Investing in an RRSP feels great in the moment. You might miss the cash in hand in the short-term, but you know you have your long term investment plan in mind. You’re making a smart choice. And you can afford it. Good for you.
It’s also great in a few months when you get a tax refund.
But it’s best when, after years of investing at a competitive interest rate, you can count on your RRSP to supplement your retirement and open up more choices.
“Being financially smart today reduces stress, improves family relationships and gives you more confidence, which can turn into even more opportunities,” explains Devron Jakeman, Wealth Advisor with Aviso Wealth and Fusion Credit Union. “Striking the balance between wants, needs and future needs is a challenge for everyone. But planning, and living within your means, is worth it.”
An RRSP is a strong financial choice because it offers several benefits, including tax-deductible contributions, tax-deferred growth, and the ability to contribute on a tax-deductible basis.
Here’s how it works:
When you file your income tax return, you can deduct RRSP contributions to reduce your taxable income. For example, say you earned $50,000 and put $5,000 into your RRSP. You would only pay tax on $45,000. Assuming that your employer has been deducting tax from your paycheque on a regular basis, this should result in getting a tax refund at the end of the year.
Your tax refund is now in your account earning interest! Your tax refund can be used for whatever you want, including potentially using it for next year’s RRSP contribution, or into a tax sheltered account such as a TFSA.
When investing, the goal is to focus on life goals, rather than financial goals.
“When planning for the future, ask yourself, what do you really want to do?” explains Jakeman. Do you want to travel, spend more time with your family, volunteer, work for social causes? Your goals must satisfy you throughout your life, not just a few months.
“Short-term goals such as “play more golf,” or “read more” are important, but it’s important to reach beyond those to discover what will happily take you through 20, 30, or more years of retirement,” comments Jakeman.
Take the time to understand your options. Invest in ways that support what’s important to you. Look at all your choices.
At Fusion, you can get competitive interest rates, and while your money grows for you, it stays here to support people and businesses in our communities.
As stated by Jakeman, “investing in an RRSP is an investment in your financial wellness. Whether it’s a big annual commitment or setting a smaller amount aside regularly, RRSPs pay personal and financial returns now and in the future.”
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc.
Unless otherwise stated, mutual funds, other 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. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.
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