For most of us, retirement means working less or not at all so that we have more time to enjoy life. It also means living on our accumulated wealth held in public and private pension plans, registered savings plans and non-registered accounts. For those who have saved and invested well, retirement can be a time when dreams are realized. For those who have not built sufficient wealth, it can be a time of nightmares.
The sooner you start planning for retirement, the better off you will be because your money will have that much longer to grow. It is important to receive professional advice regarding other ways to maximize the value of your investments. For example, all things being equal, investments that produce capital gains and losses should be held in taxable accounts because the tax rates are lower than on investments that produce earned income and interest income. As well, capital losses are deductible from capital gains and so provide a kind of tax advantage. Dividends are taxed at preferential rates, so they should also be held outside of registered plans. Income-generating assets such as mutual funds that invest in bonds and GICs can be held within the RRSP to take advantage of tax postponement. Finally, your retirement portfolio should include some cash-equivalent assets so that if you need a substantial amount of cash quickly, you won’t have to sell your investments.
For an explanation of the Enhanced Retirement Income Concept, please click on the button below: