It goes without saying that a country’s economy has a significant impact on different sectors or areas. The economy is an ever-changing entity. Even when the Canadian economy seems to be doing well, many people continue to dread that much-talked-of economic downturn. People are always worried about what they will do when this inevitable and unpredictable financial crisis comes.
People are impacted during these downturn events by the market value of their RRSP’s (Registered Retirement Savings Plan). An RRSP is a tax-deferral, government-sponsored savings plan. Most families have them invested in market-based accounts that are highly impacted to economic twists and turns. Examples of a twist could be the oil price, the currency value and even events caused by mother nature that can affect supply chains.
History repeats itself, and these market cycles constantly wreak havoc on the invested retirement accounts of Canadians. Plus, if they have any job security concerns like the Covid pandemic, their ability to continue funding these accounts is reduced, and many citizens end up having to take out their registered account values to make ends meet.
If you face an economic challenge and pull your RRSP accounts early, you can end up in a triple-pain financial event. First, you have withholding taxes to pay immediately, plus you may be down on your account values. Additionally, you give up the earning potential of those accounts forever, and you cannot get the time back to allow for proper compounding to happen again.
If your accounts are with an employer, there may be even more restrictions to accessing your funds which can add more pressure to a tense situation. When a crisis hits, it is imperative to have simple, easy access to a liquid warehouse of capital. Canadians are waking up to this reality during the pandemic and realize that even their home equity can be frozen entirely when the job market changes. No lender will provide access to loan funds if you were just laid off from work or a government mandate has shut your business down.
So What Can I Do To Protect Myself?
Start focusing on your retirement accounts starting today for access. Can you redirect the flow of your savings contributions to a better asset class that gives you more choices and flexibility? Can you isolate your savings from the volatility of the markets and find a way to be more productive with the same dollar? The answer for most Canadians is yes.
Implementing a savings vehicle like Participating Dividend Paying Life insurance can help create a passive tax-free retirement income and stockpile money for major life expenses. Thousands of Canadians are embracing a concept known as Becoming Yoru Own Banker and putting this into practice. No longer are they restricted by how and when they want to tap into retirement values early when an opportunity or a major life change event happens.
The economy of Canada can have an impact on your registered accounts. It is your job to find a clear path to protecting your family’s money and your retirement dreams. Continue reading our articles for more tips on how to protect and preserve your hard-earned money.
For further assistance regarding your RRSPs, contact Ascendant Financial today and speak with someone from our team of Financial Advisors.
