The tough economy drew many Canadians away from their RRSP strategies, but now is the time to come back, experts say.
Aaron Margolis, a vice-president at Investors Group, says last year’s market scramble has mostly stabilized and the time is ripe for smart, careful investing.
“Certainly the market conditions this year are very different. Last year there was so much fear and panic, this year there’s much more calmness. There’s a sense that people need to get back into the market, but in a prudent way,” Margolis said.
Rather than looking for quick fixes, get back to tried and tested strategies like RRSPs and income-generating investments.
“It’s about getting back to the basics. Advisers are saying what has worked in the past should put you in good standing in the future — it might be a little more boring but it works. It’s almost like the old adage: What’s old is new,” Margolis said.
While the Tax-Free Savings Account introduced last year has proven popular, Margolis says you should prioritize your RRSP contribution first because of the tax savings it can provide.
“The TFSA is a terrific vehicle for creating emergency savings, but try as much as possible to max out your RRSP first to benefit from tax efficiencies inherent in it, then consider maximizing your TFSA contribution,” Margolis said.
Look for investments that grant an income and try as best as possible to invest with your risk tolerance in mind, he suggests.
Lee Anne Davies, head of retirement strategies at RBC, says an RRSP should be a long-term priority for any Canadian, yet in a recent RBC RRSP poll, only 35 per cent of Canadians with RRSPs said they plan to contribute to their RRSP for the 2009 tax year, with 54 per cent citing the tough economy as the reason.
Perhaps more surprising, the poll also found that 32 per cent of Canadians have not started saving for their retirement, an unfortunate scenario in the making, Davies says.
“We’re all going to retire eventually, and you want to make sure you have that nest egg waiting for you,” Davies said.
For people feeling like they can’t spare enough to save for retirement, Davies says putting away even a relatively small amount, like $25 or $30 each month, can make a big difference in the long run.
“Stay committed to your retirement and it will happen one day. If you just keep saving a bit at a time, it really does add up,” Davies said.