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A complete picture helps you make better choices

Published on: July 22nd, 2019

Your investment plan is an important part of your plan for financial success and wellbeing. It’s not the only element, however, and by making sure that all the parts of your personal financial situation work together, you can enhance the value and power of each.

Here’s a look at the potential benefits of a “big-picture” approach.


Minimize tax

Are you holding your investments in the most tax-efficient manner? For example, the interest income generated by investments held outside a registered plan is fully taxable at your marginal rate. Inside a registered plan, it’s tax-deferred. Repositioning your holdings may save you hundreds or even thousands of dollars in tax every year.

Tax rules can be complex, of course. Professional assistance can help you explore the possibilities and avoid the potential tax traps.


Optimize RRSPs

People often have more than one Registered Retirement Savings Plan (RRSP). Perhaps they’ve dealt with several companies in the past, or have forgotten about small plans opened long ago. Others may have opened separate RRSPs to access different kinds of investment offerings.

Maintaining separate accounts can result in investment gaps and duplication. Consolidating your RRSPs may make them easier to manage and improve your asset allocation. You might also save money on administration fees.


Coordinate pensions, RRSPs, and TFSAs

People often make RRSP investments without considering their employer-sponsored pension plans. Yet when RRSPs and pensions work together, the result can be a larger nest egg to meet your retirement needs. If you are using your Tax-Free Savings Account (TFSA) to save for retirement as well, then consider coordinating all three for maximum benefit.

Also factor all your plans into your personal asset allocation. A defined contribution plan in which you make investment choices can be fully coordinated with your RRSP and TFSA. A defined benefit plan with a guaranteed payout can be considered in a similar way to a fixed income asset, so your other investment plans could be more aggressive than they might otherwise.


Consider your mortgage

Finding the best rates and features when taking out or renewing a mortgage can reduce your long-term interest costs substantially and cut years off your mortgage. Paying down your mortgage early frees up additional cash for investment elsewhere.


Consider automatic investing

“Pay yourself first” is a key principle of long-term financial success, but finding the money to invest can be hard. You can set up regular monthly or quarterly contributions to your RRSP, TFSA or non-registered accounts. Even a small amount each month can make a big difference over time and chances are you’ll hardly miss the money.

Professional advice can help you on the way to financial success, but get the full benefit from examining your full financial picture.

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