Thinking about this year’s RRSP contributions need not be daunting. Follow this top 10 checklist for guidelines for 2013.
1. Seek out an accredited financial advisor to help you with your retirement saving plan. It will make the rest of these tips much easier.
Understanding how Canada Pension, Old Age Security, company pensions, tax free savings accounts (TFSA) and RRSPs all work together is reason enough to find an expert.
More importantly, a good retirement nest egg could be two to three times the value of your home by retirement. It is not a “do-it-yourself” project.
2. If you haven’t started saving, start now. It’s never too late to invest in your future.
3. Invest early and often to take advantage of the “time value of money”.
Because your investments are allowed to compound tax-free within your RRSP and TFSA, there are significant advantages to investing on a monthly basis rather than a lump sum annually.
4. Use professional money management for investment expertise. For most of us, it means using mutual funds or guaranteed investment funds managed by the top investment managers in Canada.
5. Know what you need to save each year/month to reach your retirement goals.
Your financial advisor can help you determine the amount and whether RRSPs, tax free savings accounts or a non-registered portfolio best suits your retirement plan.
6. Don’t be too cautious and choose low risk investments only. And don’t chase last year’s highest performing asset class, either. It’s very rare that they repeat.
A well-balanced, diversified portfolio will include a variety of asset classes to minimize risk and maximize returns.
7. Think long term – five, 10, even 20 years – instead of letting short-term market volatility sway your investment decisions. History shows, the longer the term, the more consistent the results.
8. Take advantage of dollar cost averaging by using a pre-authorized chequing (PAC) plan that fits your budget and spreads your purchases over time.
PACs also help moderate portfolio volatility and improve long term returns.
9. If you don’t have the cash available, consider moving non-registered investments to your RRSP.
10. Don’t wait until the last minute to meet the March 1, 2013 deadline for 2012 contributions.
Investment decisions shouldn’t be rushed.
Dan Allen – CFP, MFA, EPC – is a retirement income and protection specialist at the Heritage Group, located in Guelph.
