Monday, February 7, 2011

Is an RRSP an Investment? If You Answered Yes, You're Wrong! AOL's WalletPop Canada

If you think an RRSP is an investment, don't worry; many Canadians think the same. However, an RRSP - Registered Retirement Savings Plan, is simply a shelter, not an investment.

I like to explain it this way: think of your RRSP as a garage. It's essentially an empty structure. You still need to put cars into your garage. These cars could be GIC's at your bank, stocks, bonds, mutual funds or just about any combination and more. But without carefully choosing which cars go into your RRSP and periodically changing those cars up, many Canadians aren't optimizing their RRSPs.Thinking that the shelter is the investment is the number one error I see individuals making when it comes to RRSPs. They rush into their banker or financial advisor's office moments before the deadline and take a sigh of relief that their investment made it in time for a juicy tax refund to come. The professionals in the financial industry are swamped at RRSP time and may simply plunk your investment in a cash account within the RRSP (that's a car too) so that you can make the deadline and ask you to remember to come back at a less busy time of the year to property allocate (diversify) your contribution. You forget to do so, or at least, many do, and therefore your RRSP doesn't work as hard as it could to grow your retirement savings.

Read my full article here:

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