1. Contribute as much and as early as you can. Time, money, and
tax savings are a powerful combination. Here's proof: A 25-year old investor who
contributes $3,000 per year, for ten years, to an RRSP earning a hypothetical 9%
will have $1,014,184 at age 65 to show for a total investment of only $30,000.
Conversley, a 35-year old investor who contributes the same $3,000, but does so
for 35 years (for a total of $105,000), results in a nest egg of only $705,374.
That's over a 40% difference!
2. Consider a spousal RRSP. You get the tax savings while the money
compounds tax-free in your spouse's name. This could mean two lower tax brackets
upon retirement-- instead of a single higher one.
3. Take advantage of the foreign content allowance. The Income Tax Act allows
you to invest in certain non-Canadian securities. International investing can build
greater stability through diversification-- and offers new growth opportunities.
4. Consolidate your RRSP holdings for easier record keeping -- and better growth.
There's no limit to the number of RRSPs you can own. But to minimize fees and maintain more
control over your portfolio, it's often wise to consolidate your RRSP holdings.
5. Consider borrowing to contribute. With today's lower interest rates, it may make sense
to borrow money to invest in an RRSP as long as the RRSP is earning a good rate of return -
and you pay off the loan promptly. Although your borrowing costs are non-deductible, you can
use your tax refund to reduce your debt. Plus, you'll have a bigger nest egg for retirement.
6. Ask about a Pre-Authorized Chequing Plan. It's a convenient, no-cost way to contribute to your
RRSP directly from your bank or trust company account. And, you can benefit from dollar cost averaging
through regular contributions.
7. Rely on professional Investment advice. An independent financial advisor can help you set goals
for your RRSP, and develop a balanced, diversified portfolio that fits your personal investment
8. Avoid taking a short-term view. RRSPs build wealth for the long-term. So should mutual
funds. That's why you should take a long-term approach when assessing the merits of a mutual fund.
9. Maintain an appropriate mix of asset classes. The two most significant asset classes are fixed
income securities-- such as bonds and mortgage-backed securities -- and equities. Research has shown that
the relative weightings of asset categories within a portfolio is responsible for over 80% of investment returns.
10. Be selective when choosing a mutual fund management company. Select a manager with a
solid performance track record who can offer a wide range of fully exchangeable funds.
Over time, you may wish to add additional diversification to your portfolio or adjust your asset mix.