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PAC now for a more comfortable retirement

You may find yourself scrambling to find ‘extra’ money to contribute to investments held in your Registered Retirement Savings Program (RRSP). While making the maximum contribution each year is the best path to maximizing your savings held in your RRSP for retirement, finding that ‘extra’ money by the contribution deadline can be stressful. But there is a much better way: a Pre-Authorized Contribution (PAC) program.

A regular payment plan becomes part of your budget as a monthly cash outflow that you probably won’t miss and when markets decline, automatic contributions allow you to purchase more mutual fund shares or units, resulting in a lower average cost over the long term.

Here’s an example of the power of the PAC:

  • Set up a regular investment plan – assuming you invest $250 into your RRSP-eligible investments on the first of every month.
  • At a compound annual return of 6.5%, you’ll have $278,000 of pre-tax assets after 30 years¹
  • If you wait until the end of each year and invest a lump sum of $3,000 into your RRSP-eligible investments (presuming you can up with that large chunk of cash on short notice) you’ll have only $259,100 of pre-tax assets after 30 years.
  • By using a PAC- each month, you could potentially add $18,900 to your retirement fund – and it doesn’t cost you an extra penny!
  • In addition to the extra long-term tax-deferred appreciation, your contributions also deliver a nice tax benefit for the current tax year.

Your PAC removes RRSP deadline stress and enhances your retirement income. Talk to your professional advisor about establishing a PAC, other sound investment strategies and achieving all your life goals.

Date reviewed: February 2, 2015

1The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values or returns on investment.

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.