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Most members will agree — saving for retirement is an important financial goal. An RRSP can help you maximize your savings and help you realize your retirement objectives. Here are a few things to consider when planning your RRSP investments.
How much do I need to save?
A large number of us have considered our financial future at retirement. Our thoughts may turn to the question: Will I have enough money to maintain my current lifestyle and do the things I want when I am no longer employed?
While you may receive some retirement income from the Canada Pension Plan (CPP), Quebec Pension Plan (QPP) and Old Age Security (OAS), you cannot rely solely on these programs which may only supplement a portion of your income. Your company pension plan also plays a part, however, those funds may not be sufficient to achieve the retirement lifestyle you've planned upon.
Most of us envision a comfortable, financially secure retirement. The time to begin a savings program is now. A Registered Retirement Savings Plan (RRSP) is undoubtably one of the most effective ways to build a solid financial foundation for your future.
Begin Now
The key to planning for your retirement is to figure out how much money you'll need for your retirement and then determine how much you need to put in your RRSP each year to reach this goal.
Once your goal is determined , how should you invest your RRSP dollars? Choosing the right investments doesn't have to be complicated. Your answers to a few simple questions can help you to determine what kind of investor you are and to identify the investments that are right for you. Take a look at the different types of RRSPs and your investment options.
RRSP Investments
What types of investments are available for my RRSP? There are basically three types of investments to choose from:
Cash and cash equivalents: Includes savings accounts, certain term deposits, T-bills, money market and Canada Savings Bonds. These offer the greatest security and liquidity while providing for some income.
Fixed-income investments: Includes investments in Guaranteed Investment Certificates (GICs), bonds, and some mutual funds such as mortgage and bond funds. These offer some growth potential as well as income.
Equity investments: Includes stocks and mutual funds. These fluctuate in value but offer the greatest potential for long-term growth.
How do you decide?
The first and most important step is asset allocation an appropriate mix of the three classes of investments. With so many products to choose from, you may find it helpful to consider the following questions when making your investment decision:
- What are your financial goals?
- How long will you be leaving the funds invested?
- Can you afford to take some risk to potentially increase the return on your investment, or do you need guaranteed returns?
The professionals at ECU can take you through a simple series of questions to determine the types of investments that are right for you.
Mutual funds are offered through Credential Asset Management Inc. and mutual funds and other securities are offered through Credential Securities Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. There can be no assurances that the money market fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated. Credential Securities Inc. is a Member - CIPF. ®Ethical Funds and The Ethical Funds Company registered marks owned by Ethical Funds Inc. and are used under licence.
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