Q. I have over $10,000 in RRSPs and would like to get advice on how to better invest these funds as I am planning to retire within a couple of years.
One of my friends who works for an investment firm has advised me to consider guaranteed mutual funds for my money. What are your suggestions?
I am not sure if it would be wise to move my RRSP or keep it as is.
A. Retirement is a big decision. Most people are not prepared financially for that milestone in their lives.
Congratulations for saving over $10,000 of retirement funds in your RRSP. This will definitely contribute to your post retirement years.
If you do not have a pension from your employer, you will have to be diligent in managing these funds in order for it to last you through your post retirement years.
There is a possibility that you can top up your income with your Old Age Security and your Canada Pension Plan funds, depending on how much you receive, but your lifestyle will determine how long those funds will last.
How you invest those funds in the next couple of years will determine the amount of investments you will have to sustain your lifestyle.
Your level of risk will determine where you can invest these funds in order for them to grow and allow you to have that money in a couple of years.
There is no such thing as a guaranteed mutual fund. Mutual funds can and do fluctuate. You can place your investments in a money market fund, which is basically holding your funds in cash and the possibility for growth is minimal.
Speak to your investment advisor and find out where your funds are invested right now. Does it match your risk profile and the time frame for the next few years when you will be retiring?
The answer to that question will determine if you should keep the investments as they are. If not, RRSP’s can be moved to different investment vehicles to best match your investment goals.
Should you move your funds from your RRSP, be prepared to pay withholding taxes to the government. Based on your age, you have the option to convert the RRSP to a Registered Retirement Income Fund (RRIF) from which you can withdraw income.
My advice is to speak with a financial advisor to discuss your goals in retirement and what you will need to get there.
They can also create a financial plan for you and provide you with recommendations to achieve your goals.
– Chris Alexander, MBA, BBM, PFP, FICB