Written for: The Canadian Press
Retirement & You
As the deadline for RRSP contributions approaches, many people may be looking at their finances with confusion: have I made the right decisions with my investments? How is my wealth advisor making my money work for me? Will I be able to retire on a livable wage?
This is where investment or wealth advisors come in. They are the professional managers of all your hard-earned money; whether that means investing in individual, spousal, or group RRSPS, the investment advisor is there to create a tailor-made financial experience.
Mark Yip, an investment advisor with Servus Wealth Strategies, believes there are several things to consider when choosing to invest. “Knowing your time horizon, return objectives, risk tolerance, and end goal are all things you should consider,” Yip says. “Just because you make 6.8 per cent return on an investment doesn’t mean it will fulfill the need of a client.”
An additional factor that most people don’t consider is the rate of inflation. “If you don’t invest, your money doesn’t grow,” explains Yip. “Good and services are all going up, but your money isn’t. So you’re losing purchasing power.” For those hesitant to trust their money to credit unions or banks, the fiscal reality of inflation may be a reality check. “The only purpose of money is a medium of exchange for goods and services,” says Yip. “Otherwise, its just paper.”
Another financial planning option is investing your money into group or spousal RRSPs. By consolidating your funds, spouses can split their income more evenly in retirement. This means that the income tax you pay on your retirement income is lower than through separate RRSPs. It also protects your spouse’s future income if they aren’t covered through their employer. Group RRSPs, on the other hand, are typically opened and paid for by employers. Your contributions are deducted from your pay and may be matched by your employer.
That’s why RRSPs are so popular: taking into account the lifestyle, goals, and retirement plans of clients, an advisor builds a custom portfolio of various investments designed around individual needs. Each contribution a client makes to their RRSP is income tax deductible, and accrues tax-free, so when a client reaches 71 years old and is required to withdraw from their RRSP, their money is ready for use. Once withdrawn, the client is responsible for paying income tax on the retirement income—another aspect that advisors can help with.
“Wealth advisors can adjust your portfolio at any time to make it as tax-efficient as possible,” says Yip. “The biggest thing holding people back from investing is the fear. Wealth advisors are here to address these kinds of misconceptions.”
Financial planning for the future can be scary. But with the right advisor and the right institution, your RRSP can ensure that your future is taken care of.