Is it too late to reach my retirement savings objectives?
Life constantly reminds us that times flies. When it comes to savings, for example, some people tell themselves that they've still got lots of time to plan and save for retirement. Then they wake up one morning and... Oh no! Retirement is on their doorstep.
Christian Nolet: Financial planner
If the years have flown by and you've been pushing off your contributions to a registered retirement savings plan (RRSP) for a while, don't despair - it's not too late to take the bull by the horns.
Before anything else, you need to know how much you can invest in your RRSP. To find out, consult your most recent Notice of Assessment from the Canada Revenue Agency. Amount (A) - 2011 RRSP deduction limit - shows you the total amount you can contribute, including your unused contributions from past years. If you exceed this amount, a penalty may be applied to the excess contributions.
Also, check if you have accumulated money in non-registered accounts. If so, you may be able to transfer those funds to your RRSP. This solution is usually more beneficial if you already wanted to use that money for your retirement.
Once you've checked these two things, it's time to take action! To make it easier to reach your savings objectives, you can start with systematic investing. This simple, highly useful program lets you automatically withdraw an amount from your bank account in order to transfer it to an RRSP. You can choose both the amount that will be withdrawn and the frequency of the payments. That way, it will be easier to reach your goals than by contributing a lump sum, which would necessarily be larger, at the end of the year.
You can also apply for an RRSP loan or line of credit if you need more cash in order to make a contribution. This solution can prove beneficial if the borrowing rate is lower than the expected rate of return on your investments, and especially if you can repay the loan quickly. In fact, contributing to an RRSP can make you save on taxes. Should you receive a tax refund, you can use it to reduce the balance of your loan.
Have you already maxed out your RRSP contributions? Then you're certainly a very disciplined investor. If you want to save up even more, then the tax-free savings account (TFSA) may be of interest.
Whatever your situation, an advisor can help you find the most suitable solution for your needs. Talk to one today... before you wake up and find that your retirement is here!