slips inevitably show up in late March to early April.

 RRSP OR TFSA or MORTGAGE?

 Mortgage reduction provides an immediate, and quantifiable "Return on Investment" in the form of future interest cost savings. The mortgage interest rate is an important factor in this consideration. If debt reduction provides the highest comfort level of all the choices for spare cash, by all means emphasize this in your goals for the year.

Where investors have earned income in a high tax bracket, it is still normally advisable to make contributions to RRSPs. This has the advantage of providing an extra tax refund that could then be reinvested in paying down a mortgage or adding to a TFSA later in the year.

In lower income households, and certain other cases, TFSAs may make more sense than RRSPs for retirement planning. If you anticipate that some funds may need to be withdrawn BEFORE retirement, the recommendation would weigh strongly towards TFSAs. In fact, 8 out of 10 people that withdraw from RRSPs before retirement are under age 60. Individuals in this category should most likely favour TFSAs over RRSPs. Just keep in mind that you CANNOT re-contribute amounts withdrawn from TFSAs in the same calendar year.

 The RRSP / TFSA decision may have several points of consideration. If you need assistance in making this decision, we are more than happy to discuss it with you personally and confidentially.

Phone: 519-660-3229
Toll Free: 1-800-265-1242
Fax: 519-660-3264
E-mail: Contact us