We know that for many people, Registered Retirement Savings Plans 鈥� RRSPs 鈥� are a smart investing tool to save for retirement while also offering tax benefits today.
But because one-size never fits all when it comes to investing, it鈥檚 important that your plan be custom-fitted to you and regularly reviewed to incorporate changes like promotions, marriage, home purchases and children.
Part of that assessment will include whether investing in an RRSP will provide you best bang for your buck, or whether another option, such as a Tax-Free Savings Account, is a better fit for now, explains Stu Tunheim, a Consultant with in Courtenay.
First, it pays to understand just how an RRSP works. By putting money into an RRSP, either in regular payments throughout the year or in lump sum deposits, you鈥檙e building retirement savings to be accessed later. In addition to providing for retirement income, the funds can also be used for a first-time home purchase or post-secondary education down the road.
Additionally, RRSP contributions also qualify for a tax deduction come income tax time 鈥� an added benefit that lets you see real benefits today.
However, because the tax benefits rise with your income level, someone earning less 鈥� say someone just embarking on their career 鈥� might find greater benefits in other investment vehicles, such as a TFSA. Not only does it allow more flexibility in that you can remove funds without penalty, but you always have the option of moving it into an RRSP once you鈥檙e earning more, letting you maximize those tax benefits, Tunheim explains.
鈥淭here鈥檚 no cookie-cutter solution for investment planning, but what is true is that it鈥檚 a good idea to diversify your retirement planning through RRSPs, but also options like TFSAs, a personal corporation for those with a high enough income and life insurance,鈥� he says.
鈥淭he whole idea is to have several avenues for investing in a way that also lets you maximize the tax benefits.鈥�
鈥淲hat should I invest in?鈥� is another common Tunheim receives as people assess their options.
鈥淭he right investment for you is the one that matches your tolerance for risk and your time horizon, but regardless of where you are in your investment plan, there is something for you,鈥� Tunheim says.
And remember that it鈥檚 never too late 鈥� or too early 鈥� to start your retirement planning.
READ MORE: Why 鈥榤ortgage insurance鈥� may NOT be best option
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Courtenay鈥檚 IG Wealth Management team is working remotely, but you can reach Stu on his cell at
Investors Group Financial Services Inc.
Insurance products and services distributed through I.G. Insurance Services Inc. Insurance license sponsored by The Canada Life Assurance Company. Trademarks, including IG Wealth Management, are owned by IGM Financial Inc. and licensed to its subsidiary corporations. This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Stu Tunheim is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant.