What could I miss doing that could ruin my retirement?

Perhaps you haven’t started investing regularly, or the amount you allocate is not enough to reach your retirement goals. Here are a few of the things people are not doing that can ruin otherwise good investment goals.

Not viewing debt as negative investment earnings. If you are paying 18% interest on a credit card while earning 8% in an investment, that immediately places you in a 10% loss position per dollar compared. Moreover, where else can you get such a guarantee on your investment return, as you can by investing in your debt repayment? By paying off $5,000 over one year, you’ll earn $900 risk-free and you won’t have to pay that with after-tax dollars ever again.

Unsecured credit card debt can kill a once-healthy budget, while substantially reducing your income. And opportunities can suffer when your cash flow is crippled by debt. It is harder to solve the need for emergency cash if you are debt-ridden.

Especially look at paying down debts that carry interest that cannot be written off as you are paying for both the principal and the interest with after-tax dollars.

Not putting money away into an emergency fund. If an emergency arises you should be able to access a simple bank account to cover up to three to six months’ worth of living expenses such as your rent or mortgage, food, debt repayment, car payments, etc. Consider using a money market fund for this savings plan.

Not assessing your retirement time horizon. You can analyze what you will need to invest annually, by running calculations to see if you will have sufficient income to live on. Confer also with your advisor about how you can get there over your remaining employment years, by investing with a clear vision.

Not assessing the impact of inflation on your retirement income. Refer to this table to see how inflation can affect your retirement plan.

Planning for your dependants. Make sure you have sufficient life insurance to pay off your total debts such as: credit card balances, car loans, IOUs, and any business-related debt. Incorporate this with sufficient coverage to provide future income for your dependants. This is especially necessary if your debt exceeds your annual income as it does for the average Canadian household where debt runs at 150% of income. Source: The Vanier Institute of the Family, February 2011

How can I minimize the tax paid in my estate?

The need for estate planning is especially evident for those accumulating significant retirement wealth, either in the form of business ownership, real property or investment assets. Though it is true that “You can’t take it with you”; it is possible to reduce your estate taxes enabling you to transfer more money to your heirs. The estate tax is payable on income accrued to the date of death including salary, investment income or dividends.


The Income Tax Act deems that you dispose of all your capital assets, including stocks, bonds and mutual funds, at their fair market value just prior to your death. In the year of your death, gains that have accrued on your investments and other capital property will become taxable, reduced by accrued losses on investments and other capital properties. You will need professional tax advice when developing your estate plan.

Leaving Non-Registered Assets to Your Spouse

A surviving spouse can continue to benefit from your assets. You can defer tax payable on your accrued gains at death if you leave your assets to your surviving spouse or to a spousal trust established for the sole benefit of your spouse during his or her lifetime. The taxes are deferred until the death of your spouse or until he or she sells the assets. The deferral allows your spouse to utilize your investment assets in a tax-efficient manner and to dispose of assets in a way to minimize the taxation.

Leaving RRSPs and RRIFs to Your Spouse

Did you realize that your RRSPs and RRIFs would be subject to immediate tax upon your death unless you have established your spouse or a financially dependent child as your beneficiary, and certain other conditions are met? Tax will be payable when monies are withdrawn as income by your spouse or as annuity payments to financially dependent children. Even if you have not established your spouse as your beneficiary, he or she may be able to legally request a transfer of your RRSP/RRIF funds to his or her RRSP/RRIF and defer the tax that would otherwise be payable upon your death. Further, upon your spouse’s death, any remaining RRSP/RRIF money will be taxed (assuming there are no financially dependent children). Any RRSP/RRIF tax liability could optionally be paid using a special pre-designed life insurance strategy to help maintain your asset base and is transferable to heirs surviving your spouse.