3 Reasons why I hate RRSP’s

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3 Reasons why I hate RRSP’s

RRSP Investing Success

Will an RRSP help you, or hurt you into the future?

It is that time of year again, when the airwaves will be filled with commercials, advertisements and teasers talking about the joys of RRSP’s. But over the years in meeting with hundreds of clients that have invested their hard earned money inside of an RRSP, I found out some alarming trends in how they invested their money, and why they wished they never had. This information is based upon our own research and in no way is scientific, but merely factual.

3 reasons why an RRSP may not be your best retirement income choice…

 

RRSP Problem number 1. Tax Deferral

RRSP are not tax freeAn investment in an RRSP today, will lower your Tax Obligations to Revenue Canada, while at the same time encourages you to save some money for your future retirement plans. This sounds great in theory, pay less tax today, and also be saving for my retirement years. Why would this be a problem? Well it is not tax free, but simply a tax deferral into the future, so the tax owing does not go away, it is only put off until you retire, coincidentally when you need tax efficient income… And as well, as your initial investment grows, so does your tax obligation. As an example, if you had invested $100 today, and you are in a tax bracket of 38%, you would receive $38 back from Revenue Canada. And as that $100 grows into $200 for your retirement years, and your tax bracket remains the same, you would then owe $76 worth of tax into the future. So it is not tax free, it is only tax deferred.

RRSP Problem number 2. Forced Income

RRSP InvestingDid you know that when you reach the age of retirement as defined by the government, you must take a mandatory amount out of your RRSP each and every year, whether you need it or not. The reason is, the government would like you to start paying them back their deferred taxes in a reasonable amount of time, starting at your age of retirement. This can create a problem for people who do not necessarily want to take money out of their RRSP accounts, because it will put ALL of their income into a higher tax bracket, because we use a Graduated Tax System in Canada, meaning the more we make, the more we get to pay in taxes, and you may not even need the income, but you have to take it…

RRSP Problem number 3. Bad Advice

Good RRSPThat’s right, I have to say it, because it happens all too often. Someone has all the right intentions in the world, to get themselves on track to be diligent and start saving for their future and they go into their local branch and set up an automated withdrawal program for their RRSP. Every month clients are investing their hard earned money, it flows from one bank account into a savings account, and if you are lucky you get a statement on a quarterly basis. But no one ever calls, no one ever gives you the right direction, and no one ever tells you where to invest and how much to invest, so you can reach your own retirement goals. If there is one factor that could destroy your retirement income, it is a mismanagement of your hard earned savings. Typically, your branch will not even give you guidance or advice until your portfolio is in excess of $100,000, and by that time, you have wasted so many valuable years of compounding, that it is much more difficult to be successful.

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So how can you get your RRSP back on the right track?

 5 Ways to get your RRSP back on Track…

RRSP InvestingIt really would be a shame for you to have invested into an RRSP for so may years, and then just throw in the towel, so here we will look at 5 ways to get your plans back on track, and give you the confidence you need to save and invest in your future.

  • Get a plan together, and understand how much of your income will be generated by CPP and OAS. If you do not know how much you will be getting as a base income, you really need to read this article; How much will CPP and OAS pay you into retirement.
  • Dig out your “old” Investment statements, and determine how much of a return you have gotten in the past and how much you are receiving today, you need to look at a bit of history about your own personal planning, and how your portfolio has performed, in good times, and certainly in bad.
  • Diversify your savings plan. If you only invest in one savings vehicle for your retirement then you will only have one choice in retirement. But if you diversify outside of your RRSP in many other ways, then you are given the choice and flexibility we have found people need during their retirement years.
  • Monitor and re-balance your retirement plans based upon your age and your risk tolerance. If you are younger, you may be able to pallet the events of the financial crisis of 2008 (of which many have not fully recovered),  but what would happen if your retirement portfolio fell 30-40% in the years leading up to your retirement? Would you be willing and able to put off retiring, or would you have to wait until your income recovered?
  • Work with a good, trusted advisor, who will be there for you, not only for today but years into your future. A well managed plan, will help you buffer the bad times, and take advantage of the good times, but it needs to be actively managed.

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How can we help you achieve your retirement goals?

RRSP's are confusing

 

There are many ways to achieve the financial success you deserve, especially living, working and playing in such a wealthy area of the world that we live in. So why are you worried? Is it because your expectations not been met? Is it because you have been handed off to so many so-called advisors at your bank that you have personally given up? Or is it because you simply have no idea as to “what” you should be expecting in retirement or “how much” you should be putting away to have success?

These are questions we deal with every day, and have for the last decade, and this is why we have built our business on answering those challenges that are found above. So if you feel that you need the service, consistency and faith in your retirement plans that you haven’t in the past, then it is time to give us a call.

About Us…

We do not charge any fees to our clients, and are fully compensated by the companies that we entrust your hard earned money to. As well, we do not have a minimum deposit amount you must have to be considered a client, you just have to be serious about your retirement goals. And don’t worry we deal with all the big companies that are out there as Brokers of Financial Services, and do all the work in the background, so you never even need to meet with your banker or advisor again, if you so choose.

Don’t wait any longer, call us today and get the service and advice you deserve…

Steffen deGraaf

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