The Ins and Outs of Investing for Retirement

The Ins and Outs of Investing for Retirement

Are you on track for financial freedom once you retire? If your answer is no, it may be time to start looking at some investment options before it’s too late. The average pension and old age security likely won’t cover all your expenses, so it’s wise to have some other vehicles of money saved for that golden day. Here are some of the most common ways of investing for your retirement that can set you on the path towards financial independence.

Employee-Sponsored Retirement and Pension Plans

Under an employer retirement and pension plan, you and your employer regularly contribute money. When you retire, you’ll receive the contributed money as well as any money from the investments in the plan. In many cases, you can invest more money into the plan. This can be of great benefit, especially if your employer is matching every dollar you contribute. You can speak to your HR department to find out if any of these types of plans are offered: Group Registered Retirement Savings Plans (Group RRSPs), Pooled Registered Pension Plans (PRPPs), Defined Benefit Pension Plans, or Defined Contribution Pension Plans (DC).

Registered Retirement Savings Plans (RRSPs)

Another common way to invest in your retirement is through an RRSP. Within the plan, you can grow your money tax-free. Each year you are allowed to allocate a certain amount that can be later carried over if you don’t utilize it one year. When you pull your money out after you have retired, you will only pay the taxes based on your current tax rate. This is often a much lower rate than when you’re at your prime working years. Within your RRSP you can hold a number of investments, such as Mutual Funds, Stocks, Bonds, and GICs. Just be aware that the money also may impact the money you receive from government benefits, such as your Old Age Security and Guaranteed Income Supplement.

Tax-Free Savings Account (TFSA)

A TFSA is very similar to a regular savings account except that you don’t have to pay tax on the interest, capital gains, or dividends. You also don’t have to pay any tax when you decide to remove your money from the TFSA either. Like an RRSP, there is a maximum amount that you can contribute each year, and any unused portions will roll over. It’s an excellent way to save more money for your retirement.

Life Insurance

Life insurance can be a brilliant way to put away additional funds for your retirement above any retirement plan you already have in place. You just need to buy a policy with an underlying investment vehicle that will build value until your retirement. At the time you retire, you can withdraw cash as a tax-free loan that will not need to be repaid. The death benefit for your beneficiaries will be reduced, but if you’ve done adequate estate planning, the benefits will far outweigh the potential impacts.

To talk more about how you can set up a life insurance policy as a way of investing for retirement, contact us at Rowat Insurance. Our team of insurance professionals can help guide you through your options and help you plan better for your future.

Rowat Insurance

Insuring Ontario and Quebec since 1955. Trust Rowat Insurance Brokers to look after your home, auto, business and life insurance needs. We always guarantee fast, friendly service and highly competitive premiums. As brokers, we are entirely independent from Insurers and Financial Institutions; we will work with you to analyze and advise on risk, and customize the coverage that is right for you.