The hard reality for most of us is that we need to save for retirement. Government benefits like Old Age Security (OAS) and Canada Pension Plan (CPP) are generally not enough. Combined OAS and CPP can be as much as $1500 monthly; however, most citizens do not qualify for the maximum monthly benefit. With that said, Canadians have started losing sleep over it. While borrowing money has become easy thanks to the low-interest rates, it has made disappointingly difficult to grow investments and savings. It doesn’t help when it comes to retirement money. Since we are living longer and longer, we will have to stretch our dollars further and further. Hence, you need a foolproof plan in order for your retirement to be without hardships.
If you are already investing in Registered Retirement Savings Plan, it is great to know. But if you think only an RRSP retirement plan isn’t enough to cater to your retirement needs, there are plenty of other options available that can maximize your existing policy.
In this post, we will discuss how you can boost your retirement savings for a happy retired life.
#1 Tax-Free Savings Account (TFSA)
Similar to your Registered Retirement Savings Plans, a Tax-Free Savings Account is an investment vehicle that allows citizens to hold numerous investments such as mutual funds, exchange-traded funds, bonds, and stocks, among others. However, unlike the mentioned investments, Tax-Free Savings Account comes with a few different sets of rules. For instance, you can open a TFSA account with a Robo advisor or an online brokerage that will allow you to maximize your returns. Opening a TFSA investing account is advisable for those who want fast access to cash or for those who need flexibility. That is, you can withdraw money whenever you want and get instant access to your funds. Further, any dividends, capital, or income gains are entirely tax-free.
#2 Pooled Registered Pension Plans (PRPPs)
Pooled Registered Pension Plans are a part of the workplace savings programs. It was introduced by the federal government in 2011 addressing the concern that millions of Canadians don’t have a workplace pension. Pooled Registered Pension Plans are a type of defined contribution pension plan intended to help self-employed entrepreneurs and small businesses save for retirement. The concept of PRPP is that employers can pool resources with other enterprises to enjoy lucrative pension plan that is easily controlled.
#3 Deferred Profit Sharing Plans (DPSPs)
In a Deferred Profit Sharing Plan, an employer distributes a portion of pre-tax benefits to selected employers. But, unlike your regular pension plan, the employees don’t contribute to Deferred Profit Sharing Plans. On the other hand, Deferred Profit Sharing Plans allow employers to put entrusting periods on employer contribution. Such types of retirement plans are becoming increasingly popular in areas where pension plans have diverged towards instant vesting.
Final Words
Overall, it depends on what type of retirement account you choose for your retirement period to be fruitful. Retirement planning is always personal, and the plan you choose should depend on your personal preferences. Always consult a financial advisor before choosing a retirement plan.
