Inflation, market volatility, politics and world events: These forces have transformed our finances and investments. They might also have shaken up our financial habits.
Are you worried about your investments and your retirement savings? Or maybe you’re wondering whether you can afford to buy a house. This is the kind of thing that keeps many people up at night. But before you get too sleep-deprived, now may be a good time to meet with an advisor. They can offer personalized advice that fits your specific situation.
Don’t have an advisor? Find an advisor today.
Saving money during a crisis: how to do it
Sun Life financial security advisor Julien Ringuette recommends:
- Make a financial roadmap, or review the plan you already have. It’s best to build your plan with your advisor’s help. And once you have a plan, stick to it!
- Put your investments sooner rather than later in RRSPs and TFSAs. The sooner you invest, the more time you have to increase your buying power and combat the effects of inflation.
- Automate your savings with automatic withdrawals. You’ll be able to set aside a fixed sum of money at the frequency you choose. Automating your savings takes the stress out of saving.
- Be patient. With time, things often sort themselves out.
- Think things over carefully before making any decisions. Now is not the time to be rash or impulsive. Sleep on your choices before taking action.
- Look to financial professionals for answers, rather than random internet pages. Even the smartest internet experts don’t know you and your individual situation.
- Resist the urge to make impulsive RRSP withdrawals. If you take money from your RRSP, the government will charge a withholding tax.
- Keep your long-term vision in sight, no matter what happens.
- Avoid playing the stock market if you don’t have experience buying and selling stocks.
Should you save for retirement or for a house?
Over the next few years, interest rates may climb even higher. This could hamstring your ability to buy a house. As well, the housing market has cooled in some regions, but prices can still be eye-poppingly high. Are you wondering if there’s any point to saving for a house? Or is it smarter just to save for retirement?
Good news: You can do both. Ringuette suggests investing in a registered retirement savings plan (RRSP). An RRSP will help you save for retirement. But it can also help you become a homeowner.
That’s thanks to the Home Buyers’ Plan (HBP). For your qualifying withdrawals, you can withdraw your RRSP savings plus the interest you’ve earned without having to pay taxes or penalties as long as it is repaid. Under the HBP, you’re currently allowed to withdraw up to $35,000 from your RRSP toward the purchase of a home. You then have several years to pay yourself back.
For couples, if you both qualify for the HBP, this solution could add up to a substantial down payment.
And now, there’s another tax-free way to save for your first home. If you qualify, the First Home Savings Account (FHSA) lets you save up to $8,000 a year ($40,000 maximum). You pay no tax on the investment growth in your account, so your savings grow faster. And – like an RRSP – your FHSA contributions are tax-deductible. When you’re ready to buy your first home, you won’t pay tax on the money you take out of your FHSA. If you use the money for something else, though, you will pay tax. And there’s more good news: Unlike the HBP, you don’t have to pay the money back to your account for qualified withdrawals.
This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.
