We all wonder how we will manage to look after ourselves when we are no longer able to work for a living. We plan for those days in the hope that not only will we be able to count on a pension from our work, but that our government will also repay us the money we have contributed to the government pension plan during our working years. And yet… and yet we still don’t feel quite safe. On top of those promised pensions, almost everyone makes an effort to save something on their own initiative for their retirement years.
Whether you call it an RRSP in Canada, or an IRA in the US, we are putting our money away at a great rate so that we can live comfortably when we are older. There are a myriad of different savings accounts, investment plans, and financial advisors all vying for our money. The trick is to choose what works best for you.
Many people choose to simply put money in the bank every month, but today’s interest rates on savings are so low that their money is making almost nothing for them, since it accrues so little interest. The advantage to a simple savings account is that the money is available at any time if you need it, and that makes a big difference to some people.
Canada has the Tax Free Savings Account, or TFSA. This account allows individuals to put a limited amount of money away each year and not pay taxes on it. This saves some money for the individual, but since there are very strict rules governing the use of TFSA’s it is not unusual for people to be assessed a penalty for too many transactions on the account, or other small infractions, and since the penalty is often larger than the savings obtained by using the account, they are not always profitable.
The American IRA runs on similar principles, and a great many people use these accounts as their retirement plans.
Whatever you choose to use, doing your homework first can save you a lot of money in the future.
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