What should you do with your tax refund?

Interested in travel or holidays? Maybe you should analyze what to do with the tax refund you'll get now that your Registered Retirement Savings Plan (RRSP) contribution has been made. Like many investors who like to travel, you may wish to spend your refund on an immediate holiday. But have you ever considered investing it for future holidays instead?

The Personal Tax Strategy (PTSTM) is a Universal Life program with incredible flexibility and many benefits for you. One such benefit is the ability to create a personalized investment program for your vacation, or a "PTSTM travel program."

This tax-preferred investment program can increase your quality of life, a benefit you can see when you compare the impact of spending versus investing your refund, or maybe even combining the two.

Spending. You can spend the refund each year as it comes in. This is quite tempting as some of us live very hectic lives, and it would be nice to get away. Unfortunately, if you can only get away for a few days it is difficult to leave the busy schedule behind. You dream of your retirement years when your busy schedule will be replaced with fun activities and travel with friends. It is going to be great, isn't it?

Investing. You could invest the refund into the PTSTM travel program. You see, the program isn't designed for you to stop travelling, but to consider the impact of your decision, and to get the most travel you can out of your refund.

Consider a couple, both age 50, that makes a household RRSP contribution each year of $10,000. They contribute to their RRSP each year until age 60, and then retire. Where is their yearly tax refund best utilized?

The spending route. One scenario could be that they receive approximately $5,000 in refund each year, and then go on a holiday together. In retirement they draw on their pensions, and cash in investments for the travel money required.

But there's a better way. How can this couple increase the amount available to maximize their retirement travel dollars?

The PTSTM route. Alternatively, they could consult their Investment Planning Counsel planner, and invest into the PTSTM travel program. Within this program, there are a couple of options that could improve their quality of life.

Choice 1. If the couple invests the $5,000 for 10 years they could begin to draw $7,500 of tax-free income at age 60, for 20 years. That's right, by investing instead of spending their refund in their 50s, they will be able to travel for the next 20 years. The PTSTM could also leave behind an estate benefit in excess of $500,000 - not too bad a travel nest egg for their children!

Choice 2. The couple could invest $2,500 and spend the balance on a less exotic getaway during their 50s. The investment would then produce a return in the area of $4,000 of tax-free travel money starting at age 60, for 20 years. This choice also leaves behind an estate benefit of approximately $250,000.

It's clear that you don't have to either spend or invest your entire tax refund. Somewhere in between is the amount that is right for your PTSTM travel program.

Our responsibility is to help our clients profit from promising investment strategies, so they can realize their dreams one strategy at a time.