Commentary, Opinion

Planning for retirement: The overlooked benefits of charitable giving

August 8, 2024   ·   0 Comments

By Kara Harris

Have you started planning for your retirement? As we navigate life, retirement planning becomes essential to securing our future and the legacy we leave behind. Many Canadians invest in Registered Retirement Savings Plans (RRSPs) or Registered Retirement Income Funds (RRIFs) to ensure financial stability during their golden years. However, an often overlooked aspect of these retirement accounts is the significant benefit they can bring to charitable organizations, such as the Stevenson Memorial Hospital Foundation while offering substantial tax benefits to your estate.

RRSPs and RRIFs are popular retirement savings options in Canada. Contributions to an RRSP are tax-deferred, meaning you only pay taxes on the money once you withdraw it. This makes it an attractive option for those looking to reduce their taxable income during their working years. When you retire, you can convert your RRSP into an RRIF, which provides a steady income stream.

However, what happens to these funds when you pass away? Upon death, any remaining funds in your RRSP or RRIF are considered income and are redeemed as of the date of death. This amount is then subject to taxes, which can significantly impact the marginal tax bracket of your estate.

One critical aspect of setting up an RRSP or RRIF is appointing a beneficiary. This step is often overlooked, but it’s crucial. By doing so, the funds are directly transferred to the beneficiary upon death, bypassing your estate and avoiding probate fees. If you fail to name a beneficiary, the funds will be deposited into your estate and subjected to additional fees and taxes. Being well-informed and prepared about this aspect of retirement planning is a responsible and proactive step that can make a significant difference in the financial legacy you leave behind.

Strategic tax planning is a crucial element of retirement and estate planning. By carefully considering how your retirement funds will be distributed, you can minimize the tax burden on your estate. This could potentially increase the money that goes to your loved ones or charitable causes. Understanding and implementing these strategies can make a significant difference in the financial legacy you leave behind, giving you hope for a brighter financial future for your beneficiaries.

Did you know you can benefit your estate by naming a charity as your RRSP or RRIF recipient? When you donate to a registered charity, your estate can receive a charitable tax credit to offset the taxes owed on the RRSP or RRIF redemption. This means that you are supporting a cause you care about and potentially reducing the tax burden on your estate, leaving more for your loved ones.

For example, consider the following scenario:

• Canadian Pension Plan and Old Age Security Income: $26,000
• RRSP/RRIF redemption: $100,000
• Total income: $126,000

In this case, taxes will be calculated for the entire $126,000. However, if you bequeath $50,000 to a charity, the taxable income is reduced to $76,000. This not only reduces the tax burden on your estate but also supports a cause that is meaningful to you.

Donating a charitable gift to the Stevenson Memorial Hospital Foundation is a thoughtful and impactful way to create a lasting legacy. Your contribution ensures that the hospital can continue to provide exceptional care and be equipped with the latest technology and resources. Additionally, it offers you significant tax and estate planning benefits.

By incorporating charitable giving into your long-term financial planning, you can make a difference in your community while securing your financial future. A planned gift ensures that future generations will continue to have access to high-quality health care.

To explore the benefits of this type of gift to your estate, consult with your financial planner. They can provide personalized advice on maximizing the tax benefits of your RRSP or RRIF while supporting charitable causes.

If you want to learn more about how you can support quality health care in our community through our Legacy Giving Program, please contact the Foundation at (705) 435-6211, ext. 2350. They can provide information on how your gift can make a lasting impact.

Planning for retirement involves more than just securing your financial future; it’s about making thoughtful decisions that reflect your values and priorities. By considering the tax benefits of charitable giving through your RRSP or RRIF, you can create a legacy supporting your loved ones and the community. The Stevenson Memorial Hospital Foundation offers a unique opportunity to ensure that your legacy lives on, providing exceptional health care for future generations.

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