my money
At a Glance
Helping You Understand Financial Planning and Investments
Saving during a recession – a little goes a long way
When it comes to planning for retirement, most
Canadians have a long way to go. According to
Sun Life Financial’s unretirement index, only
51 per cent of Canadians expect to be fully retired
by the age of 66, while 48 per cent expect to still
be working, full or part time, longer than they
originally expected.*
The next time you go grocery shopping, make
sure you decide what meals you’ll be making
and purchase only those ingredients required for
your plan. This will ensure that you don’t spend
extra money on items you don’t really need.
Also, consider shopping at wholesale or discount
stores, which generally offer significantly lower prices.
Resisting the urge to cut back on your retirement
nest-egg is important when it comes to surviving
this recession because a little bit of savings can
go a long way – even when the markets are down.
Cash-back credit cards
Monthly budget can help solve
money woes
Take time each month to set a monthly budget.
Ensure that your income exceeds your expenses.
Remember, your first order of business is to pay
yourself, start saving in order to build wealth.
Examine the areas in which you could potentially
cut back and save some money.
Consider refinancing your mortgage – it may be
worth the initial fee, if your bank can give you
a better rate. Trimming your clothing budget by shopping at discount stores can also help
you save money.
With the recession forcing everyone to revisit
their budgets, and reduce spending, banks and
lending agencies are looking to boost consumer
confidence by providing more incentives to use
credit cards. If you’re in a position where you can
pay off your credit card balance each month,
consider taking advantage of new promotions such
as cash-back credit cards. Many banks are offering
a one per cent cash rebate on any purchases made
using their credit card.
While finding ways to reduce your expenses will go
a long way in relieving financial strain, it’s just
one piece of the puzzle. Paving the way for
a healthy retirement requires an aggressive approach
to saving.
This information is provided to the Academic Money Purchase Pension Plan Members from
the Academic Money Purchase Pension Committee (AMPPC) as part of the ongoing information
and communication strategy.
This document and future communications are available online at: www.usask.ca/fsd/pensions.
Continued
*
Don’t leave any money on the table
(cont’d)
Registered savings vehicles such as RRSPs can help
you save money on income tax (since they act as
tax-shelters), while also providing opportunity
for long-term growth, as you build a nest-egg for
retirement. You’re allowed to contribute up to 18 per
cent of your 2008 earned income to a maximum of
$21,000 for the 2009 tax year.
It’s important to maximize your monthly contribution without leaving any money on the table. If your
company plan matches your own contributions, then
opt to contribute to the product which your company
matches. For example, if you put $100 into a certain
plan and the company matches that contribution by
50 per cent, your total contribution is now $150,
rather than $100.
Remember, the longer your money is invested, the
higher the growth potential. For example, assuming an average growth rate of 6 per cent, if you
invested $500/annually for 40 years, instead of
$1000/annually for 20 years, the 40-year investment
would yield $118,193, compared to just $45,045
for the 20-year investment. That’s a $73,148
difference on the same $20,000 principal!
Investing over long periods of time has other
advantages too, such as protection from wild swings
in the markets. If you regularly invest the same
amount each month in your RRSP, when the markets are low, that amount will buy more units of a
particular fund, increasing your growth potential.
When the markets are bullish and performing well,
your monthly investment will buy fewer units in that
fund, but your money will be growing at a faster rate.
Save more by reducing tax burden
If you find yourself in the enviable position of
receiving more income than before, think of it as
an opportunity to put away some money. Increasing
your RRSP contribution to your yearly maximum
will undoubtedly help your nest-egg to grow and
reduce your immediate tax-burden. If you are married
or common-law, take advantage of income-splitting
provisions to reduce the income tax you’ll have to pay
back to the government.
In 2008, the Federal government also introduced
the new Tax-Free Savings Account (TFSA), allowing
you to deposit up to $5,000 annually - any investment income, including capital gains is tax free.
Unlike RRSPs, your withdrawals aren’t taxed, and the
amount withdrawn can be put back in the following
year without reducing your contribution room.
*[Sources:Sunlife.ca’s economy blog (post about retirement, references
Sun Life research on unretirement index)
i
If you have a general question or suggestion about this newsletter, please send an e-mail to grsmarcom@sunlife.com
or write to my money At a Glance Newsletter, Group Retirement Services Marketing, Sun Life Financial, 225 King Street West, Toronto, ON M5V 3C5.
This bulletin has been created exclusively for you. It addresses issues to help you with your financial planning and investments, and cannot be
reproduced in whole or in part without the express permission of Sun Life Financial.