Stock Purchase Plan options???

[midnightfxgt]

Hey guys,

I am not the best when it comes down to all these Stock purchase plans etc. So I got a couple easy questions! :)

My company will match a certain percentage of what we pay in. Cool. We have the option of having them in a Non Registered account, or a registered account (RRSP).

Is it right to assume that when I purchase stocks, they are in an RRSP, and then when I cash them in, I now have an RRSP worth that amount?? :whoa

Anyone have a dummies guide for this?

-John

[majic]

are you purchasing your company's stocks and you can put them into a regular bank account or a RSP OR are you purchasing any stocks as long as they are under the RSP umbrella?

[majic]

the first option is the one that makes sense ;)

so say you buy $50/mth of your company's stocks.. and they match it so you have $100.. it's important where the money is coming from, to purchase the stocks..

say you put $200/mth into RSP account, that money just sits there until you use it to buy stocks/gics/mutual funds/etc.. so you take $100 dollars from the RSP account and buy the aforementioned stocks.. so now they can grow and what you make on it is tax deferred.. at the same time (i believe) your company can either give you $100 in stocks under RSP or under your regular account (i think they would be doing the same thing as you so if you use RSP money to purchase the stocks they would dump their stocks with your RSP)

so now you have $200 in stocks and $100 in cash within your RSP umbrella.. makes sense? best would be to call up the benefits rep and see what it's all about and set it up which ever way you want..

[iconicrocket]

What's the maximum you can contribute? :evilgrin

[billyfo]

If you buy stock, don't put it in RRSP, cause future value uncertainty. if the value goes down when you're retired, not only you lose money, also you have to pay taxes when you draw $ from RRSP/RRIF, so double lost. I think some members here is financial advisors, or get your own, it is the best way to plan your future

[majic]

What's the maximum you can contribute? :evilgrin

upto 18K (for 2006)
2007 - $19,000;
2008 - $20,000;
2009 - $21,000; and
2010 - $22,000.

check your last year's NOA (notice of assessment) and it will tell you if you have any unused contributions..

[majic]

If you buy stock, don't put it in RRSP, cause future value uncertainty. if the value goes down when you're retired, not only you lose money, also you have to pay taxes when you draw $ from RRSP/RRIF, so double lost. I think some members here is financial advisors, or get your own, it is the best way to plan your future

i wouldn't say NOT to put it in RRSP bc your portfolio should be diversified.. also if you put in say $1000 and lose it all there's no tax to be paid when you withdraw that $0 :chuckle

oh yah and it's a tax deferring system b/c as billy said you still pay but later when you withdraw the $ for your expenses when you get older..

[IMHIP2]

Is there a vesting period? (time you need to be employeed before employer matches your contribution)

If you leave the employer do you lose the contributions they invested (or a portion)?

Is there a hold period where you must hold the shares before you can sell?

Do you have other stocks held outside of an RRSP account or have you ever had losses on the sale of stock previously?

Use the RRSP option if you don't plan on cashing in the shares for awhile. Tax would only assessed when funds are eventually drawn out of the account - presumably on retirement.

If you will require the cash in the near future then you may want to opt for the non-registered. When you sell the shares you would be taxed on the increase in value as capital gains (half the gain at the current time). If you have previous capital losses you can claim those against these gains.

Like was suggested ask your benefits rep and consult your financial advisor to determine the best option for your situation.

[midnightfxgt]

Is there a vesting period? (time you need to be employeed before employer matches your contribution)

If you leave the employer do you lose the contributions they invested (or a portion)?

Is there a hold period where you must hold the shares before you can sell?


No Losses, and no vesting, and no hold period. :)

The stocks are purchased, and can be under an RRSP, or Non-Registered. See, I have never done this before. I do have RSPs at my bank, but nothing like this. I can contribute whatever percentage I want to RSP, and to Non-Registered. So I guess it is essentially like RSPs, but dynamic, in the sense it can go up and down. I do have the option of transferring over into another RSP account. Say for example I do this, what are the fees normally like?

Thanks for the help guys!
-John

[majic]

i know that td charges 50bux and pc charges 25bux to trasfer out of rsp account to another rsp account (different financial institution)

achieva charges you 0.. so i parked my cash there till i figure out what i want to do.. :)

[IMHIP2]

No Losses, and no vesting, and no hold period. :)

The stocks are purchased, and can be under an RRSP, or Non-Registered. See, I have never done this before. I do have RSPs at my bank, but nothing like this. I can contribute whatever percentage I want to RSP, and to Non-Registered. So I guess it is essentially like RSPs, but dynamic, in the sense it can go up and down. I do have the option of transferring over into another RSP account. Say for example I do this, what are the fees normally like?

Thanks for the help guys!
-John

Don't know what the fees would be, if any. Unlike a mutual fund i don't think there would not be any backend fees. Maybe commissions? The institution directing the RSP may have fees.

[RedRaptor]

John,

Should you choose to go with the RRSP/Registered option, your RRSP contribution each year is dependent on the Book Value (the ACTUAL amount of money you put in). The value of the stock itself will go up and down but either way even if the stock value is down to $0 at the end of the year, you are still claiming the Book Value on your RRSPs.

There are fees to transferring stocks from both the your current and target financial institutions. Check with both of them before transferring them.

My advice is to diversify. If you don't have any stock RRSPs, this is a good chance to get started. Who knows how the company will do, it may go up or down. This is your call.

But one thing is for sure. Sign up for the company matched stock option right away because its worth while. ;)

[iconicrocket]

Don't forget that any RRSP contribution will increase your tax credit come tax time next year.

[midnightfxgt]

Thanks Guys,

Rob, thats a VERY good point! I am signing up for the matched one for sure, even though its not Very much. I am starting to think I will have this small amount socked into the RRSP side, and I will contribute to my RSPs at the bank, on my own :)

-John

[midnightfxgt]

John,

My advice is to diversify. If you don't have any stock RRSPs, this is a good chance to get started. Who knows how the company will do, it may go up or down. This is your call.


Why do people suggest to diversify? Is it not less overhead to simply dump money into a "regular" account and let it sit? Its also a safe bet.

Do people suggest this simply because it gives you options? I know the gains can be much better also.

Any good reading on this type of stuff?? :)

-John

[RedRaptor]

Thanks Guys,

Rob, thats a VERY good point! I am signing up for the matched one for sure, even though its not Very much. I am starting to think I will have this small amount socked into the RRSP side, and I will contribute to my RSPs at the bank, on my own :)

-John

John, eventhough most company matched contributions are a small percentage, at the end of 4 to 5 years, you'd be surprised at how much you accumulate at the end of it.

My personal advice is sign up for the RRSP/Registered option. Its like the company matching your RRSP contributions and if you earn a higher income, RRSPs is what is saving you from paying taxes out of your arse. ;)

I guess when people say diversify, they meant to put some money into different options. Like you wouldn't put 100% of your money into one stock because if it crashes, you'll be SOL.