RBC debunks 4 (more) RRSP myths

Most Canadians start saving for retirement in their early 30s, says the annual RBC RRSP Poll.

It also finds 26% haven’t started to save at all, however, because “there are common misconceptions around savings and investing that may be keeping [them] on the sidelines,” says Jason Round, head of Financial Planning Support at RBC Financial Planning.

Read: RRSPs are more than tax tools

On the bright side, 60% of account holders who contributed in the 2012 made regular contributions rather than waiting to make a lump sum. In fact, 37% of Canadian ages 18-to-54 dedicated funds to regular payments.

Following TD’s effort to reveal common misconceptions about RRSPs, RBC has also highlighted some myths surrounding account contributions for your clients. These are:

Myth #1: It’s easier to catch up on RRSP savings when older and established.

Reality: When clients are older, they’ll likely also have more financial responsibilities or challenges. They have to adopt a “pay yourself first” to ensure they can meet both medium- and long-term goals.

Read: Mid-life and behind in retirement planning

Myth #2: An RRSP only benefits those in top tax brackets.

Reality: Tell investors RRSPs are about more than a tax refund, and remind them the accounts can include a variety of investments. TFSAs are a good alternative option depending on their circumstances.

Read:

• Don’t rules out equities for TFSAs

• 5 tips for young clients

Myth #3: I need to have a sizable lump sum to invest.

Reality: A lump sum may seem more substantial, but the benefit of compounding turns small contributions into a lot over time. Tell clients to set up manageable, pre-authorized contributions that line up with their paydays.

Read: Lump sum cash receipts and the RRSP

Myth #4: Investing is complicated.

Reality: They can tailor their investment approaches to suit their individual goals and risk tolerances. Provide them with lists of investment methods and example portfolios that include outlines of the kinds of investors suited to each style.

Read:

Active or passive? Help clients choose their styles

RRSP essentials and strategies