Canada reached a very important milestone earlier in 2015 when the number of Canadians aged 65 and over surpassed the number of Canadians 14 and younger for the first time.
The fact is Canada’s aging population presents a unique set of challenges that the government and individuals need to take into account.
Many experts believe that Canada is lagging behind other industrialized countries in addressing the particular needs of an aging population. “We haven’t necessarily had the national debates we should be having around aging,” Amanda Grenier, director of McMaster University’s Gilbrea Centre for Studies in Aging, told the National Post in September 2015.
In addition to managing an aging population and the unique challenges this presents, Canadians are also living longer. Last year, a World Health Organization study found that the Canadian life expectancy had increased thanks in part to a decrease in smokers and a reduction in liver and heart disease diagnoses.
However, the fact that Canadians are living longer and healthier lives makes successfully saving for retirement all the more important.
I’m often asked by potential clients of Canaccord Genuity Wealth Management, “Nick, what are other financial tools that can be used to save for retirement?” Aside from the traditional Registered Retirement Saving Plans (RRSPs), and Defined Contribution Pension Plans, Self-Directed Registered Retirement Savings Plans, or SDRRSPs, are a viable option for investors who are looking to have more control over where and how they invest.
A Self-Directed Registered Retirement Savings Plan is similar to a regular RRSP account. However, a SDRRSP allows an investor to hold many different types of investments within a single account, which, in turn, provides investors more investment freedom and control.
While SDRRSPs require a more hands-on approach than other investment tools, there are many benefits in consolidating assets into one SDRRSP account. Most regular RRSPs now charge fees for withdrawals and transfers. By consolidating all your RRSPs into a single plan, you may be able to reduce your annual administrative costs.
Despite requiring a more engaged approach, consolidating assets helps reduce and simplify record keeping. It also makes it easier to view your portfolio in its entirety. Unlike many regular RRSP accounts that only offer mutual funds or GICs, SDRRSPs offer diversity and variety. Investors can choose from conventional investments like GICs, bonds, mutual funds, exchange traded funds (ETFs) and stocks, as well as mortgages, small business corporations, and other non-conventional investments.
After I share this condensed information with clients, prospects and friends, most then ask, “But how do I choose what to invest in, Nick?” The name ‘Self-Directed Registered Retirement Savings Plan’ can be a little misleading. The account owner of a SDRRSP account can of course manage the account on his or her own. However, this in no way discounts the use of investment managers and financial specialists, who can help manage and oversee SDRRSP accounts, as well as offer guidance.
SDRRSPs may not be for everybody. With that said, they are another tool for investors to use when planning for retirement. That is especially important in today’s world where retirement funds are forecasted to be needed for a longer period than ever before.
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