If you choose a labor-sponsored fund, the first thing to look at is the quality of the investments it makes – essentially how it will perform without the tax credit. If you're looking at the long term – and you have money in a few duds – consider selling some of these (if they're outside your RRSP) and taking a capital loss. If you have an argument with your spouse, it doesn't mean you have to go to divorce court.
If you haven't already, consider a life insurance program to protect your RRSP funds from the tax collector in the event of your death. If you want the kind of returns you can brag about, you have to be patient. If you contribute to your RRSP, you should not use it as collateral for the loan.
Of course, if you've been in the market in recent years, you don't have to worry much about losses. There are lots of reasons, especially if you've been in the fund for four or five years. If you have a big tax year or you want to generate capital gains after a big market run-up – and you have unused contribution room – you can always borrow the money and contribute it to your RRSP.
If you had been out of the market during its best six months, your investment would have only grown to $154,100. If all your money is in real estate, you're out of luck if you can't sell it when you want. If you want the balloon and the rope - the interest and the capital gain - then invest in a bond or a bond mutual fund.
If you buy term deposits, try to justify them in the name of the spouse with lower income. Basically, you should try - if you can - to move to a province where you will be taxed at the lowest possible rate on the last day of the year. The bank will do its best to correct errors - if you catch them.
Usually, the bank will remove them - if you can show that it was at fault. If you have stocks, bonds, and mutual funds outside of your RRSP, consider leveraging capital gains. Bottom line: it's worth doing the math if you're shopping for a mortgage.
If you do not have an outstanding mortgage, review the totals under each of the columns in the amortization schedule.
Find another job — what do you do with your pension?
But if you decide to go now, your best bet is to hide as much as possible from your breakup. When we have an unusual jump in income in one year, we can trigger AMT even though we transferred this money to our RRSP. However, if this is a one-time jump and your income levels off in the coming years, you should be able to recoup the AMT you paid.
It may also be possible to alleviate this tax problem by talking to your employer. In some cases, you may be able to spread your resolution over this year and next. This strategy can keep you from bumping into a higher tax bracket—and if you use the returns we've discussed, you may not need to worry about the AMT at all.
The disadvantage of this strategy - you are not able to get out of your money as quickly and will not be able to earn as much from it as a result. An alternative is to have your employer pay you interest on these funds between the time you receive the first installment and the second the following January. I am often asked by people why they should roll this money into their RRSPS if they will need some of it to live on in a few months.
If you roll all this money into your RRSP now, it will prevent you from being bumped into a higher tax bracket. And if you want money, you can always withdraw it a little at a time - usually when your taxable income is very low. In addition, you will need to add these withdrawals to your taxable income and pay tax on the total when you file your return.
Meanwhile, you will earn income on the remainder tax-free within your RRSP.
Go into business for yourself
But if you don't have these resources at your disposal, how can you get the support you need. One of the main reasons people choose franchising over building a business from scratch is that they are able to leverage a mass marketing program that they otherwise could not create on their own—essentially taking advantage of the brand recognition that a national franchise offers. If you review the financials with an accountant who understands all the ins and outs of franchising and discover, for example, that the expenses outlined in the pro forma statements are understated to the extent that the franchise is likely to make a loss, you didn't win be so eager to buy that franchise.
If you are in your mosquito and lose your family as well as your savings, it is a devastating experience that many individuals find difficult to recover from. That may or may not be the case - but if you're putting up $250,000, you really should know what you're getting into and what your chances of success are. It's a great way to do business — if you have the right ingredients in place and you buy the right franchise, one with a distinctive trade name, a competitive edge, solid training and retraining programs, and an ongoing monitoring system to help retain franchisees on track.
Guarantees could also be included, but these too depend on the franchise's track record. If you expect 100% financing, you can assume that some form of guarantee will be included. If you still have an unused contribution room, borrow as needed, but give those contributions.
If you've been a GIG investor, take the opportunity to learn about timing and risk. As a general rule, stocks not only outperform investments like GIGS, but they also do so consistently - and with virtually no risk - if held over a long period. By adjusting the mix, you can reduce or increase volatility - and returns - according to your risk tolerance, enabling you to use a multidimensional strategy to its fullest.
If you turn 69 this year, you'll need to collapse your RRSP before the end of the year and decide what to do with the proceeds. Mind you, that could happen – if interest rates suddenly rose to the !2% to 15% level of a few years ago. If you poke a hole in the bottom of the barrel, the oil will slowly drip out and with use the hole may even become slightly larger.
