February 5, 2024

Start off the New Year on the right foot – savings-wise

As the snow flies, signaling the true start of another winter, there’s an opportunity (as well as some time) to put your savings hat back on.

So writes Dale Jackson for BNN Bloomberg.

Jackson notes that he is pretty optimistic about 2024. “Canadians who invest for retirement have a lot to feel good about,” he writes, citing recent positive trends in both the U.S. and Canadian stock markets.

He offers up four “risk free ways to boost portfolio returns in 2024.”

First, Jackson says, it’s time to address debt.

“A massive five-per-cent hike in the Bank of Canada benchmark interest rate in less than two years has more than doubled monthly debt payments for some Canadian households,” he writes.

“For many, the best investment for 2024 is to pay down debt, starting with the highest rates. Balances owing on credits cards, for example, can top 25 per cent. There is no comparative investment that can produce a 25 per cent risk-free return,” he explains.

Next, he continues, is the opportunity to shore up (or create) a fixed-income portfolio.

“A big silver lining from higher borrowing rates is higher lending rates,” he writes.

“After three decades of lacklustre yields, fixed-income options such as guaranteed investment certificates (GICs) are returning more than five per cent annually.

Higher fixed-income yields bring an opportunity for investors to lower overall portfolio risk without sacrificing returns by shifting assets away from the volatility of equities,” Jackson explains.

His third strategy for boosting income is to “take advantage of tax perks.”

“Some experts say a good investment tax strategy can boost returns by 25 per cent over the lifetime of an investor. For most Canadians, that requires utilizing their registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs) and any other tax perks available,” Jackson notes.

This year, he continues, “Canadians will be permitted to contribute an additional $7,000 to their tax-free savings accounts (TFSAs). As it stands, the current limit for those who were 18 years or older when the TFSA was launched in 2009 is $88,000, but it can vary among individuals depending on withdrawals made over the years.”

He also notes that contributions to a registered retirement savings plan (RRSP) made before the end of February are tax-deductible for your 2023 taxes.

His final piece of advice is to pay very close attention to investment-related fees.

“Most Canadians invest for retirement through mutual funds, which can charge annual fees above 2.5 per cent. That means the fund would need to generate a return higher than 7.5 per cent to give investors a five per cent return,” he writes.

“Many mutual funds outperform the broader market after fees but most don’t. Consider less expensive alternatives such as basic market-weighted exchange traded funds (ETFs) with much smaller fees,” he concludes.

If you’re a member of the Saskatchewan Pension Plan, you’re already taking advantage of lower fees. SPP’s pooled, professionally managed Balanced Fund operates with a fee that is typically less than one per cent! Not a member? SPP is open to any Canadian with RRSP room, so check out SPP today and see how we can get your retirement savings plans back on track!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.

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