The New Tax World and the Retired Canadian

Winter 2000 CSANews Issue 37  |  Posted date : Mar 07, 2007.Back to list

Federal and provincial budgets in 2000 have shown a dramatic turnaround in surpluses and tax reductions. For the retired Canadian, the implications for financial, investment, tax, retirement income and estate planning are clear. A new series of strategic imperatives exists.

Risk Management, using risk-managed investments, is even more critical than ever. The first priority is the preservation of retirement and estate capital. However, because of the Superintendent of Financial Institutions' new capital reserve requirements for insurance companies, especially as they relate to segregated (capital-insured) mutual funds, these risk-managed investments will either become scarce or rise dramatically in cost for investors.

Capital Gains will be taxed at half the rate of interest income. It is, therefore, essential to use capital gains-based investments, such as stocks (or bonds, as interest rates fall) and equity mutual funds to enhance returns and reduce taxes.

We must, because of the new four-tier tax brackets, plan to reduce taxable income below $30,000, to ensure the lowest tax rate for retirement income, and to generate cash flow from annuities, systematic withdrawal plans from mutual funds, and tax-free cash flow personal pension plans created by borrowing against universal life insurance policies.

We now have $240 billion in RRSPs/RRIFs. This is now a great tax trap for $110 billion in tax liabilities. Your RRIF withdrawal and RRIF in your estate will be taxed at the highest rate. Therefore, the core 2000-2001 strategy is to liberate the RRIF capital tax-free and reinvest it back into tax-free cash flow investments, such as universal life insurance.

We can use items such as charitable annuities, flow-through shares, charitable remainder trusts, and increased interest deductions from borrowing, for risk-managed equity investments to create a tax-free RRSP/RRIF withdrawal.

Don't worry if you don't understand these new terms, new strategies and new tax imperatives, or if you feel confused about what's new for 2001.

I'll be at all of our CSA Extravaganzas in Florida, Texas, Arizona and California, to conduct workshops explaining these major changes, and we can cut your taxes by half and greatly enhance your retirement cash flow.

This is the new CSA Estate and Future Wealth Investment and Tax series, and CSA members will once again benefit by being empowered through knowledge. See you all at our free 2001 Extravaganza seminars.