‘PAC’ now to re­tire well

This pro­gram makes in­vest­ing easy

The Guardian (Charlottetown) - - BUSINESS - This col­umn, writ­ten and pub­lished by In­vestors Group Fi­nan­cial Ser­vices Inc. (in Québec – a Fi­nan­cial Ser­vices Firm), and In­vestors Group Se­cu­ri­ties Inc. (in Québec, a firm in Fi­nan­cial Plan­ning) presents gen­eral in­for­ma­tion only and is not a so­lic­i­tati

It’s an un­de­ni­able fis­cal fact: Fill­ing up your Reg­is­tered Re­tire­ment Sav­ings Plan (RRSP) con­tri­bu­tion room each year is a great way to max­i­mize the size of your re­tire­ment nest egg. But, many Cana­di­ans have trou­ble com­ing up with a size­able chunk of money as the con­tri­bu­tion dead­line looms (as it is now) – and as a con­se­quence that con­tri­bu­tion room goes un­filled and their re­tire­ment sav­ings are di­min­ished.

But, there is an easy so­lu­tion: A Pre-Au­tho­rized Con­tri­bu­tion Pro­gram (PAC), an easy way to in­vest – so easy you may ac­tu­ally for­get you are in­vest­ing – that de­liv­ers th­ese sig­nif­i­cant fi­nan­cial ben­e­fits:

• Your reg­u­lar con­tri­bu­tions have longer to grow and thanks to the mir­a­cle of com­pound­ing, you add sig­nif­i­cantly to your re­tire­ment nest egg.

• You en­joy the ben­e­fits of dol­lar cost av­er­ag­ing – mean­ing that you buy fewer units of an RRSP-el­i­gi­ble mu­tual fund ( for ex­am­ple) when prices are high and more units when prices are low. Over time, this strat­egy re­duces the im­pact of volatil­ity and usu­ally re­sults in a lower av­er­age cost to you and the ac­cu­mu­la­tion of more units.

To start PAC-ing, sim­ply ar­range with your bank to deduct a spec­i­fied amount from your sav­ings or chequing ac­count on a reg­u­lar ba­sis that is con­trib­uted to your RRSP (or ad­di­tion­ally or al­ter­na­tively to a Tax-Free Sav­ings Ac­count or your non-reg­is­tered port­fo­lio).

You’ll be amazed at the longterm growth your PAC can de­liver – here’s an ex­am­ple: PAC $250 into your RRSP each month and (at an an­nual com­pound­ing rate of re­turn of 6%) you’ll have $243,628 of pre-tax as­sets af­ter thirty years.* But if you wait un­til the end of each year to in­vest a lump sum of $3,000, you’ll only have $237,174. So by PAC-ing each month, you po­ten­tially add $6,454 to your re­tire­ment fund with­out cost­ing you one ad­di­tional penny!

There’s no doubt that a PAC can be in­stru­men­tal to reach­ing your long-term goals, but it is only one el­e­ment of a com­pre­hen­sive fi­nan­cial plan that should also in­clude such strate­gies as as­set al­lo­ca­tion, port­fo­lio bal­ance/re­bal­ance, tax-re­duc­tion, es­tate plan­ning and other strate­gies tailored es­pe­cially for you. Your pro­fes­sional ad­vi­sor can help you pick the PAC and fi­nan­cial plan that works best for you.

*The rate of re­turn is used as an il­lus­tra­tion only and is not in­tended to re­flect fu­ture re­turns on in­vest­ment.

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