Take Charge Of Your RRSP

In a recent Scotiabank/Ipsos-Reid poll, 83% of Canadians acknowledged that it was up to them to fund their own retirement. Fortunately, saving and investing in an RRSP doesn’t need to be complicated. This is really good news, because many of us would rather be doing other things.

We know it's important to save for retirement, but don't want to spend time budgeting. We want to have some money in the stock markets because of potentially stronger returns, but aren't sure how to make the best investment choices.

There are a number of ways to take charge of your retirement savings, with only a small investment of time and little stress. Here are some ideas. Keep in mind that there is no cookie-cutter approach to investing. The path you take should reflect your objectives, your temperament, and your personal financial and employment situation.

Get A Plan: There are a number of simple financial projection calculators that can help you determine where you stand today, and what you'll need to save to live the life you want tomorrow. Be realistic in terms of what you need, and modest in your return expectations. The Scotia RRSP Reality Check™ tool can help get you started.

Save More: After you've crunched the numbers, do what you can to boost your savings. Canadians are living longer and spending more time in retirement. The more money you can sock away in your RSP today, the better your financial position down the road.

Find The Money: Having trouble saving? Make a point of contributing any raises, bonuses, tax refunds and other financial windfalls to your RRSP. Another good strategy is to take a closer look at your discretionary spending and then eliminate daily expenditures that don't add a lot of value to your life. These small amounts can add up incredibly quickly.

Borrow Prudently: With interest rates today at historically low levels, borrowing to top up your RSP contribution can be a good idea.

The long-term benefits will usually outweigh the short-term interest costs - especially if you borrow only what you can afford to pay back quickly. Once you get your larger tax refund, use that to pay down the loan.

Form Good Habits: Arrange to have money automatically transferred from your bank account to your RRSP on a regular basis. This is an easy, convenient and disciplined way to save. And it's hard to break this good habit once you've started it.

Be Boring: Too busy living your life to think about investing? Would you rather be spending time with family and friends than chatting about stocks? If so, a well-diversified mutual fund or two can help simplify your RRSP arrangements.

A balanced mutual fund, for instance, holds a mix of cash, bonds, and stocks. An experienced fund manager determines the precise mix and takes care of the day-to-day investment decisions, freeing up your time for the more important things that you’d rather be doing.

Be Really Boring: If being in the markets makes you nervous, there are many conservative RRSP options - such as Guaranteed Investment Certificates (GICs) and high-interest savings accounts - that don't involve any real market risk.

Again, it all depends on your temperament, investing time frame, and financial situation, among other things. For instance, if your income fluctuates, it may be a good idea to take a safer approach with your longer-term savings.

The Scotia Investment Selector® tool can help you determine the kind of investor you are and suggest an appropriate mix of RRSP investments that reflects your profile.

Be Enterprising: Maybe you enjoy investing and are knowledgeable about the markets. If you're comfortable taking calculated risks to potentially improve the returns on your savings, a self-managed RRSP may be right for you. You can hold individual stocks and bonds in your plan, and gain the freedom and flexibility to manage your retirement savings.

Be Flexible: Saving for retirement is a long-term commitment, and your RRSP should be an expression of that commitment. It's a good idea to periodically revise your plan's projections in light of your evolving goals, changes to your employment situation, and market trends. Your advisor is a good sounding board, and can help you review your RRSP on a regular basis.

It's Your Money: We all know someone who has used the RRSP Home Buyers' Plan toward a down payment on a first home or condo. Perhaps you also know someone who has used the RRSP Lifelong Learning Plan to go back to school and take their career in a different direction.

Under these plans, you can borrow from yourself - interest-free and tax-free. You have to pay the money back, and you do lose growth potential, but the point here is that an RRSP is a powerful financial tool, with many uses and benefits.