Q. The past year, my Registered Retirement Saving Plans (RRSPs) have declined more than 40 per cent. Can I roll some of my RRSPs into a non-registered plan and report the losses? How much tax savings will I benefit? Should I consider cashing out completely from the market?
— Charles
A. No losses can be claimed on your tax return while in your RRSPs.
However, subsequent losses outside your RRSP can be claimed as a capital loss and used to reduce capital gains in the current year, carried back three years or carried forward. Additionally, you maybe taxed on the partial withdrawal from your RRSPs.
Investing in the stock market is a long-term commitment. Before the start of last year’s financial crisis, many novice investors experienced only market gains and believed stocks moved in one direction —up. This was a rude awakening for investors, novice and seasoned.
After watching helplessly as their wealth evaporate between 30-50 per cent, investors had two choices: Hold and wait it out or run for the hills.
Many short-term investors took their losses and turned tail. Others held and were rewarded with a recovery of values in the past several months. This week, S&P/TSX index advanced more than six per cent. Not bad for doing nothing. Some made a conscious decision to hold, while others were too overwhelmed to react. Either way, they got some value back.
However, there was a third option … Buy!
Yes, you knew that stocks would come back up but prefer to further discuss with colleagues and impress with your insight. Our world will always continue to have two types of people: The ones that do and the ones that talk about it. Talking might get you a pat on the shoulder; doing takes you outside the box.
Follow the herd and you may share some of the leftovers, however, lead the pack and you will have first choice!
– Henry Choo Chong, CGA, can be reached at choochonghcga@yahoo.ca and 416-485-5225.
