Great Returns Under Most Scenarios!
| LSIF
Investm't |
Assumed Growth Rate |
Investm't Vehicle |
Tax Refund Rate |
Total Cash Invested |
Holding Period (Years) |
Investm't at End of Period |
Fund
Redempt'n Fee |
Fund Proceeds |
Tax on Gain |
Net Proceeds |
RSP
Redempt'n Tax Rate |
Final Value |
Avg. Annual Return |
| $5,000 |
5.00% |
RSP |
78% |
$1,100 |
8 |
7,387 |
0.00% |
7,387 |
0% |
7,387 |
48% |
$3,841 |
16.9% |
| $5,000 |
5.00% |
RSP |
66% |
$1,700 |
8 |
7,387 |
0.00% |
7,387 |
0% |
7,387 |
36% |
$4,728 |
13.6% |
| $5,000 |
0.00% |
RSP |
78% |
$1,100 |
8 |
5,000 |
0.00% |
5,000 |
0% |
5,000 |
48% |
$2,600 |
11.4% |
| $5,000 |
-5.00% |
RSP |
78% |
$1,100 |
8 |
3,317 |
0.00% |
3,317 |
0% |
3,317 |
48% |
$1,725 |
5.8% |
| $5,000 |
5.00% |
Non RSP |
30% |
$3,500 |
8 |
7,387 |
0.00% |
7,387 |
24% |
6,814 |
0% |
$6,814 |
8.7% |
| $5,000 |
5.00% |
Non RSP |
30% |
$3,500 |
8 |
7,387 |
0.00% |
7,387 |
18% |
6,958 |
0% |
$6,958 |
9.0% |
| $5,000 |
0.00% |
Non RSP |
30% |
$3,500 |
8 |
5,000 |
0.00% |
5,000 |
0% |
5,000 |
0% |
$5,000 |
4.6% |
| $5,000 |
-5.00% |
Non RSP |
30% |
$3,500 |
8 |
3,317 |
0.00% |
3,317 |
0% |
3,317 |
0% |
$3,317 |
-0.7% |
Prepared by Carl Spiess, Director, Wealth Management, ScotiaMcLeod
Assumptions
|
- Marginal Tax Rates used: 48% or 36% as indicated.
- Capital Gains taxed at 50% of the marginal rate (in the last
example losses could be used to offset future gains).
- Fund must be held for 8 years to avoid 30% tax credit clawback.
Retirees now also need to hold the fund for 8 years to avoid
tax.
- Redemption fee paid on early withdrawal of fund.
- Upon early withdrawal of investment and subsequent repayment
of tax credits, investment will still have benefited from the
deferral of tax.
- Average Annual return calculated on growth of total cash
invested over the holding period.
- You live in a province where the tax breaks are
available.
|
Bottom Line
|
- Even assuming low returns, for people in high tax brackets
(earning over $29,000 a year) LSIFs can provide good after tax total returns.
|
Inside and Outside the RSP - LSIFs Provide a 30% Tax
Break (up
to 35% for some Ontario funds)
Maximum tax credit used in this illustration on a $5,000 investment is $1500. This $1500 includes
15% Federal ($750) and 15% Provincial ($750) Tax credits. (Can be up to
20% in Ontario for a 35% total)
Please note that these are projections only. Please consult the fund
prospectus for complete details on risk factors, tax refund rates and
other pertinent information. Unit values and investment returns will
fluctuate.
Return to Annual Review
of LSIFs
Return to Investor Learning Centre
|
