What will your income be in retirement? The answer goes well beyond investment returns
The financial industry sometimes overlooks the significant differences in investment knowledge from one person to the next. Some people are savvy, self-directed investors, while others do not understand the difference between an RRSP and a TFSA.
Recent research by Angus Reid for Tangerine found that only 74 per cent of those surveyed knew that TFSA stands for tax-free savings account. Despite being around much longer than the TFSA, the RSP acronym was only known by 39 per cent. Retirement savings plans are often referred to as RRSPs or registered retirement savings plans as well.
One of the problems with money is that people who are smart and successful in other areas of their lives may be hesitant to let their lack of financial literacy show. It is one of the reasons these same people can be vulnerable to some members of the financial industry who may exploit their lack of knowledge.
A recent poll from FP Canada and CIBC found 54 per cent of Canadians define a financial plan as something that details long- and short-term investment products. This leaves out many other elements, such asretirement planning, not to mention tax strategy, insurance needs and estate planning. An investor’s understanding of how their investments will turn into a paycheque in retirement can be overlooked at the expense of an industry focus on investment sales.
For all the non-experts planning for retirement, here is a quick summary of the retirement income sources you may have at your disposal.
Canada Pension Plan (CPP) is a contributory pension meaning you contribute to it and the more you contribute, the higher your pension. Contributions are made based on your employment and self-employment income. A contributor generally needs 39 years of
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