Rethinking your RSP approach for the 'new normal'

Everyone's retirement vision and plan to get there is different. 

Some Canadians have the option of participating in an employer-led retirement savings plan, while others may not have access to this option or prefer to choose an alternate way of saving for the future. 

Regardless of your personal situation, the economic fallout of the COVID-19 public health emergency has caused many Canadians to re-think their retirement plans and assess if they're still on track to meet their goals.  

TD Financial Advisor, Mohamad Hannouf, from La Salle, Quebec, says many customers are now examining their retirement plans and asking some common questions at this time: 

Q: Are you noticing a difference in the way people are approaching their RSPs right now, compared to how they might have been doing things before the pandemic?

MH: As you may know, we have had a pretty volatile market in the past few months due to COVID-19. Many of our customers are worried about their RSP investments right now, so our approach has been to review their investment time horizon, which means discussing their investment goals and looking at the timeline they are working with.

For me and my team, an important step is to have a proactive conversation with our customers to truly understand their current situation, current needs and concerns for the future. A lot of my customers want to know they are on the right track, and they are wondering whether they should be buying or selling. Many of the concerns customers have are the same as always, but of course, the state of the world has heightened some concerns.  

Q: For those customers who are looking to make changes to their RSPs and their retirement planning, how should they be rethinking their approach? 

MH: One of the first things to consider is how markets perform long-term. It's important to review your financial plan on a regular basis, such as once a year or whenever you have a major life event, like buying a house or losing your job.  

But if your long-term goals – such as saving for retirement – haven't changed, you need to be careful with adjusting your plans. We always try to be proactive in talking about an RSP plan with our customers. As a financial advisor, I consider it part of my responsibility to help keep customers on track for their investment time horizons and informed on how markets tend to behave over the long-term. 

Q: What's one of the biggest mistakes customers might make as it relates to their RSP right now? 

MH: If you attempt to predict the ups and downs of the market, and you find yourself buying and selling at the wrong times, you could find yourself missing out on long-term growth. 

More generally, a pre-authorized payment plan allows you to make regular contributions towards your RSP, so you don’t need to think about the best time to buy. 

Often, the best days for investment growth come after a downturn, which is why staying focused on long-term investment goals is so important, as those who sell during a down market could miss out on returns during the recovery. If you react too quickly, and make impulsive decisions based on emotions, it can have a negative impact on your long-term financial goals. 

It's easy to get emotional when the market looks challenging. This is why it's important to talk to your financial advisor and to consider whether to stick to the plan you have laid out together. 

Q: What are the most common questions you're getting about RSPs right now?

MH: Many customers want to understand how they can use the money in their RSP accounts. For example, they want to know if it's only available to them after they retire. Often, these are younger individuals who are hoping to tap into their RSP to buy a home. 

For customers looking to buying their first home, the Home Buyers' Plan (HBP) in Canada lets you, subject to eligibility and conditions, withdraw up to $35,000 from your RSP (or $70,000 per couple) to buy or build a qualifying home, which you then have 15 years to repay. There also can be the option to use your RSP towards the Lifelong Learning Plan if you're looking to finance education for yourself or your spouse.