How to plan for retirement and manage your RSP
Based on the TD Newsroom article published July 15, 2020
Everyone's retirement vision and plan to get there is different.
Some Canadians have the option of participating in an employer-led retirement savings plan, while others may not have access to this option or prefer to choose an alternate way of saving for the future, like saving for their retirement through a Retirement Savings Plan (RSP).
Regardless of your personal situation, changes to the economy and your personal financial situation can mean you may need to re-think your retirement plan and assess if you’re on track to meet your goals.
Review your retirement investment goals and timelines to reach them
Before making any changes or decisions, it’s important to understand your investment time horizon. This means being clear on your investment goals and looking at the timeline you’re hoping to meet them by.
In some cases, this may mean having a conversation with a financial advisor who can help you outline your current situation, current needs and help to address your concerns about your financial future. Even if you feel like you’re on the right track, a financial advisor can be a good sounding board to check whether your plan continues to align to your objectives.
What to keep in mind if you’re thinking about making changes to your retirement plan
One of the first things to consider is how markets have historically performed long-term and whether current market changes are likely to continue. A financial advisor has the knowledge to help provide more information and perspective on these changes and help you navigate what can be an emotional situation if the value of your retirement savings has dramatically shifted in the short-term.
In addition, it's important to regularly review your financial plan, not just if there are large market shifts, but at least once a year or whenever you have a major life event, like buying a house or if you were to lose your job.
What are some common retirement investment mistakes to avoid?
When it comes to investing, trying to predict future market ups and downs in an attempt to avoid them could result in making buying and selling decisions at the wrong times with the possibility that you could miss out on long-term growth.
One way to address this concern is to set up a pre-authorized investment contribution plan. These enable regular automatic contributions to your RSP, which can help to even out the ups and downs of market volatility and remove the need to think about the best time to buy. This type of plan helps you to automatically and consistently build towards your goals and also help you avoid making impulsive, emotions-based decisions based when the market is down.
When the market looks challenging, it's easy to get emotional and forget about sticking to your retirement investment plan. This is why it's a good idea to have a financial advisor to talk to, so you can get a second opinion and determine whether sticking to the plan you have laid out together is in your best long-term interests.
Are RSP accounts restricted to retirement use only?
People often want to know if the money in their RSP account is only available to them on retirement. Often, they are young investors who are hoping to tap into their RSP to buy a home or to finance their education. The good news is, there are opportunities to use these savings before retirement if needed. If you’re looking to buying your first home, the Home Buyers' Plan (HBP) in Canada lets you, subject to eligibility and conditions, withdraw up to $35,000 from your RRSP (or $70,000 per couple) to buy or build a qualifying home, which you then have 15 years to repay. If you're looking to finance education for yourself or your spouse, there is the option to use your RSP towards the Lifelong Learning Plan. Just remember that any RSP monies used under these programs must be repaid to your RSP.
This content discusses current topics of interest in a general and informational manner only and may not be appropriate in all circumstances. Please ensure that you seek advice personalized for your situation from the appropriate professional, consultant or subject matter expert on the topic of interest to you.
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