Saving yet? A nudge from experts at RRSP time
Elizabeth Fraser | CBC News | Posted: February 27, 2017 11:30 AM | Last Updated: February 27, 2017
The average consumer debt in New Brunswick is almost $23,000
It's time to start searching the house and scrounging up your annual savings.
The Registered Retirement Savings Plan contribution deadline is March 1.
With the average consumer debt in New Brunswick inching toward $23,000, which comes from a recent Equifax Canada Inc. report, Marissa Sollows says saving is an important asset when planning long-term.
For every $1 a person earns, about $1.65 is being spent by Canadians., said Sollows, senior education co-ordinator with the New Brunswick Financial and Consumer Services Commission.
"The amount Canadians have been saving has been declining consistently in the last 30-plus years and our debt level is increasing," she said.
What is an RRSP?
An RRSP is an account used to save for retirement, and it has advantages at tax time.
"You're saving for your retirement in a plan and the government is willing to let you deduct your contribution from your taxable income," said Elke Gaudet, manager of financial planning for RBC in western New Brunswick.
"That lets you reduce your taxes and also lets your grow your money."
Consumers will only be taxed when they withdraw money, which typically they do at retirement when they are making less money than when they were employed.
In 2015, Statistics Canada said the median RRSP contribution was $2,600. In 2011, it was $2,400
How to save for retirement
Matthew Smith, a financial planner with RBC in Fredericton, sees a lot of the same questions this time of year including, "Is this enough?" or "How much should I put in?"
The answer?
Smith says the first step is trying to understand what's important to each individual consumer. He said it's crucial to know where the cash flow is going to go in retirement and where it's going today.
People should invest because the population is aging and there's going to be less resources to rely on in the future. - Matthew Smith
"What's important to one person is totally different from what's important to another person," he said.
"Do you want to have that luxury lifestyle cruising around the world [or] do you want to be sitting at home in a rocking chair knitting?"
Next, New Brunswickers need to budget and consult a financial adviser to set themselves on the right track. He said it's also important for consumers to know how much they're spending on a regular basis.
"If you don't know where your cash flows are going in from and going out to, how can you effectively manage those so you can get the best bang for your dollar with your after tax cash flow?"
Finally, consumers should start investing as early as they can so they can benefit in the long-term.
"You have to weigh the pros and cons of living for today or saving for tomorrow," he said. "The only way of knowing how much to put away today is how much you're going to need later on."
The benefits
An RRSP allows consumers to get a break come tax time for contributing to an RRSP.
And those yearly contributions — up to 18 per cent of an earner's annual income — lead to more self-reliance, Smith said.
"People should invest because the population is aging and there's going to be less resources to rely on in the future," said Smith.
"We need to be more self-reliant, and putting ourselves as a priority is important to maintain a type of lifestyle for yourself and your family."