March 1, 2024

Congratulations on taking a fantastic leap forward by opening a Registered Retirement Savings Plan (RRSP)! This trusty vessel is set to guide you toward the tranquil shores of retirement, but it won’t sail itself. How do you ensure your journey is smooth sailing and not adrift in the open seas?

Imagine your RRSP as a garden you’ve just begun to sow. To flourish, it requires attention, strategy, and regular nurturing. But rest assured, you don’t need a green thumb to grow your retirement savings—you need savvy management skills.

Managing Your RRSP

Getting Acquainted with your Investments

First things first, understand what’s in your portfolio. Are you heavy on stocks, bonds, or mutual funds? Your choice should reflect your risk tolerance and the time you have until retirement.

  • For those who can take on the possibility of risk, stocks might be your mainstay.
  • If you prefer to be on the safer side, consider Guaranteed Investment Certificates (GICs)
  • And for those who like a bit of both, mutual funds or ETFs could provide the balanced diet your RRSP craves.

Regular Contributions: Keeping the Wind in Your Sails

Once you’ve charted your investment course, consistent contributions are key. Whether you opt for an auto deposit or an annual lump sum, remember that even small additions can compound into a hefty nest egg over time. It’s wise to review your RRSP investments at least once a year. However, there’s no harm in checking in semi-annually, especially if market tides turn swiftly. Contribute to your RRSP often and contributing to your RRSP early in the tax year gives your money more time to grow, while systematic contributions can take advantage of dollar-cost averaging.

Weatherproofing Against Taxes

Your RRSP is a tax-deferred haven. You won’t pay taxes on contributions or growth within the account until you make withdrawals. Be mindful of when you are withdrawing from your RRSP and for what reason. You can withdraw from your RRSP any time if your funds are not in a locked-in plan. The withdrawal, however, is subject to withholding tax and the amount also needs to be included as income when filing your taxes.

There are situations in which tax-deferred withdrawals can be made from your RRSP. For instance: If the funds are used for the purchase of a home for the first time through the Home Buyers’ Plan or for funding education through the Lifelong Learning Plan. In Canada, the current withholding tax rates for withdrawing funds from an RRSP are as follows: 10% on amounts up-to $5,000; 20% on amounts over $5,000 up-to and including $15,000; and. 30% on amounts over $15,000. Your taxable income at retirement is likely to be lower than the taxable income you had during your working life; you’ll pay less tax by withdrawing from your RRSP once you retire. It’s therefore more tax-efficient to wait before making a withdrawal.

Rebalancing: Navigating Market Storms

Essentially, rebalancing means selling some assets in your portfolio and buying others to help maintain your target asset allocation. This is especially important during times of significant market volatility. As market conditions shift, so too should your portfolio. We recommend that you consider if you need to rebalance whenever you review your portfolio, or at least annually.

Life After RRSP Contribution

The thrill of starting your RRSP is one thing, but the steady journey of managing it toward a comfortable retirement is another. Over time, you will see the landscape change—it’s inevitable as the markets ebb and flow. 

In the end, managing your RRSP effectively is about staying informed, adjusting as needed, and keeping a long-term perspective. With these navigational skills, your retirement prospects look bright as daybreak on the horizon.

Haven’t opened your RRSP yet? YNCU has more than one RRSP investment option for you. Check out which option would work best for you.

With research and dedication, self-management is totally doable. That said, the more you know, the better. YNCUniversity is here for all your financial literacy needs. Need one-on-one help? We got you! Reach out to our advisors HERE.

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