Trusted Tips and Resources

Trusted Tips & Resources

H&A Financial Advisors Trusted Regina Financial Advisors share information about RRSP season.

H&A Financial Advisors serve individuals, families and business in the Regina area. Their primary goal is to help each client meet their unique financial goals. H&A Financial Advisors are Trusted Regina Financial Experts.

Welcome to RRSP Season!

It is that time of year again when attention turns to RRSPs and tax planning

The purpose for making an RRSP contribution, from a financial planning perspective, is to build savings and assets over time so that you can replace earned employment income with passive or investment income for your retirement years. In other words, you can sleep in and still have the lifestyle you want without going to work!

The Canadian Government assists you with that objective. It does this by giving you a tax deduction for contributions so that you can save more money on a pre-tax basis than you would if the money was taxed and then saved. Secondly, it allows for the tax-free growth (tax deferral) on your RRSP so that the capital amount will be much greater than it would be if you were taxed annually on the growth or income.

Most people focus on the tax deduction only while ignoring the significant benefits of the compounding effects and growth on the money that is not paid out as taxes. The theory is that you are contributing money while in a higher income tax bracket during your working years and withdrawing it in your retirement years while you are in a lower tax bracket. The reality is higher income earners may find themselves in the same tax bracket in retirement!


This leads many people, including some accountants, to challenge the effectiveness of RRSP by saying: Why bother with an RRSP if you have to pay taxes on the withdrawal!? This viewpoint ignores the real power of tax-deferred compounded growth and the effects of compound growth that you can achieve in an RRSP, especially on the capital that would have otherwise been lost to income taxes.

The math works something like this. If you took the assumed future capital value of your RRSP at age 65 or 70 and then collapsed the RRSP (not recommended) and paid 50% of the capital as income taxes, the remaining capital would still be higher than if you had been building your savings outside the RRSP in a fully taxable environment.

Impossible you say! Take a calculator while watching TV and invest, say $10,000 a year, minus your annual income taxes, say 30%, then invest the balance of $7,000 at an assumed rate of growth, pick 5% to keep it simple, then subtract the taxes on the earned income $105. The net amount at the end of Year One is $7,245. Then do this another 39 times assuming the person is age 25.

Year One Effects of RRSP Investing

Compare this with the RRSP with $10,500 at the end of Year One. The gap only gets bigger over time!

Long Term RRSP Accumulation

There are situations where RRSP contributions may not be the right thing for some people some of the time. For example, young people at the start of their careers or low-income earners nearing retirement. A TFSA may be the better solution!

These are just two alternatives for building savings and assets something which you would still need to do even if RRSPs didn't exist. RRSPs just make it easier to build savings. Call us today to discuss more savings and tax planning strategies!

For more information on Ta planning Check out their website here.

Mutual funds and approved exempt securities are provided through Portfolio Strategies Corp. Non-securities products and services are provided through H & A Financial Advisors

H&A Financial Advisors are Trusted Regina Financial Experts.  Check them out under the Regina Financial Services Category.



Are you a retirement savings late starter? Our Trusted Regina partner H&A Financial Advisors have a tip for you!

H&A Financial Advisors serve individuals, families and business in the Regina area. Their primary goal is to help each client meet their unique financial goals. H&A Financial Advisors are Trusted Regina Financial Experts.

Retirement Savings Late Starter?  

H&A Financial Advisors have a tip for you.

Harry and Sally both earned high incomes and liked to live the good life. They leased higher end European cars, took two-week exotic vacations almost every year, and lived in a house much larger than they truly needed. To accomplish this lifestyle, they put off retirement savings. Now in their forties, Harry and Sally are realizing they have some catching up to do. Listed below are a few things to consider:

Procrastination or bad breaks may have derailed a savings plan. Now is the time to make savings a priority.


Pay off the house - Avoiding mortgage payments in retirement can dramatically reduce Harry and Sally's living expenses. They could even consider downsizing the house now and free up more cash for savings. If they still have a mortgage payment as they approach their chosen retirement age, it would be good to have payments end at the same time they retire. This can be made possible by making additional principal payments each month or a lump sum yearly.

Plan to work longer - Putting off retirement a few years can have a dramatic effect on retirement savings. For each additional year worked, Harry and Sally gain an extra year of savings and delay one more year of having to live off those savings. By working part-time or seasonally for a while in retirement, Harry and Sally can reduce the amount they need to draw from their savings. This can give their money a chance to grow some more.

Take Canada Pension Plan (CPP) early and save it - CPP retirement benefits can be taken as early as age 60 or delayed until as late as age 70. If Harry and Sally take their benefits early and save them, it makes for larger savings that could be paid out on early death. These additional payments may be lost if income from CPP is postponed.


Avoid investing too aggressively - Those waiting too long to start saving for retirement may be more prone to 'gamble' with their savings on speculative investments. This approach is more likely to result in big losses.

Avoid investing too conservatively - Some late starters may be inclined to save their money in cash or money market type investment vehicles. The problem with this strategy is that their modest savings will be ravaged more by inflation over time.

By making a few adjustments now, Harry and Sally may be able to avoid the shock of a forced lifestyle change when they retire.


Questions about Retirement Savings?  

H&A Financial Advisors are Trusted Regina Financial Experts.  Check them out under the Regina Financial Services Category.