With household debt levels in Canada reaching new peaks, saving for retirement may seem next to impossible. And with the March 3rd RSP deadline looming, many Canadians are at a loss on how to best save for retirement while trying to retire their debt.
“Not so long ago many Canadians could count on government benefits and company pensions to help fund their dream retirement, but sadly that’s no longer the case,” says Wade Stayzer, Vice President of Retail and Investment Services at Meridian, Ontario’s largest credit union. “The sad reality is many Canadians are retiring with more debt than they had planned.”
Meridian’s recent Ontario Retirement Study found that for 40 per cent of Ontarians, saving for retirement is taking a backseat to servicing their debt.
According to Stayzer, having a long-term plan that addresses both debt repayment and retirement savings is possible especially if you follow these strategies:
- follow url Work with a trusted advisor. An expert can help tailor a plan suited to you that encourages debt repayment and investment growth. Make sure to meet with your financial advisor at least once a year to revaluate your plan and make any adjustments necessary to keep you on track to reaching your financial goals.
- go Don’t lose sight of your retirement goals. Don’t sacrifice your long-term retirement savings in order to pay back your debt sooner. While there is no one-size-fits-all approach to the saving vs. debt repayment dilemma, investing as little as $20 a week into an RSP can help your nest egg grow over time. Plus any tax refunds garnered by your RSP contribution can be used for debt repayment.
- http://crystalpalacemuseum.org.uk/artifact_006.html Be strategic in tackling your debt. Pay off the debt with the highest interest rate first, while paying the minimum on the rest of your debts. Once that first debt is paid off, concentrate your efforts and funds in paying the next debt with the highest interest rate. Once you’re finished paying off all your debt, take the money you would normally use to pay down your debt and invest it all into your retirement fund. Again working with a trusted financial planner can help you develop a customized debt-repayment plan.
- Supplement retirement savings with TFSAs (Tax-Free Savings Accounts). Introduced by the Federal Government in 2009, a TFSA is a savings vessel that allows contributions to grow tax-free. Any withdrawals made from a TFSA and any investment income earned is also tax-free. For investors who have maxed out their RRSP contributions for the year, a TFSA is a great way to complement their retirement savings tax-free.
- Put your savings on auto pilot. Many financial institutions provide pre-authorized contribution (PAC) plans, which automatically withdrawal funds from your chequing account into your savings investments in regular intervals. PACs are a great tool for contributing to RSPs or TFSAs and if you time the withdrawals to align with your payday then the money will hardly be missed.
Visit www.meridiancu.ca for more information.