To the Young and Restless: Plan

Crisp, clean ocean air. A temperate climate. Magnificent mountains. Diverse cultural events. Art exhibits. World class shopping. Almost all-season access to every sport imaginable.

These are certainly things to love about Vancouver. But we do put up with a high cost of living for the privilege of calling one of the most beautiful cities in the world home.

The expensive nature of this fine city can burn through income like the SUVs littering our streets guzzle gas. What remains of a paycheck after the bills have been paid and the groceries bought, can seem like an insignificant sliver. In the short term, this can result in something as straightforward as not being able to travel, or buy new clothes. But there are long term implications as well, ones which those of us in our mid-twenties to early thirties – those of us for whom retirement is but a distant fantasy—often don’t even consider.

But, according to Steve Nowak, a certified financial planner with Investors Group, fulfilling dreams of a retirement bathed in luxury, of frequent trips and never a dull moment, requires a lot of planning.

He recommends putting funds into a Retirement Savings Plan (RSP) now, unless you think winning the lottery is a very real possibility.

Although the RSP deadline has passed for 2006 contributions, it’s never too early to start planning for 2007, Nowak says. Being proactive and starting a monthly savings plan now is a great idea.

Nowak explains that a monthly contribution can seem like less of a financial burden than a lump sum contribution at the end of the year. Also, since the RSP deadline comes right after Christmas, a lot of people find themselves over-extended financially and coming up with an RSP contribution at that time can add a lot of stress.

Nowak strongly advises people to start contributing to an RSP while young. “If you invest early, your money will have a longer period in which to grow,” he explains. Plus, he says additional financial pressures often build as people reach their mid-thirties. Once you’ve got a couple of Rugrats running around, it may be more difficult to siphon funds to an RSP.

Depending on your strategy, you may still be able to have it all – kids and an annual RSP contribution. Nowak worked with Shannon, 30, and Adam, 34, parents to a one-year-old son, in setting up a plan where they could do just that. Although their RSP contribution often reduces their ability to indulge, Shannon explains, “We want to do things when we retire– we want to be able to travel and really enjoy that part of our life – so we are making sure we are going to have enough money for it.”

While single people, myself included, may curse those living on a dual income because it seems they have an easier time of it, Nowak explains most people’s inability to save comes down to “lifestyle choices.” Going to the bar, eating out on a regular basis, and not being conscious of spending patterns are the biggest hindrances to an RSP, he says.

He often suggests those interested in finding a way to tuck some money aside look into the Request to Reduce Tax Deductions at Source that’s available through the Canada Revenue Agency (www.cra-arc.gc.ca). This allows your RSP contribution to be deducted directly from your pay at the beginning of the year, thus lessening your gross income. As a result, fewer taxes are taken off from the get-go.

Nowak also suggests that people look into an RSP loan. He explains, “You take a small loan of $5,000 and if you get approximately $1,500 to $2,000 back, you can place that directly on the loan and then you only owe around $3,000.” This has multiple benefits. You’ve put money away, gotten a tax break, and your money is now growing at an annual rate of 8 to 10%, he says.

As for the dilemma about the cost of living in Vancouver, Nowak has no strategies for overcoming that and says, “If you’re not making a good income in Vancouver, it can be difficult to find a way to put some money aside for RSPs.” Even if it means sacrificing in the short run, however, he still suggests people aim to direct 10% of their after tax income into an RSP. But he says this is not an absolute and the amount is based on the situation and financial goals of the individual.

And his advice for what to do with your RSP contributions? It’s different for everybody, Nowak says. The key is in having a well-balanced portfolio, one that’s reflective of the individual’s risk tolerance.

So take Nowak’s advice – don’t wait until February of 2008 to start thinking about your RSP contribution for 2007 – start a monthly RSP now. Surely a comfortable retirement is something you deserve after thirty-plus years of catering to the whims of senior management. The cash back from your tax deductions will just be an extra little bonus along the way.

To contact Steve Nowak: steve.nowak,,,investorsgroup.com

For a wide range of choices, check out www.gvrd.com/investment/index.html for links to other local experts who have posted articles, forums, and other advice about what to do with your investment funds.

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