Plan your future and benefit today
WHAT IS AN RRSP?
A Registered Retirement Savings Plan (RRSP) is a plan in which you register investments in order to save money for your retirement. The plan is registered with the Canada Revenue Agency (CRA).
An RRSP defers income tax. You do not pay tax on the income that accumulates in the plan, as long as it remains in the plan. However, if you withdraw registered investments from the plan, you generally have to pay tax on any withdrawals.
An RRSP must be converted into retirement income before the end of the calendar year in which you turn 71.
WHO CAN CONTRIBUTE TO AN RRSP?
• Tax payers who have earned income, as defined under the legislation, or income eligible for a transfer to an RRSP.
• There is no minimum contribution age1 and you can contribute up to December 31 of the year you turn 71.
ADVANTAGES OF AN RRSP
• Your disciplined savings approach is immediately rewarded in the form of a tax refund or tax savings.
• Your investment returns are tax-sheltered, meaning they are not taxed as long as they remain in your plan.
• When you reinvest your tax refund, it's as though the government has lent you the money from your taxes interest-free, so that you can make it grow until you retire!
• You won't be tempted to use your savings before you retire, since all withdrawals from the plan are taxed.
• Subject to certain conditions2, your RRSP is creditor proof in the event of bankruptcy.
ADVICE FOR REAL LIFE
Laurie Renton, Owner at LR Future Insurance & Investments and Financial Advisor with Desjardins Financial Security Investments Inc. says "we are here to help you make informed choices, by offering you honest and straightforward financial advice based completely on your needs. We call it advice for real life, and it starts with your life."
1. The contributor has reached the minimum authorized age to own a contract in Canada. The legal age in Quebec is 16 and the legal age in the other Canadian provinces is 18.
2. Except for contributions made to an RRSP contract that is subject to seizure in the 12 months prior to the bankruptcy. An RRSP can only be exempt from seizure if a preferred beneficiary has been designated. To find out more, speak to a legal representative (attorney or notary) about an analysis of your personal situation.
Avoid making emotional investments
(NC) — Emotional investing doesn't pay — it costs you instead, says Andy Beer, strategic investment planning expert at Investors Group.
"Market study after market study have clearly proved that when investors are driven by emotions — jumping into and out of stocks looking for the next winner, pouring money into mutual funds following a period of strong market growth, and then moving to the next 'hot' asset class during market troughs — they often lose, and sometimes lose big."
Beer explains that trying to time the market or an individual stock almost never works. But time in the market often does by delivering better overall returns — especially when you couple your long-term stay the course strategy with other key strategies such as effective asset allocation and dollar-cost averaging.
He noted that volatility is the nature of stock markets, but with a carefully selected and properly diversified 'mix' of assets, you can effectively reduce risk, and enhance your chances of achieving your long-term goals.
Beer also suggests that dollar-cost averaging (the strategy of buying a stock or fund on a regular basis regardless of the stock or fund price) is an investment strategy that saves you from trying to time the market. This approach is designed to lower the average cost of your stock or mutual fund units, and ensures you are always participating in the market, so you will never miss out on periods of excellent returns.
Source: This column, written and published by Investors Group Financial Services Inc. (in Quebec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances. More information on this topic can be obtained from your Investors Group Consultant.
Put your mind at ease with a financial plan
(NC) — Did you know that more than one third of all resolutions made before the clock strikes midnight on December 31 are related to personal finances? This finding regarding the average Canadian was revealed in a study conducted by BMO Financial Group.
“Our finances have an impact on so many areas of our lives, so it’s not surprising that they figure so prominently when making New Year’s resolutions,” says Chris Buttigieg, the senior manager of wealth planning strategy at BMO Financial Group. “For those who made a resolution linked to personal finances, the chances of actually achieving your financial goals increase significantly if you take the time to create a financial plan. For example, if you want to get in shape or lose weight in 2014, you need to create a plan that will most likely include an exercise schedule and a diet regime. The same holds true for your financial objectives – it all starts with a plan.”
A financial plan helps people work towards their short and long-term goals like the purchase of a new home, saving for a child’s education or investing for retirement. It provides a roadmap that outlines the path from where they are today to where they want to be in the future. The process of creating a financial plan begins with meeting with a financial professional who will review your finances (including assets, liabilities, income, spending habits and investments) and then work with you to build a personalized plan that takes these items and risk tolerance into account.
“The sooner you create a financial plan for yourself, the faster you will progress towards reaching your short and long-term goals,” Buttigieg pointed out.
A full range of online tools to help you get started are available at www.bmo.com/financialplanning.