You’ve opened an RRSP! Now what?

You’ve opened an RRSP! Now what?

YOU’VE OPENED AN RRSP! NOW WHAT?

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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SAVING SMART FOR ALL STAGES OF LIFE

SAVING SMART FOR ALL STAGES OF LIFE

SAVING SMART FOR ALL STAGES OF LIFE

Wednesday, December 6, 2023

There are plenty of major milestones in life that we can look forward to. Whether it’s graduating from post-secondary education, buying a house, getting married or retiring after years of a fulfilling career, we all need to plan accordingly. All of these major steps in life often require some financial planning to ensure you can effectively fund your dreams and maintain your financial health.

If you’re ever wondering when or how you should start saving, YNCU is here to lend a helping hand and give you a tailored strategy to achieve your goals.

We sat down with YNCU’s Sherri Atkinson — a Member Service Representative at the Trunk Road, Sault Ste. Marie branch, to learn how we can master saving smart for all stages of life.

1. Saving for post-secondary education

Going to post-secondary school, whether it’s a 6-month or 6-year program, can be a significant financial commitment. If you’re saving for yourself to go to school, some savings programs are smarter than others and can help take some of the burden off your shoulders when it comes time to pay your tuition or buy books.

Saving over a longer period of time is always beneficial and Sherri recommends setting up an automatic transfer into a savings account as soon as possible. You can set transfers to take place weekly, bi-weekly, monthly or quarterly — whatever fits your budget and lifestyle. Automatic transfers also take the brainpower out of saving and ensure you never forget to set some money aside.

Working with our advisors, we can take the pressure off of students when it comes to paying for school, leaving you time and energy to focus on your studies instead.

2. Saving after graduation

Once you’ve graduated and landed your first job, the newfound freedom and income can feel a little overwhelming. You likely have some student debt, but are looking to the future and are ready to start saving again. So, where do you start?

Sherri recommends you start to pay your loans down as soon as possible and set up a realistic payback plan that fits within your budget.

If you have extra money to set aside once each bill and loan payment has been made, then it’s time to focus on jump starting your emergency savings. By opening up a Tax Free Savings Account (TFSA), you can set money aside and earn interest tax free.

Finally, if you feel you have additional funds to set aside for future savings, it’s never too early to set up a Registered Retirement Savings Plan (RRSP) — a tax sheltered savings account specifically for retirement. It can feel overwhelming to save for so many things right out of school, so only begin to contribute to savings if you have the means and room in your budget to do so.

For additional support or information, you can always reach out to your YNCU advisor to see if you’re ready to jumpstart your savings as a new grad.

3. Saving up before you have kids

Having children is not only a massive time commitment (think 18 years … and then some!) but it is also a significant financial commitment.

When it’s time to bring a new member of the family into the world, Sherri suggests you start saving up for a few different expenses:

  • Daycare
  • Day-to-day supplies
  • Clothing and toys
  • Post-secondary education

Even before your baby is born, you can apply to open a Registered Education Savings Plan (RESP) — a tax sheltered savings account specifically for the expenses associated with post-secondary education. Setting up small contributions to start can make a world of a difference. By the time your child is ready to go to school, their RESP can help partially or fully cover their major expenses.

Finally, if you qualify for the monthly Ontario Child Benefit and have room in your budget, you can use this money to invest or save for your child’s future, meaning you are taking less money out of your income to save each month.

4. Saving for retirement

The first step to saving effectively for retirement is knowing how much money you will need to save by the time you plan to retire. Using YNCU’s Retirement Planner calculator, you can start to add your retirement savings into your monthly budget, which will set you up for success years down the line.

The earlier you start and the more you can save each year, the better. However, every little bit counts and will make a big difference in your retirement plan in the future.

Sherri recommends setting up automatic transfers into an RRSP and/or TFSA, so you won’t even notice the money has left your chequing account. Being mindful of your spending and cutting down on extravagant purchases can also make a difference in the future. For example, frequently purchasing a new vehicle, gambling your money or giving money away too often to charities, families, or friends are all major reasons why individuals report they are unable to save for retirement.

Saving smart doesn’t have to be complicated and at YNCU, our goal is to make it as simple and straightforward as possible. To get a head start on your retirement savings, reach out to a YNCU advisor to build a comprehensive financial plan and prepare yourself for retirement as soon as you can.

To get help on saving smart — no matter what stage of life you are in or are planning ahead for — find your local YNCU branch and reach out to an advisor to take control of your financial future, today.

BE READY FOR THE UNEXPECTED

BE READY FOR THE UNEXPECTED

BE READY FOR THE UNEXPECTED WITH YNCU’S EMERGENCY SAVINGS ACCOUNT

Friday, October 14, 2022

At YNCU, we understand how unpredictable life can be and we want to help set you up for financial success. Oftentimes, when planning finances, people only think of their savings, retirement, and managing their debt. People often forget to plan for emergencies. Emergencies can happen at any time (take the pandemic for example) and you never know when unexpected costs will arise.

An emergency fund is what we at YNCU refer to as the money you set aside to prepare for unexpected expenses, like urgent vehicle maintenance, job loss, veterinarian visits, and health problems that result in missed work. You will more than likely be met with a situation where you need money fast, or experience a drop in income at some point in your lifetime. These surprises usually don’t give you enough time to adjust your budget.

It is important not to confuse unexpected expenses with occasional expenses such as school supplies, winter tires or holiday expenses. Occasional expenses should already be planned for in your budget.

Make sure you are setting aside a reasonable amount each month for your emergency fund. Although it’s important to save gradually and plan ahead, it’s not helpful to break your budget to do so. By putting aside a little every few weeks, you will have enough to cover those unexpected situations. Also remember to take advantage of every chance that can help you add to your emergency fund. Deposit any additional amount into your savings whenever you can. The general rule of thumb is to save 3-6 months’ salary for your emergency fund, but do what works for you and your budget.

YNCU is now offering an Emergency Savings Account that offers a higher rate than our traditional savings accounts, has no minimum balance requirements, and no monthly fees. We recommend setting up recurring contributions to be auto deposited into your emergency savings every pay period. This product was created because YNCU listened to the needs of our members to help them stay on track for their financial goals even when something unpredictable occurs. This emergency savings account makes it possible to:

  • Handle an unexpected expense without going into debt
  • Avoid high-cost loans (like payday loans or credit card cash advances)
  • Avoid incurring costly credit card interest rates
  • Have financial control and peace of mind

Learn more about the Emergency Savings Plan here!

For all your general financial inquiries and how you can plan out your financial goals, come talk with someone at your YNCU branch!