Although Larry Hemeryck has diligently contributed to his registered retirement savings plan for most of his career, the self-employed accountant has pursued a different strategy for the past couple of years.

Mr. Hemeryck, 55, is now putting the money that would have gone to his RRSP into the business he set up in 2005.

"That cash is now funnelled into establishing the business so it can enhance earnings, which will, in turn, provide more room for RRSP contributions later on," says the certified general accountant from Simcoe, Ont.

It's an attractive strategy for many of Canada's estimated 2.5 million self-employed business owners, not only to improve immediate profitability but also for long-term retirement prospects.

Mr. Hemeryck expects his accounting firm will provide him with a significant source of additional funding to complement his RRSP, either through dividends or cash proceeds from a sale 10 or 15 years down the road when he is ready to call it quits.

Even if they don't have their own business to count on, many investors have both RRSPs and outside sources of retirement investments. This can be a healthy mix for a variety of reasons, financial experts say, including taxation efficiency.

It is, for example, often best to place assets that generate regular income (such as guaranteed investment certificates and government bonds) in a tax-sheltered RRSP, and to keep those that create dividends or capital gains outside an RRSP portfolio where they enjoy tax-privileged status.

Investors bullish on real estate as an investment vehicle for retirement, whether by owning a leisure property or rental property, do that outside their RRSP, notes Kathy Henderson, an Edmonton-based investment adviser and associate director with Scotia Capital Inc.

Another non-RRSP source of retirement funding is an investor's own home. Thousands of Canadians view their principal residence as their main financial investment for retirement, especially if their homes have appreciated substantially in value over the years.

"I have seen people selling larger homes in places like Toronto after their kids finish school, and moving down to Port Dover, Ont., where they are able to pay cash for a smaller home overlooking Lake Erie," says Mr. Hemeryck. The difference between the high selling price and low buying price equals tax-free cash that can be used for retirement, he notes.

Many investors turn to non-RRSP options simply because a registered savings plan isn't sufficient to meet their retirement goals. That's because the annual RRSP contribution ceiling is 18 per cent of the previous year's earnings. For the 2007 tax year, the ceiling sits at $19,000. So for people earning $105,555 or more, they can't contribute more than that to an RRSP even if they want to.

"That is really limiting for people in the higher income [earning brackets]," notes Ms. Henderson. "It is important for them to be investing outside their RRSP, too, because [otherwise] they won't be able to save enough to provide themselves with an income they will need in retirement."

Some executives and self-employed business owners whose companies generate high incomes do not bother with an RRSP, instead favouring an Individual Pension Plan to save for retirement.

An IPP is a pension plan that uses an actuarial calculation to determine how much of an annual contribution is required to fund a pre-established pension amount.

"The amount you're allowed to set aside to fund an IPP goes up the older you get," and there is a minimum contribution prescribed by pension-fund legislation, explains Malcolm Hamilton, a consultant and pension actuary with Mercer Human Resource Consulting Limited in Toronto.

The mechanisms for IPPs are similar to RRSPs, "in the sense that you're putting money in; getting a tax deduction; the money compounds untaxed in the vehicle, and everything is taxable when you take it out," Mr. Hamilton says.

"For people who are well-to-do enough that they can afford to put more than the RRSP maximum aside every year, the IPP can be an interesting alternative."

An IPP also provides another benefit because it is creditor-proof and therefore protects retirement funds, says Robert Snowdon, a chartered accountant from Ottawa.

RRSPs also aren't a cure-all for higher-income earners like 64-year-old Dorothy McGill and her husband Jim, 65, who found the minimum withdrawal amounts would keep them in too high a tax bracket.

The couple, building contractors who own investment properties outside the Ottawa area, always made maximum contributions to their RRSPs. But last year they began drawing down their RRSP balance, five years earlier than necessary, in part to avoid being hit with a too-large tax bill in a few years.

"It was better to reduce the RRSP now," Ms. McGill says.

Just as RRSPs have drawbacks for people with high incomes, they may also be ill-advised for people with very low incomes, some financial analysts believe. For those people, cashing in their RRSP when they are 65 or older can wipe out government benefits such as the Guaranteed Income Supplement, which is subject to a clawback of 50 cents for each dollar of taxable family income outside of Old Age Security.

In fact, Mr. Hamilton believes that those with a low income and a modest RRSP should seek professional advice about whether to cash in their RRSP before they turn 65, in order to avoid such a clawback. "For those people . . . it can actually make sense to try and get the money out of their RRSP before they turn 65," he says, adding that the withdrawn money should be invested (outside of an RRSP) or saved for retirement needs.