As moms we spend a lot of time and energy planning for our children’s futures. From choosing the right preschool, to making sure we have good insurance, to setting up an education fund, we’re investing in our little ones for the long run. As you manage your family’s budget and keep on top of where your money is going it’s important to keep an eye on your own future, as well. With RRSP season here, it’s a great time to think about your retirement. It’s not just something you’re doing to ensure you’ll be in good shape down the road, either – investing in RRSPs has benefits that start immediately.
Pay Less in Income Tax
With tax documents starting to arrive in the mail, you might be wondering what surprises your own return will yield this year. One way to make sure the money numbers swing in your favour when you file in April is to set up an RRSP now. Contributions to your RRSP – right up to your contribution limit – can be treated as a deduction from your 2013 income. March 3, 2014 is the deadline for contributing to an RRSP for the 2013 tax year. This means that you’ll pay less income tax (and have more money in your pocket) if you set up an RRSP now.
Get Professional Money Management Help
Any interest that you get inside your RRSP is tax-free, so your retirement fund can grow even faster. It is this tax-deferred growth over many years, even at modest return rates, that can create a very sizeable nest egg later on in life. Of course, the annual rate of return you earn in your RRSP will of course impact the size of your ‘retirement pot’. This where working with a skilled investment professional is key. After all, many of us just don’t have the time or knowledge or willingness to handle these money decisions on our own. Having a skilled manager helping you out can help you make better decisions.
Share the Wealth
You might want to consider setting up a spousal RRSP. Spousal RRSPs allow you and your partner to effectively split your retirement income. In the process you may be able to further reduce how much your family pays in tax overall. Spousal RRSPs work just like regular RRSPs, except that one spouse contributes and the other spouse receives the retirement accumulation and income benefits. You’ll want to talk to a professional to find out if a spousal RRSP is right for you. Our point is simply that there are a number of ways that you can maximize your tax savings – and your retirement savings – by investing in an RRSP.
How to Get Started
There are three key points to keep in mind when setting up an RRSP:
1. Contribute Early
The sooner you start investing in an RRSP, the longer your retirement savings will have to grow. When it comes to investing your money, compound interest is your friend. To get the most benefit from that compound interest, start sooner rather than later. Even if you’re in your 40s and up, it’s still not too late to get started or to ramp up savings. It simply means that you want to start today, rather than waiting until tomorrow.
2. Contribute Regularly
Setting up a regular contribution – perhaps through automatic deposit – will help make sure that you don’t forget to plan for your future. Committing to regular, yearly savings is one of the keys to building a decent nest egg. Very few of us are able to invest a big lump sum of money when we’re young. Smaller, but regular, contributions will add up over time, increasing your retirement nest egg each time you invest.
3. Contribute as Much as you Can
Government figures show that most of us don’t maximize the contribution room each year to our RRSPs. There are many reasons for this, of course. Those kids are expensive! All the same, anyone looking to build a comfortable retirement is making a mistake in not taking advantage of their RRSP room. If you can’t make your maximum contribution this year, it still makes sense to contribute as much as you can, both in terms of your retirement and your tax picture.
This article was sponsored by WN Wealth Management. At WN Wealth Management we’re committed to helping our clients work towards their retirement goals. For a no obligation, detailed retirement review, please give us a call at 604-643-0118 or email@example.com. www.wnwealth.ca
WN Wealth Management is an advisory team at Canaccord Genuity Wealth Management, a division of Canaccord Genuity Corp., Member-Canadian Investor Protection Fund.