Westworld Alberta

toolkit Investment for the Ages Retirement planning is a lifetime affair by Lindsey Norris I NVESTMENT ADVICE TODAY IS PLENTIFUL, sometimes free – and often confusing. You read one thing in the news and you fi nd a contradictory article online. Ask Bob in accounting how his stock market dabbling paid for that tropical vacation home and your investment advisor will tell you to do the exact opposite. That's because everyone's circumstances and retirement goals are different: there are guides, not rules. But there is one constant: it's never too early – or too late – to start planning for retirement. Here we provide tips you can follow at every age to ensure that ulti- mately you retire from your career, not your lifestyle. The Starter 20s Some 20-somethings might wonder how they can start saving for retirement when their idea of extravagance is brand-name ketchup on their boxed macaroni. But even they can begin saving. Janet Petonjic-Rogers, manager of deposit services for Bridgewater Bank (a wholly owned subsidiary of AMA) in Calgary, explains: "It's been proven time and again that you should start saving when you're in your 20s, even if that's when you're least likely to think about it." That's because in many registered prod- ucts and savings vehicles, you are guaran- teed a certain percentage of interest. When that interest is compounded (monthly or annually), you earn interest on the interest. So, for example, if you were to invest $4,000 a year starting at age 20, and receive an eight per cent aver- age annual return, by the time you were 60, you would have more than $1 million saved. If you waited until you were 32, you'd have to invest around $10,000 a year for the same result. So where should the young investor begin? One option is a basic high-interest savings account (usually with rates of around two per cent to four per cent). "You can start out with as little as $25 a month. ableimages/Masterfile The interest is calculated at the end of the month and it is usually compounded," says Petonjic-Rogers. If you have a Registered Retirement Sav- ings Plan (RRSP) at work, don't give it a second "It's been proven time and again that you should start saving in your 20s, even if that's when you're least likely to think about it." thought: sign up. These tax-deferred plans are registered with Revenue Canada and can also be set up through your fi nancial institution. A range of investments can be placed in RRSPs, including mutual funds (more on these later), bonds and stocks. Once you put money into an RRSP, consider it locked away until you retire – if you cash it early, you'll pay tax on the withdrawn amount. The 20s are also a perfect time to open a tax-free savings account (TFSA), to which you can contribute up to $5,000 annually. As with RRSPs, you can choose from a range of investment options under the TFSA umbrella, including mutual funds, guaranteed investment cer- tificates (GICs) and bonds. The benefi t here is that your money is still accessible, since withdrawals are tax-free – and the earnings are, too. Contributing $200 a month to a TFSA for 20 years, with an annual return of 5.5 per cent, will accumulate $11,045 more than if the money had been in a tax- able product. (For more on the benefi ts of TFSAs, see the Government of Canada calcu- lator at tfsa.gc.ca). In your 20s, you might want to lean toward higher-risk products with higher WESTWORLD >> NOVEMBER 2011 47

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