Maximize retirement savings
(NC)—Valuable tax preparation resources are available to communities across Ontario prepared by the Certified General Accountants of Ontario www.cga-ontario.org.
Here is a snapshot of tips to maximize pension contributions and your Registered Retirement Savings Plans:
• Individuals who are paying Canada pension plan (CPP) and/or employment insurance (EI) premiums may claim a 15 per cent federal tax credit and 5.05 per cent provincial tax credit on the amount paid.
• Contribute to your RRSP early in the year. If, for example, you contribute $22,970 — the maximum possible annual contribution amount for 2012 — at the beginning of the year instead of at the end, over a 25-year period, assuming a five per cent rate of return, you would have an extra $54,800 in your RRSP.
• If you are an employee who is making regular RRSP contributions, request that the amount of income tax withheld on your pay cheque be reduced in order to reflect the savings those contributions will bring. This is a more efficient way to manage your money.
• You don't have to deduct an RRSP contribution in the year it is made; instead, you can carry it forward for deduction in a future period when you have income placing you in a higher tax bracket. Be sure you have used all personal tax credits before deducting your RRSP contribution.
• If you are at least 65, consider creating pension income by converting part of your RRSP to a life annuity or an RRIF if your financial circumstances warrant such a move.
• Contributing to a spousal RRSP also creates potential pension income for your spouse or common-law partner.
• Pension income splitting can be a good strategy to minimize overall family taxes if the spouse to whom the funds are being transferred has low, or no other sources of income.
• If you qualify for Canada pension plan (CPP) disability benefits, remember to check to see whether you also qualify for the federal disability tax credit (DTC).
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