How do you choose the right RSP for you?

Find­ing the right fit comes down to your knowl­edge and expectations

Metro Canada (Halifax) - - SPECIAL REPORT: TD RSP - Michelle Wil­liams

You’re think­ing about open­ing a re­tire­ment sav­ings plan. That’s a good thing. Aside from the ob­vi­ous ben­e­fit of cre­at­ing a nest egg for your re­tire­ment, you may also get a nice de­duc­tion on your up­com­ing tax re­turn.

And the sav­ings you put away can have sev­eral years of tax-de­ferred growth be­fore you with­draw the money.

Many rookie in­vestors think that once you de­cide how much to put into your RSP, you’re done. How­ever, you also have to de­cide where and how you want to in­vest the money — which ve­hi­cles and prod­ucts to use.

“Once you’re ready to in­vest, you have to de­cide on your RSP type,” says Kurt Rosen­treter, a fi­nan­cial ad­vi­sor and char­tered ac­coun­tant. “One op­tion is to ex­plore the group plan that may be of­fered by your em­ployer.” This type of plan is spon­sored by your em­ployer, who may top up or match your con­tri­bu­tion. “It’s wise to take ad­van­tage of this be­cause the em­ployer’s con­tri­bu­tion is like free money.”

An RSP is a “por­ta­ble as­set,” says Kath­leen Peace, part­ner and wealth ad­vi­sor at Woodgate Fi­nan­cial Inc. and In­vest­ment Plan­ning Coun­sel. “So if you leave your job, you can take it to any fi­nan­cial institution.”

An­other ben­e­fit is that you can ar­range to have con­tri­bu­tions au­to­mat­i­cally with­drawn from your pay, so you won’t miss the money. But you may not be happy with the in­vest­ment op­tions your em­ployer’s plan of­fers. If you’re look­ing for more con­trol of your in­vest­ments, an­other op­tion is to set up an in­di­vid­ual plan with your bank.

“In this case, you de­posit your money into an RSP ac­count and you can choose to buy the bank’s fi­nan­cial prod­ucts ac­cord­ing to char­ac­ter­is­tics like your risk tol­er­ance and your fi­nan­cial goals,” ex­plains Rosen­treter.

For those in­ter­ested in do­ing their own in­vest­ing, “self-di­rected RSPs can be man­aged on­line. You can do this through most fi­nan­cial in­sti­tu­tions,” ex­plains Peace. “This is an at­trac­tive op­tion to the in­vestor who wants to se­lect and man­age their in­vest­ments them­selves and pay min­i­mal trans­ac­tion fees.”

Re­mem­ber to take stock of your own goals and expectations be­fore choos­ing an in­vest­ment.

“How and where you in­vest should be aligned to your risk tol­er­ance, time hori­zon, tax bracket, fi­nan­cial knowl­edge, re­turn expectations, re­tire­ment goals and other fac­tors,” says Rosen­treter.

Is­tock

Think­ing about open­ing a re­tire­ment sav­ings plan? First you have to de­cide where and how you want to in­vest the money.

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