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The Companion Advisor: Retirement Planning
Factors to weigh when choosing your RRSP investments

You are probably besieged with sales information on all the latest RRSP-eligible investment products. To make just the right choice, ask yourself the following questions:

How far am I from retirement?
The more years ahead of you, the more equity-based investments you should have in your RRSP. Countless studies have shown that equities are the best long-term hedge against inflation. You need them to multiply the contents of your whole portfolio. As you get closer to retirement, you can up the proportion of short-term funds and debt instruments to provide security of principal as well as income potential. But don't give up on equities, even then, as you could easily live for two or more decades beyond age 65; especially if you're a woman. Also inflation will continue eating away at your spending dollars, whether you're 65 or 80.

What is my attitude towards risk?
An investment that keeps you awake nights is the wrong investment for you. Be aware however, that even conservative growth investments can be more volatile than debt instruments in the short run, but pay off with considerably higher returns in the long run. So try to balance risks against potential returns.

What other retirement plans do I have?
If vested in a secure company plan, you might be willing to take some risk in your RRSP.

How knowledgeable am I?
Never buy into investments you don't understand. If you don't have the time to educate yourself, consult a compatible financial adviser and tap into his or her experience and intelligence.

What's my potential rate of return?
Take the RRSP label off the investment and ask yourself how hard you want it to work for you.

Have I maximized my tax situation?
If you have got assets inside and outside your RRSP, consider keeping your interest-earning investments inside your RRSP, and assets that provide potential dividends and capital gains in your non-registered portfolio, where they enjoy some tax advantages.

Will I need to income-split down the road?
If your spouse will have less retirement income than you, consider a spousal RRSP.

How much can I afford to contribute?
Invest as much as possible. The more money you have growing for you, the more likely you are to enjoy a secure retirement. With today's low interest rates, it's worthwhile to borrow money for your RRSP, but do plan to repay the loan within the year.

What are the costs?
Make sure that you understand the fees involved.

How diversified am I?
Don't keep all your investment eggs in one asset basket.

If I am cash-poor, do I have other investments, such as mutual funds or term deposits, that I could roll into my RRSP?

How does the investment compare with its peers?
Compare the returns on mutual funds you're interested in with similar funds that have similar objectives. Most daily newspapers publish mutual fund performance tables weekly or monthly. Then get your hands on the prospectus and sales literature of funds you're interested in. They should outline the fund's investment objectives and tell you about the fund's management team. A strong team can take even a sluggish fund to astonishing heights over time. Need more info call a Independent Financial Advisor from Fiscal Agents.


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© , Fiscal Agents Money Management Newsletter 
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RRSP Planning
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