Canadian Living & Partners
Canadian Living readers get advice from an expert on the importance of investing in your future, and the best way to do so.
Carrie Russell,
Senior Vice President, TD Canada Trust, has over 20 years of experience in banking and saving.
Investing in Your Future
It can be tough to prioritize saving for the future when you’re star- ing down the financial obligations of today. Your retirement may be a long way off, but it’s important to plan and start saving now to help ensure you live the retirement you want.A Registered retirement savings plans (RRSPs) are one of the best saving and investment tools available today. Even if your golden years are decades away and you don’t have a lot of money to save, you should take advantage of the potential benefits of tax-deferred growth and compound interest that an RRSP offers.
Contributing to an RRSP can greatly reduce the amount of income tax you pay. To begin with, the money you put into your RRSP is treated as a deduction against your taxable income. For many people, this will result in a tax refund which can be used to pay down a mortgage, pay off debt or invest in their future by contributing the refund back into the RRSP. With an RRSP the interest or income earned in the plan is tax deferred, so you only pay tax when you withdraw the funds. Typically, withdrawals happen in retirement when your overall tax rate is lower, so you get a tax break now and may pay lower taxes later. That’s a pretty good deal!
Like any savings program, it can be hard to find money to start building an RRSP.
The best advice is to set up an automated saving program to pay yourself first. Once you get into the saving routine, you’ll find it easier to make regular contributions rather than trying to find a large amount once a year. And remember, if you start early, you’ve got time on your side.
Two easy ways you can invest in your RRSP are with GICs and mutual funds. Investing in GICs lets you take advantage of the power of compound interest. This means you earn interest not just on your original investment but on the interest generated from that investment as well, and that money grows, tax deferred, as long as it stays in the RRSP.
Mutual funds offer a wide variety of options aligned to your personal investment style. And an automated plan allows you to take advantage of fluctuations in the market as you build a diversified portfolio.
It’s never too early to start saving for your retirement. If you haven’t done so already, visit your local bank branch or speak to an advisor about how an RRSP can help you grow a nest egg for your future.
