RRSPs are more than tax tools

Although registered accounts help clients reduce taxes in the short term, the primary aim of RRSP investments is to save for their retirements, says Laurentian Bank.

“The RRSP is particularly pertinent within today’s context,” says Denis L’Hostie, senior manager of Financial Planning at Laurentian.

He adds, “People who believed their pension plans would be sufficient saw their savings suffer setbacks related to the economic crisis, in addition to feeling the effects of weak returns generated by guaranteed investments. Personal savings are more important than ever today in order to avoid a potential lack of sufficient income at retirement.”

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Consider that the population is expected to age more rapidly in Canada than in other countries. In fact, the proportion of seniors in the Canadian population compared to the number of working-age citizens will almost double in the next 20 years.

This means other measures aimed at increasing the eligibility age for retirement can be anticipated as well.

During this RRSP season, it’s important to remind clients that their RRSPs are designed to help them meet their goals during retirement.

“The RRSP should be seen as a long-term strategic savings tool intended to provide savers with a safety cushion for once they stop working,” says L’Hostie. “And since people’s perception of retirement has changed a lot, many individuals don’t see it as a permanent stoppage any longer.”

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The best way to help clients save is to spread out their account contributions to form a systematic savings program; by adopting such a methodical plan, your clients will accumulate capital, watch it grow in a disciplined fashion, and also reduce stress.

“[They’ll] not only increase savings, but will also reduce the stress associated with scrambling to find the sums to contribute at the end of the year,” stresses L’Hostie.

He adds, “The tax saving should no longer be seen as the ultimate objective, but rather as an added benefit.”

Read:

RRSP can be a tax burden

Affordability a barrier to RRSP contribution

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