RRSPs: They're not just for retirement anymore

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By Gail Vaz-Oxlade
With tax season just around the corner, you may be thinking about your RRSP contribution. There was a time when the only thing an RRSP was used for was saving for retirement, but this is no longer the case.
These days, you can use your RRSP as a savings plan for a down payment on a home, among other things. It’s fair to say that the RRSP has become Canadians’ favourite savings account.
The problem with RRSPs being all things to all people is that its wider scope, its greater flexibility, its move from a hands-off-don’t-ever-touch-this-money retirement plan to a you-can-use-it-whenever-you-can-justify-it savings account is that the process of identifying your investment strategy has become more complex. Most people say they don’t have enough money to maximize their RRSP and set aside a non-registered emergency fund, which explains the overlap between retirement savings and other types of savings that take place within an RRSP.
The first question to ask yourself when choosing investments for your RRSP is, “When am I going to use this money?” If you’re using a portion of your RRSP savings as your emergency fund, then keep that portion of the RRSP assets fairly liquid so you can
access the money in an emergency. If you’re tapping into your RRSP to buy a home, you’ve got a short- to medium-term investment horizon and must choose investments that suit. So you’ll have to forgo equities in favour of a more-conservative investment portfolio. Since you don’t have the time to wait out the bumps in the road that are part of the equity-investment experience, you have to settle for less return.
By Gail Vaz-Oxlade – is the host of Til Debt Do Us Part and author of Debt Free Forever and blogs daily at www.gailvazoxlade.com. Follow Gail on Twitter at Twitter.com/VailVazOxlade
Original Source: METRO VANCOUVER NEW HOME GUIDE April 17 – May 1, 2015