It is a busy time of year for us right now with RRSP season in full swing. I do not have a lot of time to write full blog articles. So I thought I would collect a few daily thoughts and make a weekly blog of them!
Here are the questions I answer daily:
.should I make an RRSP or not?
.should I make a TFSA contribution instead?
.should I reduce my mortgage instead of making an RRSP this year?
.am I saving enough to retire comfortably at a certain age?
….will I owe taxes?
.how much RRSP should I make to cancel what I owe?
.how much of a refund can I expect if I make x amount of RRSP?
.etc etc etc etc
Don’t be afraid to consult. It may be the best investment you will ever make!
Spousal RRSP contributions are a way to split income at retirement to reduce taxes. With the new pension splitting laws, you can now split RRSP income at retirement but only from age 65+.
Before making your RRSP contribution, look at who made the most income this year and who has the most retirement savings. Try to equalize the pots… of money. If you made the most income, you should make the deduction in a regular RRSP or in a Spousal RRSP. This way you get the deduction and your spouse gets the RRSP investment in his or her name. With RRSPs, tax planning starts now!
The rate of saving is still more important than the rate of return. In a recent Scotia bank survey, reported in the Advisor.ca website on Feb 18, 2011, 39% respondents said they would begin investing at a much earlier age. Another 21% would have spent less and invested more, while 41% feel they started saving for retirement much too late. Just save a little consistently.
Investing and Savings is like Exercising, a little regularly goes a long way. Consistency and regularity makes you fit. A regular monthly RRSP will make you financially fit. Money you don’t have, you won’t spend. It is a lot easier to put away $100 or $500 a month instead of writing a cheque at this time of year for $1200 or $6000. Do a little monthly contribution and top it up every February is the sure way to a fit and comfortable bright retirement!
Tax planning of RRSP withdrawals is crucial to keep tax low and preserve government benefits.
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Did you look at your investment statement lately? The past 12 months returns for a balance portfolio of 20% bonds and 80% equity average 14% to 16%. It is interesting to see that most of our model portfolios also beat the benchmark. Managed money, even with management fees, may indeed do better if well managed.
RRSP loan debate continues. You will quickly see how big of a question borrowing to invest is from this article alone. The bottom line here, is that the interest rate you earn on the investment must be more than the cost of borrowing. If you can pay less tax after retirement it will also work in your favour.