Comments on: The Real Benefit of Tax Deferred Accounts http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/ One Guy's Journey to Passive Income Through Dividend Investing Thu, 11 Mar 2010 03:38:21 -0600 http://wordpress.org/?v=2.9.2 hourly 1 By: FourPillars http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/comment-page-1/#comment-24333 FourPillars Thu, 20 Dec 2007 23:23:37 +0000 http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/#comment-24333 Telly - I know what you mean. It doesn't matter if you didn't take the deduction, with holding tax applies to all redemptions from an rrsp account. If you contribute money into an rrsp and then three months later you take it out, I believe the best thing you can do is just do the withdrawal, pay the withholding tax, claim the contribution at some point in the future and move on. If the time interval between the purchase and redemption is small enough you might be able to get the trade cancelled which is a different situation. Mike Telly – I know what you mean. It doesn’t matter if you didn’t take the deduction, with holding tax applies to all redemptions from an rrsp account. If you contribute money into an rrsp and then three months later you take it out, I believe the best thing you can do is just do the withdrawal, pay the withholding tax, claim the contribution at some point in the future and move on.

If the time interval between the purchase and redemption is small enough you might be able to get the trade cancelled which is a different situation.

Mike

]]> By: telly http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/comment-page-1/#comment-24316 telly Thu, 20 Dec 2007 20:56:30 +0000 http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/#comment-24316 Mike - I was referring to money in which a deduction wasn't taken. For example, if you put $100 into an RRSP but never took the deduction and earned $10 for a total of $110, I would imagine you would have to pay capital gains or interest on the $10 if you withdrew $110. Mike – I was referring to money in which a deduction wasn’t taken. For example, if you put $100 into an RRSP but never took the deduction and earned $10 for a total of $110, I would imagine you would have to pay capital gains or interest on the $10 if you withdrew $110.

]]> By: FourPillars http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/comment-page-1/#comment-24238 FourPillars Thu, 20 Dec 2007 00:46:53 +0000 http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/#comment-24238 Telly - if you withdraw from an rrsp you just pay the withholding tax and that withdrawal gets added to your income. You don't have to worry about paying any cap gains or divs since they were earned inside the rrsp. Mike Telly – if you withdraw from an rrsp you just pay the withholding tax and that withdrawal gets added to your income. You don’t have to worry about paying any cap gains or divs since they were earned inside the rrsp.

Mike

]]> By: telly http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/comment-page-1/#comment-24187 telly Wed, 19 Dec 2007 15:26:49 +0000 http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/#comment-24187 Mike & Fecundity, I guess I assumed that there would be no withholding on the amount withdrawn but I could very well be wrong (it wouldn't be the 1st time ;)). I do have a friend that has done this but it may have been warranted in his situation (due to a foreign tax credit situation). I'll ask him about it. I would guess though, that capital gains and dividend taxes must be paid... Mike & Fecundity,

I guess I assumed that there would be no withholding on the amount withdrawn but I could very well be wrong (it wouldn’t be the 1st time ;) ). I do have a friend that has done this but it may have been warranted in his situation (due to a foreign tax credit situation). I’ll ask him about it.

I would guess though, that capital gains and dividend taxes must be paid…

]]> By: Fecundity http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/comment-page-1/#comment-24184 Fecundity Wed, 19 Dec 2007 14:44:41 +0000 http://www.thedividendguyblog.com/the-real-benefit-of-tax-deferred-accounts/#comment-24184 Great point, Dividend Guy, but I can see why the investment firms don't advertise that part. It'd frighten people. Still, it is a definite perk and incentive. Money Musing, Telly is right. You can contribute to an RRSP, but you don't have to claim it until you're good and ready. The tax returns and software are even programmed for this: "Enter the your contributions for 2006. Enter the amount you wish to claim in 2006." It then carries forward the difference, and your Notice of Assessment will show both figures. I contributed about $25 a month back when I wasn't paying any taxes, and didn't claim any of it until I was solidly in a tax bracket. Then I received a nice chunk of it back all at once, and in the meantime I wasn't incurring taxes on the compound growth my investments were undergoing. Mike is also right I believe, your investment house is likely to automatically withold the taxes when you withdraw unclaimed RRSP funds, but you'll get it back come tax time. I don't know this for certain, however, as I've never taken money out of the RRSP. Great point, Dividend Guy, but I can see why the investment firms don’t advertise that part. It’d frighten people. Still, it is a definite perk and incentive.

Money Musing, Telly is right. You can contribute to an RRSP, but you don’t have to claim it until you’re good and ready. The tax returns and software are even programmed for this: “Enter the your contributions for 2006. Enter the amount you wish to claim in 2006.” It then carries forward the difference, and your Notice of Assessment will show both figures. I contributed about $25 a month back when I wasn’t paying any taxes, and didn’t claim any of it until I was solidly in a tax bracket. Then I received a nice chunk of it back all at once, and in the meantime I wasn’t incurring taxes on the compound growth my investments were undergoing.

Mike is also right I believe, your investment house is likely to automatically withold the taxes when you withdraw unclaimed RRSP funds, but you’ll get it back come tax time. I don’t know this for certain, however, as I’ve never taken money out of the RRSP.

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