 The
Money Management Newsletter: RSP
Planning
The Lifecycle of RRSP Investing
By The Money Management Editor
Money Management Newsletter, January 2005
You have spent the last 20 years
building a fulfilling career and creating a satisfying lifestyle. Now
you're ready to turn your attention to the future.
If you haven't thought about retirement planning yet, now is the time.
To maintain a comfortable lifestyle when you retire, you will need about
75 per cent of your pre-retirement salary. Your company's pension plan,
the Canada Pension Plan (CPP) and Old Age Security (OAS) may add up to
only a portion of what you will need. Therefore, a Registered Retirement
Savings Plan (RRSP) can be another important source of retirement income.
Don Reed, President and CEO, Franklin Templeton Investments Corp. Offers
some suggestions for the beginner. “If you start now, you'll have
about 20 years for your savings to grow," and adding, "but it's
important to make smart investing decisions."
An investment advisor can help you understand the various options available.
For example, there may be ways to save more aggressively, or you may decide
to retire later. Additionally, consider the following strategies for your
RRSP portfolio:
- Contribute the maximum amount that is on your tax receipt from the
previous year.
- If you have been contributing to a Registered Education Savings Plan
(RESP) and your children are now in school, you can re-direct your contribution
to your RRSP.
- Set up an automatic transfer from your bank account to your RRSP.
Even if you start saving $100 a month, assuming an average return of
eight per cent over 20 years, your RRSP could grow to $57, 266. If possible,
it is probably a good idea to save more than this so that you have enough
to fulfill your retirement goals.
- Allocate your assets. An investment advisor can help ensure your RRSP
portfolio is appropriately diversified between equities, bonds and other
investment vehicles.
- Stay invested and review your financial plan and RRSP portfolio annually
with your advisor. Look at adjusting your strategies anytime a major
change in your life occurs.
Individuals closer to retirement
You've planned and saved for retirement for most of your adult life.
Now that it's here, it can be difficult to know what to do first. As you
transition into the life of a retiree, here are some things to consider.
Laying out your plan
Just as it is important for you to have a financial plan to reach your
retirement goals, it is equally important to have a well laid-out plan
for retirement to ensure you do not outlive your investments.
"Having a clear, detailed plan is the key to minimizing financial
stress in retirement," said Reed, "A good place to start is
to have a clear picture of all sources of income and expenses and then
create a budget for yourself. An investment advisor can help with this
important step."
Be tax efficient to maximize your RRSP savings
When your Registered Retirement Savings Plan (RRSP) matures at the end
of the year in which you turn 69, transfer it directly to a Registerd
Retirement Income Fund (RRIF) or annuity to avoid taxation, which applies
to any amount withdrawn.
Take advantage of all the tax benefits available. If you are earning
income, contribute to your RRSPs until the end of the year in which you
turn 69. You can also contribute to a spousal RRSP until the end of the
year that your spouse turns 69, regardless of your own age and provided
you have unused contribution room.
When it finally arrives, retirement can cause a bit of a culture shock,
but knowing what you want to do and how you can afford to do it will allow
you to make the most of this exciting stage of your life.
*
* *
|
|
Use this link to load a printer-friendly
version of this document. |
Have a question regarding
this article? Use our feedback form
to send us a note.
©
, Fiscal Agents Money Management Newsletter
25 Lakeshore Road, Oakville, On L6K 1C6.
(905) 844-7700
|
