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Smart Moves for Your RRSP
No matter what’s happening in the markets, an RRSP is still one of the best ways to save for retirement. You get tax benefits plus the magic of compound interest working for you. So here’s how to make the most of your Registered Retirement Savings Plan.
Save automatically
If you act on only one idea here, make it this one. Because the difference between retirement success and failure isn’t how much money you make, or how smart you are, but how well you conquer the all-too-human tendencies to procrastinate and under-save. So ask us to automatically route smaller, regular contributions from your chequing account to your RRSP. You’ll get the advantage of dollar cost averaging, you’ll probably save more, and there’s no more scrambling at RRSP season.
Save the max
Contributing your maximum is essential to taking full advantage of your RRSP. If you don’t have the money, consider an RRSP loan or using a line of credit. You'll pay interest, but the compounding growth of your money over the long term may far offset the interest costs. Another smart move — use your tax refund to pay down the amount you borrowed.
Save sooner
Make your contribution as early in the year as possible instead of leaving it until the 60th day of the following year when the RRSP deadline is looming. You’ll benefit from up to 14 extra months of tax-deferred compounded growth.
Catch up
Use up your carried forward contribution room as soon as possible. If you can’t catch up in one lump sum, consider borrowing. Check the Notice of Assessment sent to you by the Canada Revenue Agency to find your unused contribution room.
Save for your spouse
If you’re the family’s higher income earner you can invest some or all of your contributions in your spouse’s RRSP and claim the tax deduction. The big benefit comes at retirement when more equalized nest eggs can reduce your combined tax bite and mean more cash to live on.
Name a beneficiary
If you don’t name a beneficiary your RRSP will be considered part of your estate and be subject to probate, taxes, and other fees. In some cases that can reduce its value by almost 50%. If you name your spouse or a dependent child/grandchild as the beneficiary, your RRSP transfers to them tax-free.
Start early
It’s practically ‘the’ universal law of saving — start early. You’ll get time and compounding working for you. And that can make a big difference to how much you need to save. A person making $50,000 who wants a retirement income of $40,000 needs to put aside about 8% of their salary each year if they’re starting to save at age 25, but 22% if they’re starting at age 50.
Get advice
Whether you’re new to investing, or a seasoned veteran, it’s always a good idea to get professional advice. So drop into, all call, your branch and talk to us
 Credential Financial Strategies Inc. is a member company under Credential Financial Inc., offering financial planning, life insurance and investments to members of credit unions and their communities. The information contained in this newsletter is provided as a general source of information and should not be considered personal tax advice, investment advice or solicitation to buy or sell any segregated funds ®Credential is a registered mark owned by Credential Financial Inc. and is used under licence.
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