Include care giving in your retirement planning and year end reminders

Research is showing that more and more of Canada’s aging population is relying on family and friends for their care during retirement. For example, Statistics Canada shows that nearly 70% of the care needed by seniors over age 65 is provided by a family member. Another 30% of care is provided by friends, neighbours and extended family. For a large number of seniors the care is provided by both groups.

It should be noted that the statistics are based on unpaid care. However, it is unknown whether the reliance on family, friends and neighbours for care is a result of financial limitations. Some of the types of activities performed by unpaid caregivers, a senior would be unlikely to assign to an individual they didn’t know and trust, such as banking and doctor’s visits. Other activities, such as cleaning, meal preparation, laundry, groceries and personal care, would suggest that the reliance on family, friends and neighbours is as a result of financial constraints for the senior.

No doubt, many of you have your own stories of the care you have given to seniors. Countless people are caring for their aging parents and at the same time mowing their elderly neighbour’s lawn. Our own experience would tell us the reliance on unpaid care is often a way for the elderly person to control the environment around them. Paid care giving is often associated with the introduction of a new person to the home and can be confusing for the senior.

In a recent email, one reader described how their parent continued to ‘fire’ the person sent to clean her home and expected her children to clean her home. The reader went on to say that she is now paying for someone to clean her own home so that she could clean her parent’s home. The parent’s concern with have a cleaning person in the home was ‘they move things so she can’t find them’.

By 2035 it is predicted that seniors over age 80 will double and with a declining birth rate, it will fall to other senior relatives, friends and neighbours to care for those over age 80. These types of statistics emphasize the need to consider a provision for care giving in long term retirement planning.

Reminder: It’s that time of the year again – ‘To do’s’ before the end of the year…

• Grandparents, parents, friends and family can contribute to RESPs (Registered Education Savings Plans) for children.

• Grandparents, parents, friends and family can contribute to RDSPs (Registered Disability Savings Plans) for qualified disabled individuals.

• A donation to an eligible charity can reduce annual income tax.

• If you turned age 71 this year you must convert RRSPs to a RRIF (Registered Retirement Income Funds).

What is an RESP (Registered Education Savings Plan)?

• An RESP (Registered Education Plan) is an incentive for parents, family and friends to save for a child’s post-secondary education.

• RESP plans allow funds to be invested on a tax-sheltered basis until withdrawal. The result is the plan accumulates greater savings because of the tax deferral.

• Withdrawals made from the RESP will be taxed in the student’s hands when the student [child] attends qualifying post secondary institution.

• Contributions are NOT eligible for a tax deduction.

• Contributions to an RESP may qualify for a grant. The basic CESG (Canada Education Savings Grant) is 20% of annual contributions up to a maximum eligible RESP contribution of $2,500 per year.  For example a contribution of $2,500 would be eligible for a grant of $400.

• Start to save RESPs for your child before the end of the calendar year in which the beneficiary [child] attains 15 years of age to be eligible for the CESG.

For more information about RESPs and the Canada Education Savings Bond go to the Government of Canada website for further information.

What are RDSPs (Registered Disability Savings Plans)?

RDSPs, much like RESPs (Registered Education Savings Plans), allow for funds to be invested on a tax-sheltered basis until withdrawal. It is intended to help parents and others save for the long-term financial security of a child with a disability.

• The disabled person must be eligible for the disability tax credit. If for any reason, the disabled person is likely to recover or be periodically disabled before receiving the RDSP benefits, it may not worthwhile to contribute to an RDSP.

• Like RESPs, contributions to an RDSP will be eligible for a new savings grant, known as the Canada Disability Savings Grant.

The Tax Benefits of Charitable Donations

• A gift donated to registered charity may be eligible for a charitable tax credit. Planned charitable gifts represent a large portion of many charities’ annual revenue. These gifts pay for much needed research, public assistance and community support.

• The federal tax credit for charitable donations is equal to (based on 2011) 15 per cent of the first $200, and 29 per cent of the balance

• The limit for an annual charitable gift is 75 per cent of net income.

• For more information consult your Professional Advisor.

Age 71 before the end of the year… Time to change your RRSP to a RRIF

• A RRIF (Registered Retirement Income Fund) converts a RRSP (Registered Retirement Savings Plan) into a tax deferred income plan.

• The conversion from RRSP to RRIF is mandatory by December 31st, 2012 if you were born in 1941.

• While you may withdraw any amount of income from an RRIF, there is a mandatory minimum amount that must be withdrawn annually.

• For more information regarding RRIFs and RRSPs consult your Financial Advisor.

In Summary

If you have children or grandchildren under the age 16, be sure to contribute to an RESP. If you are opening a new RESP, you will need to apply for a Social Insurance Number for your child, if you don’t have one already.

With respect to RDSPs, be certain your disabled child has qualified for the disability tax credit before opening an RDSP.

With so many government cutbacks, charities are becoming more dependent on your donations. The tax incentives for donations effectively result in the redirection of your tax dollars to a charity.

Finally, if you turned 71 this year and own RRSPs, you are required to convert your RRSP to RRIF (Registered Retirement Income Fund) and withdraw the minimum amount required before Dec. 31, 2012.


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