Financial Library

Ted and Martha had about $600,000 in their RRIFs generating the minimum monthly income of almost $4,000 before taxes. Then disaster struck.

Ted developed a cognitive impairment. Martha was able to look after him at home for a little over a year, but eventually had to place him in an extended care facility.

The RRSP deadline is now only a few weeks away. Regardless of the what the media reports about recently market volatility, saving for retirement more important than ever before.

With average life spans continually increasing, Canadians must focus on the future to ensure they have sufficient capital to support their lifestyle goals after retirement.

More than 65% of Canadians have made deposits to Registered Retirement Savings Plans (RRSPs). Many do so just for the tax savings, but here are some often overlooked tricks you should be aware of:

RRSP loans - Those who use investment funds for their RRSPs should be well aware of the strategy of "buying low and selling high." As unnerving as it may feel, one of the best times to make a lump sum deposit is after there has been a substantial stock market correction. If you don’t have the cash on hand, an RRSP loan, paid back monthly, is an attractive way to come up with a larger deposit.

The newspaper headlines read: "Roller coaster stock markets have investors feeling queasy" (The Globe and Mail; "The stock market crash: History repeating itself?" (The Calgary Herald); "Uncertainty continues to pummel stock markets" (Sudbury Star); "The next market boom may be a lifetime away" (Financial Times). Interestingly enough, these headlines are from November 2002. One year later, the S&P/TSX Equity Index was up 20.8%; and two years later had soared by 40.7%.

It's important at times like this not to fall for the sensational headlines. Consider that the September 30, 2008 edition of the Edmonton Journal had a front page story, above the fold, titled "Biggest market drop since 1987." The article was accompanied by a picture of a securities trader with a facial expression that could only come from getting his kneecaps broken and learning that his dog ran away. Scary, yes. But the reality is that, as a number, it was large. As a percentage of the current index, however, it was tiny compared to Black Monday in October 1987.