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RSP Planning Tips

As you can imagine, guessing how much you should save for retirement is a tricky business. Since the number of seniors making it into their 90’s and beyond is continually increasing, you will want to make sure that you will be living off of your portfolio’s income and not eating away at the principal. One useful rule of thumb says that you’ll need at least 70% of your pre-retirement yearly salary to live comfortably in retirement. We’ve put together a list of smart RSP tips to keep in mind when planning for your retirement:

1. The early investor gets the returns.

Compound tax deferred growth is a wonderful thing because the longer your investment grows within your tax deferred RSP, the more you can take advantage of the investment growth that is being compounded. You will need to contribute significantly less money to your RSP if you get in early, and often.

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2. Get regular with your investing.

Slow and steady wins the race. Small amounts make a big difference given enough time. Sign up for our Automatic Savings Program (ASP) to take advantage of dollar cost averaging. Make it automatic!

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3. Significant returns for your
significant other.

Two RSPs are certainly better than one. You can split your earnings and contribute RSP amounts into your spouse’s account by setting up a Spousal RSP. This can have significant tax savings in your retirement years, as you can both stay in a lower tax bracket.

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4. Minimize fees – the fine print can
make a big difference.

It’s always a good idea to read the prospectus and search for those management fees. They usually go by the name of Management Expense Ratio or MER. That’s the percentage that they charge for managing the fund – every year. They can really add up, especially when you start accumulating significant amounts. Remember, our Streetwise Fund has a low fee (MER) of only 1%.

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5. Can you risk it?

What’s the right amount of risk? Essentially, it’s the amount that you’re comfortable with. If risk is keeping you awake at night, then you’re defeating the purpose here. You might want to scale back. Be sure to review your personal financial objectives by taking our Investor Profile questionnaire on this website or call to speak with one of our Mutual Fund Associates. Remember, a balanced stock and bond portfolio like The Streetwise Fund, should do well over time but you do need to be prepared to ride out the ups and downs.

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6. Make sure your basket is a big
basket.

It’s been said that asset allocation is the key to returns. Some years, most or all of a stock market’s gains can be in one sector. So you need to be there. And that means being everywhere. Diversify by sector and geography. Make sure your portfolio is international. For example, The Streetwise Fund offers investors a great opportunity to diversify by spreading their investments across 4 major stock and bond market indexes in Canada, US and overseas.

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7. A loan way to go with your RSP.

If you can’t maximize your annual RSP contribution, or have contribution room from previous years, it might be a good idea to take advantage of an RSP Loan. You’ll lower your taxable income by getting a tax deduction.

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