Thursday, November 26, 2015

The Road to a Successful Retirement

Ottawa Redblacks wide receiver Greg Ellingson catches a pass which he ran for the game winning touchdown against the Hamilton Tiger-Cats in the CFL East Division final in Ottawa on Sunday, November 22, 2015. (THE CANADIAN PRESS/Adrian Wyld)

Even if you are not a football fan, you can appreciate a dramatic ending which results in a crucial win,  the winning play that allows a team to advance to the Grey Cup.  Ottawa’s quarterback, Henry Burris, and wide receiver, Greg Ellingson, connected to orchestrate the 93-yard winning touchdown.  In those last dying minutes, the situation appeared all doom and gloom. Who knew that they would pull off a win that will go down as one of CFL’s top moments?   The synergy was so obvious between these players.  They believed in their abilities. They put forth their best effort to create a wild ending. 

The Ottawa Redblack’s success didn’t come together on a whim in those last minutes.   Every player on this team worked hard throughout the season to achieve success leading up to that moment.   Their ultimate goal was to win games which would allow them to play in the big one, the Grey Cup.   In an interview, Henry Burris shared that he tells his sons, “This is what it’s all about. All the hard work Dad puts in pays off. When you do the right things someone always looks out for you in the end.”

To write about achieving success is so fitting now between the weeks of the Western-Eastern Final Division Playoffs and the Grey Cup.  The best of the best are in a showdown to see who triumphs.  I learned a thing or two about watching the action play out on the football field.  I am not ready to turn into a pro football player but I certainly can see the benefits of having effective coaches working behind the scenes to create the winning plays.  That’s my job as a financial planner as I help prepare you for the ultimate winning play of your lifetime, retirement.

One winning strategy you may often brush aside is paying attention to your Notice of Assessment.   I hear your question.  “My what?”  When you file your annual tax returns, Canada Revenue Agency (CRA) mails a Notice of Assessment which summarizes the total income and tax payable from the previous year.  You are also shown the amount of your upcoming year’s RRSP deduction limit.   The sample statement below indicates that this tax payer’s RRSP deduction limit is $37,878.

Contributions to a Registered Retirement Savings Plan (RRSP) or Registered Retirement Plan (RPP) reduce your taxable income.  Here’s the ripple effect.  When you invest money into a tax-haven (shelter) like an RRSP or RPP, you earn the right to receive back the taxes collected off your pay cheque.  For sole proprietors, investments into a tax-haven defer income taxes from being paid on earned income. Rather than directing money towards taxes, directing money into registered savings plans can be your winning play.    
Contrary to what some might believe, the sky is not the limit when sheltering money inside RRSPs and pension plans.  You gradually build RRSP contribution room based on 18% of annually earned income as shown on your statement. If you have a pension plan, your limit is reduced.  Using this RRSP deduction limit amount as your goal and taking advantage of opportunities to save towards this amount will build your retirement savings. 
A different way to look at this is your RRSP deduction limit as though it’s an outstanding mortgage. When you set your goal to pay off (or in other words, pay up) this balance, you are implementing the strategy to “pay yourself first”.  Here are some way to help you tackle this daunting task.
Arrange regular weekly, bi-weekly, monthly contributions in an effective way to dwindle down the deduction limit.  These regular contributions should balance with your day-to-day living expenses and debt obligations.
Build your retirement savings with tax refunds.  Don’t stop to think about it; don’t give yourself leeway to change your mind and spend the money on something you will regret later.
Cut your spending to make room to catch up on your RRSP contribution room.  You won’t have to keep this trend going forever. This strategy is only in place for a “season” until the deduction limit has been reduced to only the current year’s contribution.      
Divert any over-time earnings, cash gifts from relatives, Christmas bonuses or incentive pay from your employer directly into your RRSP savings.  You can’t miss something you weren’t expecting to receive.   
Exert every effort to take advantage of the deduction limit to create a new habit.  Once you see the opportunity of reducing your personal income tax by savings, you will become addicted to maximize RRSP contributions annually. Savings won’t become a “have-to” strategy but a “want-to” strategy because of the benefit of achieving your goal.
Your retirement fund will not come together on a whim.  Regular contributions, whether through your own efforts or combined efforts with your employer, will help fund your ideal retirement plan.  The success of a dynamic football team is built with the players who make it happen on the field and the personnel who help make it happen from the sidelines. You are the key player with the earning ability to make your retirement happen.  At the same time, you seek help from your coaches, investment advisor, tax accountant, lawyer, and financial planner, to help make your retirement plan happen with critical advice and strategies.  The end result is you are in the position to create your own wild and memorable retirement after years of hard work.  Don’t pass up this chance to achieve your retirement dreams.


  1. So consistent! way to go Delores! Something I try to do related to your D for Divert is divert some of any raise I get to debt reduction (or savings). Like you said you don't miss what you never had!

    1. That is so good to hear, Bill~! Hard thing to do but you won't regret being disciplined for doing so. Congratulations.