Pay Taxes on the Seed not the Crop...

One day a farmer was on his way to the local seed shop. When he got out of the truck, there was a man dressed in a fine black business suit standing by the door. This caught the farmer off guard, so while on his way into the seed shop he greeted him hello. The man returned the welcome, and told him that he worked for the "Tax Man". Today only he was going to give the farmer the opportunity to either pay tax on the seeds he was about to plant, or the crop when it was all harvested. He thought for a moment, and graciously accepted the opportunity to pay tax on the seeds before they went in the ground.

Over the season he tended to his seeds, he watered them and placed them in the finest soil. When the seeds became a plant, he continued to water and prune and fertilize his crop throughout the season as well. And then the day came where all his hard work and time was before him.

As he watched truck after truck leave his farm loaded with the fruits of his labour, a car pulled up to the front, and out got the man in the fine black suit. He approached the farmer and shook his hand, and congratulated him on his wise choice. He then explained to him that the Tax Man didn't care when he payed taxes, just that he did pay his taxes. When asked why every farmer didn't do this, he shrugged his shoulders and said he could only see so many people in a day, and drove away...

Wouldn't it be nice to get a visit from someone who can actually help you prepare your affairs in the most tax advantaged way? Well when it comes to our typical Bank Educated clients, we see over and over that people are far more educated to pay tax on the crop instead of the seeds.

The best example of this bad planning advice comes in the form of RRSP's. Now while it is true that you should hold some RRSP's in your Retirement Savings Plan, more than 75% of the new clients we meet with,  only have RRSP's to provide an income in their retirement years.

The mentality of the years gone by has been to invest into an RRSP and get a tax break from the Government come Tax Time. But there are two main problems here.

1. You need to re-invest your tax refund when you receive it to get the full tax advantages of the investment program. Most people do not do this! When people receive their "refund" cheque from the government, less than 30% actually put it back into their RRSP's! This means that you are simply taking a loan today against your future tax obligation, an obligation that will grow & grow each and every year.

2. The money is only Tax deferred, this means that you still owe the tax, but it is not required to be paid until you start using the RRSP money in the future. And here's the big problem, the refund you receive today will also compound inside your investment. So as your money grows, so does the tax owing on that money. As an example if you had invested $1,000 at the age of 30 in an RRSP, and received a tax refund (deferral) of $250, by age 65 you will owe $608 in taxes on that $250 refund you received years before, assuming your money grew conservatively at 5%.

So you see, most people have been trained all these years to pay the tax on the crop instead of the seed, because retirement seems so far in the future, we don't care to think of the taxes that will be due. If you had the opportunity to pay the tax on the money before you invest it, when you need it, you know it will be there in its entirety and will not be diluted by the effects of taxation. This process is completely legal, and falls within the rules of Revenue Canada, but it is not advertised nearly as much as RRSP's.

We use an incredible solution to this growing problem with our clients. We show them how they can pay pennies on the dollar in tax today, to save thousands in tax into the future.

Let us show you today how you can protect your nest egg from the effects of taxation in retirement. These tools are not new and fashionable investment products, in fact they have been around for over 100 years, and are the same financial tools which have helped people such as Walt Disney, JC Penny and Ray Kroc build some of the biggest and best businesses the world has ever known.

Call our office today, and let us show you how to pay tax on the Seeds and not the Crop.