ASK THE MONEY LADY,
I wanted to know if there is anything else I should be considering to save for the future other than just RRSPs.
Bernie – there definitely is more than just RRSPs!
When you are planning for retirement it is advisable to accumulate and consider separate buckets, accounts, or as we like to say, “pools of capital” to properly diversify your future. Of course, many people may not be able to do them all, but at least you can now see what we ask clients to consider when determining an achievable retirement lifestyle, and RRSPs will always be one of them. There are typically six common ways to divide your savings towards future retirement capital. These are the things that your Advisor will want to review with you. Plan to use as many as you can when saving for your future. Remember, if you are not planning for a comfortable and secure retirement, how can you expect to have one. Here we go.
Your employment pension, government pension or both. If you are lucky enough to have both – you are definitely in the minority these days. Income is received and taxable while you live. No taxes payable at death.
Many employers have savings plans that they will match part of your contributions and some may have pension plans that you can also pay into. Please consider these options. They definitely add up over time and many can be moved to registered plans like a LIRA/LIF if you leave your employer.
Your registered investments. This would be RRSPs (RRIFs over age 71)
Limited by minimums and maximum deposits and withdrawals allowed by the CRA.
Must mature by age 71, at which time income is taxable for withdrawals unless participating in rollovers.
Estate value if fully taxable at death unless there is a spousal rollover, (approximately 50% depending on your provincial marginal tax rate).
Always a good option to supplement RRSPs. No taxation at death.
This should be considered even if RRSPs are not part of your savings plan due to limited funds.
Interest earning investments are fully taxed as it is received.
Eligible dividends: which are taxed at approximately 66% of their value in the year in which they are earned.
Capital gains on investments: which are taxed up to 50% of their value, (may be deferred until the investments are disposed). Non-registered investments may be subject to probate and other estate fees upon death.
Investment Property +/- Primary Residence
Investment properties may be subject to capital gains tax when sold or as a deemed disposition upon death unless spousal/other rollovers. Primary residence is non-taxable upon sale or death.
Tax Exempt Insurance
Limited tax-exempt life insurance policies, (for example, Participating Whole Life). Great tool for asset accumulation and wealth preservation. Adds diversification to your investment portfolio and provides tax-exempt growth over your lifetime. Tax-free death benefit. By-passes probate if beneficiary is named.
Good Luck and Best Wishes,
Written by Christine Ibbotson, Author of “How to Retire Debt Free and Wealthy” Follow on Facebook & Instagram