RRSPs in Canada
The time is coming for Canadians everywhere to scramble to their local financial institution to act responsible (and get some extra tax deductions). As an employee of a well liked and community responsible credit union in BC, I look to the next few months with something like dread, but also something like hope. RRSP season is hands down the busiest time of the year. A time where all else gets put on hold so that people can do their business with the seconds ticking down to the deadline.
It is a time of year when you can teach those who know nothing about RRSPs, and enlighten those that already have them.
You work hard for your money, so why shouldn't it do the same for you?
The first thing that you want to do is ask yourself three questions...
1) How much will I need when I retire? (keep inflation in mind, a million dollars may not be worth as much in 40 years)
2) How much should I be putting away to reach my goals? (Starting small may sound easier, but will it help you reach your goals in the long run?)
3) Where should I be putting my money in order to achieve these goals? What kind of investor are you? (Are you a risk taker or are you conservative?)
The answers will be different from person to person, and that's why the right plan, and talking to someone who knows how to find the right answers for you, is so important. You need a clear strategy that will work for you.
I am a risky investor. I'm willing to put my savings on the line to earn a potentially hihger return, because, even if I lose it, I have about 40 years to make it up. Investing is really only profitable if you are in it for the long run anyways. The way I see it, I have about 960 paychecks left, and if I want to reach my goal of one milllion dollars by age 65, and was in a very low risk product, I would have to put about $1000 every two weeks into it! As is, if my plan stays on track, and my return stays where it has been, I need only put about $200 every month! And, once I reach age 35, I shouldn't have to put any more money in, instead, the interest will compound and I can just sit back and watch my money grow! (Based on about 8% return per year)
And, another note, the earlier you start the more money you can earn! For example, if you started putting $2000.00 per year into an RRSP, you could potentially only do this for 8 years ($16,000 total deposit) and let the interest do the work, if you were to base it on the same 8%, you would end up with about $445,000 by age 65...that's $429,000 in just compounded interest!!!!!! Talk about free money! On the flip side, if you were to start later, say at age 27 and put the same $2000.00 per year in, you would have to deposit every year until age 65 to get $440,000 (the math is, you only earn $362,000 in interest, that's about $67,000 less free money........not to mention the fact that you had to put $62,000 more of your own personal money in there.)
Normally I wouldn't waste valuable Blog space for this type of thing, but I think it's important that everyone in Canada, young or getting there, knows what RRSPs can do for them.
It is a valuable service that the government provides to us. As an added incentive to saving for our retirment, the government gives us a tax deduction on the money that we save, and we don't get charged on the interest earned until we take it out after retirement, when we are in a lower tax bracket.
If you have any questions about your retirement savings plans, contact Westminster Savings Credit Union of BC toll free @ 1-877-506-0100 between January and March to make the most of your money!
Who doesn't want the government to pay them for once?????
