The million dollar SCHEME…err…I mean dream
Sit down with a financial planner and I can guarantee you that if you’re under the age of forty he will tell you how much you need to invest at what rate for how long to achieve the holy grail of RRSP, one million dollars. Wow six zeros prefaced by a one. Just think about that for a while, if the Bare Naked Ladies had it right I could buy Dijon ketchup. (Hope that’s not copyrighted). “But of course when your ready to retire a million won’t be worth what it is today,” he says. Oh crap what am I going to do without Dijon ketchup?
I think the idea of an RRSP is great it’s a generous tool allowing people to make a lot of money! RRSPs have all the right financial attributes, deferred income taxes, compounding cash that’s tax free while housed in the account, but some of the industry professionals have taken contribution pushing and product selling too far. “Don’t worry about the credit card borrow some cash and top up your contributions. You don’t want to fall behind do you?” Top up my RRSPs, I think, what about topping up the gas in my car that’s about to be repossessed?
My favorite RRSP commercial is the one with the automatic guy. He gets in his car and his seat automatically adjusts, it starts raining and his wipers turn on etcetera etcetera he’s the effortless Joe Cool. And the tag line, referring to his RRSP that automatically adjusts for him, “Set it and forget.” Hmmm do I really want to do that with my money? Sure you just forget it, forget all about it and wake up at 65 and you won’t care that there’s no money in that RRSP you started 35 years ago.
So its not that RRSPs are a bad investment tool, quite the contrary actually. But you have to be weary of all the slick devices used to sell you on retirement products. You shouldn’t set unreasonable goals or put money away out of fear. Your financial advisor is just that an advisor, he shouldn’t be selling you on a dream he should be fulfilling yours. You tell him what you want to achieve let him create a plan for you and perform your due diligence on the selections he has made. Who knows maybe you’ll accumulate more than a million.