Managed Money Reporter Newsletter — Issue 236, March/April 2007


Editors: Carl Spiess & Allan McGlade


Featured Articles



2007 Budget Update

By Carl Spiess, CFP, FMA, FCSI, MBA, Director

The recent budget had several significant changes for investors. The primary ones involve RESPs, RRSP to RRIF conversions and spousal pension splitting.

RESPs

The $4,000 annual limit will be eliminated and the lifetime contribution limit will be increased to $50,000. The maximum annual amount qualifying for the 20% Canada Education Savings Grant will be increased to $2,500 (from $2,000), increasing the maximum CESG to $500. The maximum CESG for the year will increase to $1,000 (from $800). Part-time students will now also be eligible for RESP assistance. We expect that it will take several months until the system will be running to enable us to apply for additional grants, so we recommend holding off on RESP contributions until the summer.

RRIF Conversion Age

Currently, taxpayers are required to stop contributing to their RRSPs at the end of the year in which they turn age 69 and then start a withdrawal program (RRIF). The 2007 budget proposes to extend this conversion to when the taxpayer reaches the age of 71. Individuals who turn 69 years of age in 2007 immediately benefit from the proposed change. The measure will also benefit individuals who turn 70 or 71 years of age in 2007, in that if RRSP contribution room is available, RRSP contributions can be made in 2007 and 2008 for the 70-year-old and in 2008 for the 71-year-old.

Retirement Income Splitting

The spousal income splitting measures introduced in the October 31, 2006 mini budget were confirmed in the March 19, 2007 actual budget document. This will allow retirees with qualifying pension income to allocate up to half of that to a spouse, to allow for lower overall taxation. Even those under 65 are eligible to allocate certain kinds of income. However there were no additional details or further splitting options described in the actual budget.

For more details, please see the attached documents:

More on the 2007 Budget

Dynamic Fund Name Change

Dynamic Focus+Diversified Income Trust Fund becomes Dynamic Focus+Diversified Income Fund effective April 5, 2007. The renaming of the Fund will better reflect the manager's ability to invest in a broad range of income-generating securities beyond income trusts. This flexibility will be beneficial in the event that the proposed legislation to tax trusts is passed.

In addition to income trusts, Dynamic Focus+Diversified Income Fund may also invest in other income-producing securities such as dividend-paying equity securities, real estate investment trusts on a global basis, other types of equity and/or debt securities including high yield, corporate, convertible and government bonds and money market instruments.

More on the Dynamic Focus+Diversified Income Fund

  • Morningstar analysis of Dynamic Focus+Diversified Income fund

Mutual Fund Reporter Recommended Web site of the Month

While the late filers wait for their Tax Refunds and Notices of Assessment, consider using CRA's My Account site for taxpayers. If you take the time to register for the CRA My Account service, you can find out your tax refund status and RRSP contribution room, etc.:

 



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