Fast forward your retirement plan

They say you can’t make up for lost time...

That’s not necessarily the case with contributions to your Registered Retirement Savings Plan (RRSP). Canadians are allowed to carry forward unused RRSP contribution room, and to make contributions to personal RRSPs until the end of the year they reach age 69. So, if you didn’t maximize your RRSP contributions in the past, you have the opportunity to fast forward your retirement plan by investing the full amount of your contribution limit, which includes all of your unused contribution room. Not only will you be saving for your retirement, but you will also receive a large tax deduction, all at the same time.

For example, if the Canada Revenue Agency Notice of Assessment that you received after filing your 2004 tax return advised that you could contribute $13,000 in the 2005 tax year, but you only contributed $3,000, you can still contribute the remaining $10,000 at any time. If you contribute that amount before March 1, 2007, then you can claim it as a deduction in the 2006 tax year. Just consider for a moment that if you make up for lost RRSP time sooner, how much further ahead your retirement plan could be:

• Assuming you have 20 years left to retirement, the $10,000 additional contribution could grow to $46,600 on a pre-tax basis (assuming an average annual rate of return of 8%)*.
• Plus, if your marginal tax rate is 40%, your $10,000 contribution will generate immediate tax savings of $4,000. Reinvest these tax savings through an additional RRSP contribution and you’ll catch up even faster, which will put your retirement plan farther ahead.

Although it may seem difficult to find the money to catch-up, there are a number of strategies to consider that can help fast-forward your retirement plan. First, there may be tax benefits associated with transferring money you currently have in savings accounts or other investments into your RRSP. Second, it may make sense to consider the benefits of an RRSP loan to take full advantage of the contribution room you have available**.

Through Solutions Banking™, you can take advantage of industry-competitive RRSP loans that can help you make use of available contribution room and fast-forward your retirement planning. This strategy is usually most effective when the tax refund generated by your extra contribution is used to pay down the loan.

Together, we will explore the immediate tax savings and the potential for longterm tax-deferred growth through maximizing your RRSP contributions now and the appropriate strategy that makes sense for you.

Pre-tax RRSP investment assumptions – $10,000 investment purchased on January 1, 2007 at a gross rate of return of 8% over a 20 year period. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values or returns on investment.
** The strategies represented in this presentation involve the use of borrowing to invest and are based on the assumption that the interest costs are tax deductible for federal income tax purposes. Borrowing to invest is a long-term investment strategy and is not for everyone. Gains from positive fluctuations in the value of investments will be magnified, but losses from negative fluctuations in the value of investments will also be magnified.
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This report specifically written and published by Investors Group Financial Services Inc. (in Quebec, a financial services firm) is presented as a general source of information only, and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide legal advice. Prospective investors should review the annual report, simplified prospectus, and annual information form of any fund carefully before making an investment decision. Clients should discuss their situation with their Consultant for advice based on their specific circumstances.
Investment products and services offered through Investors Group Financial Services Inc. (in Quebec, a financial services firm).
“Fast forward your retirement plan” © 2006 Investors Group Inc. MP1006 (12/2006)