Author: News Canada
(NC)—Bringing a well diversified, sufficiently mixed portfolio that reflects your risk tolerance full circle, requires some simple yet effective tax smart strategies. For example, you may want to review which types of investments you hold inside your RRSP or RRIF.
It is common for investors to hold equity investments within their RRSP or RRIF. However, many investors may not realize that by dividing their holdings between non-registered and registered portfolios, they may actually reduce their taxes.
Interest bearing investments, such as GICs, are actually best held within an RRSP or RRIF. These investments, when held outside an RRSP or RRIF, are fully taxable at your marginal tax rate. By placing these interest-bearing investments within your RRSP or RRIF, they are able to grow tax-sheltered until they are withdrawn.
Equity investments that earn dividends or capital gains are most tax-efficient when held outside your RRSP or RRIF. The former because of the federal tax credit that is applied because the corporation has already paid tax on its profits and the latter because only 50 per cent of the capital gain is taxed.
“Dividing your portfolio is all the more important because when you start to use your RRSP as a source of income, all holdings are taxed equally, removing any preferential tax treatments related to your individual investments,” says Julie Sheen, Vice-President, BMO Term Investments.
For investors in search of growth opportunities within their RRSP there are term options available through market-linked GICs. These investments offer growth potential based on individual market index performance.
A financial planner at your local bank branch can help you address your taxation needs when looking at your investment portfolio.
Information provided by BMO Term Investments. For more information visit your nearest BMO Bank of Montreal branch, call 1-888-771-0123 or visit www.bmo.com/gic.
– News Canada
You can also get further information on RRSP’s from one of our independent brokers. Use our RRSP Form to talk independent broker.