Many Canadians may be sabotaging their retirement savings without realizing it, according to financial columnist Christopher Liew. Common mistakes include neglecting tax-advantaged accounts, paying high investment fees, and failing to adjust for inflation.
Tax Efficiency Matters
Liew emphasizes that using Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) strategically can significantly boost net returns. For example, high-income earners benefit more from RRSP deductions, while lower-income savers may prefer TFSA flexibility.
Fees Eat Returns
Even a 1% management expense ratio can reduce a portfolio by 25% over 30 years, according to Liew. He recommends low-cost index funds or ETFs to minimize fees and maximize compounding.
Don’t Ignore Inflation
With inflation averaging 3% annually, a $1 million nest egg in 30 years would have only about $412,000 in today's purchasing power. Liew advises including growth assets like equities to outpace inflation.
Rebalancing and Diversification
Regular rebalancing and diversification across asset classes can reduce risk and improve long-term returns. Liew suggests reviewing portfolios annually and adjusting based on age and risk tolerance.
“Many people set their retirement savings on autopilot without checking if they are on track,” Liew wrote. “A few simple adjustments can make a huge difference over time.”
