In Part 2 at the end I summarize why RRSPs are amazing if they are put into the right investment vehicle.
4) The markets
Another common complaint against RRSPs is how poorly they’re doing right now. It’s certainly true that the financial markets have not been kind to investors in recent years. The problem is, saying you’re not going to invest in RRSPs because the markets are poor is like saying you’re buying a new car because your current one has a flat tire. This is because an RRSP is a type of account, not a type of investment. What this means is you can put just about anything in it!
The reality is that stocks have disappointed investors many times in history. If the ebb and flow of the markets also makes your stomach ebb and flow, you can always invest in something more secure, such as a GIC.
5) RRSPs are your money
RRSPs are often confused with pensions and other types of retirement benefits, which, in the most dramatic cases, have been misspent or mismanaged, leaving retirees with little more than spare change. RRSPs are different in that they are your own money, just like the cash you deposit into your checking or savings account. It’s basically a savings account that you can use to invest in whatever you want, and which most importantly, allows you to defer the taxes until you retire. That’s a good deal!
6) No RRSP= No retirement savings?!
Possibly the biggest problem with RRSP bashing is that it often results in no retirement savings at all. Since Tax-Free Savings Accounts (TFSAs) were introduced in 2009, there’s been a lot of debate about whether they are a better option for some individuals. This is an issue that people should discuss with a qualified financial professional. However, many of the richest people in the world go to great lengths to reduce their tax liabilities for the simple reason that it has a huge effect on net worth. So whether you opt for a TFSA or an RRSP, it’s likely that a tax-advantaged savings vehicle can help you reach your financial goals. It’s really rather simple: why would you pay more tax than you have to?
A huge reason why many people have been shy to invest in RRSPs is because they have NO CONTROL OVER THEM. Many people have their RRSPs in the ‘money markets’ i.e. mutual funds which means if something happens in Europe, their funds are affected. To me,, that’s lunacy. There are tons of RRSP & TFSA eligible funds that are strictly invested in Real Estate Investment Trusts (REITs) which give solid returns based on the income producing properties they hold in the REIT. properties like apartments, strip malls, seniors residences etc. produce constant revenue and because the tenants have to pay rent…plus the real estate goes up in value, plus the depreciation of the asset gets passed down to you.
The other cool investment is into a Mortgage Investment Corporation (MIC). They also give excellent returns based on both investment property they own as well as interest and fees from mortgages they have placed.
Both MICs and REITs are not affected when stuff happens to the global (or even national) economies because these investments are not in the volatile money markets.
So you can see that there are solid places to get higher than average returns with significantly lower risk. Contact me if you’d like to learn more.
So, now will you contribute this year?
To Your Wealth