RRSP Consumer Tips
Here are 10 tips to make your RRSP contribution count this year. For
more on retirement savings, see RRSPs: Your Key Investment.
It is time in the market, not timing the market, that counts. Those who
try to time the market to buy low and sell high usually find the
opposite happens. A buy-and-hold strategy works better than a
buy-and-sell-and-buy-again strategy. However, you should review your
portfolio regularly with your financial advisor to ensure it is
performing as it should.
Diversification is important, but 10 to 15 mutual funds in one plan may
prove to be a headache. They may also cost too much in management and
other fees. You need something you can track easily.
Up to 100 per cent of your RRSP can be placed into foreign investments.
This option allows you to diversify your portfolio, reduce risk, and you
can allocate your investments so that they are not concentrated in one
Borrowing for an RRSP
If you must borrow to maximize your contribution, use your income tax
refund to pay down the loan as quickly as possible. If you pay the loan
off within a year, this may be a good strategy. If you need any RRSP
loan, please feel free to contact.
Make this the last year where you rush out to buy an RRSP hours before
the deadline. You will be further ahead with a $100 monthly contribution
than with a $1,200 lump sum payment at the end of the year.
Always ask for an easy-to-understand analysis of a fund's performance
and history of the fund manager. Make sure you understand the risks
involved in investing in the fund.
Equities vs. fixed income
Over the long term, equities outperform fixed-income products. And
interest from fixed-income products is most heavily taxed. However,
equities carry more risk than fixed-income investments. Most portfolios
should contain a mix of equities and fixed-income products, according to
your risk tolerance. Here is where a financial advisor is essential in
helping you plan.
Plan with your partner
You can use your RRSP room to contribute to a spousal RRSP. This doesn't
affect contribution room for your spouse or common-law partner. A
spousal plan can reduce the tax you pay after retirement when you are
drawing down the RRSP money. The goal is to roughly equalize the income
you each receive after retirement ĘC a tax-planning technique called
income-splitting. Count company pension plans, CPP/QPP entitlements,
retirement savings, and other income sources when you plan together.
Do you have a child with a part-time job? Your child can start creating
RRSP room for the future by filing a tax return even if he or she does
not earn enough to pay taxes.
RRSPs your key investments
RRSPs are the best single investment any Canadian can make." That's a
statement heard over and over again from financial advisors. A
registered retirement savings plan should be the cornerstone, the major
building block, to help ensure your retirement income.