Investments - RRSP/RRIF/LIRA/LIF

When it comes to investing for your retirement, registered retirement savings plans (RRSP's) are the best place to start. The combined benefits of reducing taxable income in the present and the expectation of tax-sheltered compound investment returns over the long term provide a compelling reason for investors to make the most of these savings.

There are a number of tactics you can use that will help you realize the full wealth-building potential that these plans can provide. What follows are a few tips on how to make the most of every dollar you invest.

  1. Start as early as you can. You've likely seen numbers there before, but they are worth repeating: to take full advantage of the taxable benefits associated with an RRSP, the sooner you start investing the better. The longer your savings have to compound tax free, the more you benefit from the tax-sheltered investment returns that RRSP's provide.
  2. Maximize your contributions. Maximize your contributions each year to make the most of tax-deferred compound investment returns. Consider an RRSP loan if you don't have the cash, and then pay it down when you receive your refund each year.
  3. Pay yourself first. Consider contributing to your retirement through convenient, automatic withdrawals from your checking account. If you are a mutual fund investor, a pre-authorized contribution (PAC) plan will allow to contribute as little as $50 a month into a mutual fund that's right for you. A PAC plan lets you take advantage of dollar-cost-averaging, a strategy that can help lower investment risk. Dollar-cost-averaging can lower investment risk since you will be automatically buying fewer units when prices are high and more units when prices are low.