Concerned You Won’t Have Enough?

Good news if your RRSP balance is small

If you’re like many people, you’ve been a late starter when it comes to RRSPs, and it’s understandable. Between loans, kids, mortgages and life in general you didn’t have enough spare money to contribute. As a result, your retirement savings are rather small or maybe even nonexistent.

If retirement is quite a few years away

If you’re 15 to 20 years away from retirement, you shouldn’t have a serious problem. You just have to get started. You’re far enough away from retirement that you’ll likely be able to catch up.

Your earnings are probably close to peak. Perhaps your home is paid off -- or close to it. Maybe your children are on their own, or maybe you’re part of a double-income family.

In short, at your stage of life, you’ll probably have more income available so you can make hefty contributions to build your savings. So just take full advantage of the rules with these 5 tips and you’ll be able to make up for lost time.

• Contribute the maximum. A good strategy for everyone. Absolutely essential for anyone trying to catch-up.

• Take advantage of unused deduction room from previous years.

• Take advantage of the $2,000 over-contribution allowance to shelter additional funds from tax.

• When you have freed-up resources, like no more mortgage payments, put that money into your RRSP.

• Consider transferring non-registered investments into your RRSP (But be careful of triggering a capital gain or loss which could work against you. You should consult your financial planner on this one.)

back to top

If retirement is not all that far away

If you’re closer to retirement and your RRSP savings are sadly deficient, you’ll have to take some drastic action. And the closer you are to retiring, the more drastic the action. You should be able to build your savings to an acceptable level if you adopt some of these strategies:

• Delay retirement until you’re more secure. Working one year longer than you had planned can make a great deal of difference. For example, making $10,000 annual income while retired is like having $200,000 in savings paying you 5%.
• You may have to save at a greater rate
• If possible, you may have to pay down your debts faster
• You can look for alternate sources of retirement income, like working part time or starting a new business
• Cut back on spending
• Downsize the house or car
• Sell the cottage
• Change your lifestyle expectations

These strategies are not only for late starters but also for those who may have started planning and saving long ago, but whose plans have been set back by financial conditions.

For example, if your retirement plans are based on the higher returns of the 90’s, when 12% a year and better was normal, you had better do some serious revisions. Those days are over for now, perhaps for a long time. And if you were relying on income from interest bearing investments, today’s historic low rates will likely force you to alter your plans as well.

One caution is to be sure that you don't over-react to the market downturn - either by getting into riskier investments in hopes of making up for what's been lost, or by retreating to overly conservative investments that won't give an adequate return. You still need a balance. And of course as always, you should choose your investments based on your objectives and risk tolerance.

Whatever you decide to do, if you’re still working, you should continue to maximize your RRSP contributions and concentrate on reducing any debt you may have.

And you may be interested to know that if you do keep on working into your retirement, you’ll become part of a growing trend. Some studies show that over half of all Boomers plan to work during their retirement years.

If you’re concerned about not having enough in your RRSP and you’d like some expert advice, click here to find the RBC financial planning professional closest to you.

You’re going to be wealthy, no matter what

If you're at all concerned about not having enough money when you retire, there’s a brighter side. In one sense you’re going to be a wealthy person, no matter how much or how little money you’ll have.

How many times have you heard that: “Time is money”.

Well, you’re going to have lots of time, by some estimates around 2,000 hours more than when you were working. So if time is indeed money, congratulations. Your net worth just increased dramatically.

Next: Why you may need less than you think 

Important information about our financial planning services can be found at the bottom of our homepage.