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There’s roughly $150-billion of extra savings in bank accounts as a result of measures to fight the pandemic by keeping people at home. Give some thought to putting some in a registered retirement savings plan before the March 1 contribution deadline

Economists expect some of these billions to be spent when the pandemic eases, which is both understandable and desirable. Consumer spending will be important in getting the economy back to normal levels. But money parked in savings also presents an unusual opportunity to build up your resources for retirement, especially if you’re part of the majority of people who don’t have workplace pensions.

RRSPs are like a once dominant but now fading consumer brand. Tax-free savings accounts have cut into RRSP popularity. Seniors complain about the taxes they pay on withdrawals from RRSPs and registered retirement income funds. Young people put a turnstile on their RRSP contributions – money goes in, then comes out for a house down payment.

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If you’re weighing a contribution to an RRSP versus a TFSA, check out this column I wrote a while back. There’s a lot to like about TFSAs as a retirement savings vehicle, including the fact that withdrawals generate no tax. RRSP withdrawals are taxed like regular income.

But TFSAs can be dipped into easily. The money you meant for retirement could easily be next summer’s landscaping project. Withdrawing money from RRSPs can be done, but there’s enough friction involved to make you think twice about it.

One more pitch for RRSPs: Even maxxing out your TFSA contributions every year might not generate enough retirement savings.

A couple of conflicting polls have been issued in 2021 about RRSP intentions. A poll sponsored by the investment firm Edward Jones found that just 31 per cent of participants intended to make an RRSP contribution this year. Bank of Montreal’s latest annual RRSP survey found that 64 per cent of people had made or planned to put money in an RRSP before the March 1 deadline. Hey, it’s a weird time. People are clearly uncertain about what to do with their money.

But here’s the thing about 2021 – lots of money is sitting on the sidelines earning close to nothing in a savings account. Consider putting some of it to work for retirement. For ideas on how to do that in today’s stock market conditions, check out this recent column.


Subscribe to Carrick on Money

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.


Rob’s personal finance reading list

What to expect (about money) when you’re expecting

The total Year One cost of parenting is projected in this article at $8,846. Detailed information on the cost of diapers, feeding, baby gear and more. Must reading for parents-to-be.

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The credit card offer that looks better than it is

RewardsCanada.ca deciphers an offer by one particular reward credit card for five points per dollar spent, which is outstanding. Problem is, those points aren’t worth what you might think.

The not-so-high cost of clean air

As noted in a recent edition of the newsletter, people are spending a lot of money on air purifiers these days. Here’s a look at how well a variety of air purifiers perform in removing dust, pollen and more from the air. The high cost unit didn’t win.

Revisiting a class rule of retirement planning – the 4 per cent rule

The 4 per cent rule says you can sustainably withdraw 4 per cent of your retirement savings each year, with annual adjustments for inflation if desired. Here are some updated thoughts on whether the 4 per cent still makes sense.


Guest Q&A

Our guest today is the millennial investing blogger Urgen Kuyee, who I met several years back after doing a session on ETF investing at the MoneyShow in Toronto. Mr. Kuyee, 32, works a nurse and writes the Passionate Bibliophile blog, where he interviews people in the financial world.

Q: Urgen, how old were you when you started taking an interest in investing and personal finance?

A: My first “investment” was in 2007, my very first year in Canada. I was 18. I invested $1,000 into a one-year guaranteed investment certificate and earned 4 per cent interest. Good luck getting 4 per cent interest on a one-year GIC today. Consequently, I started investing in TD e-series index funds in 2010 due to their low management expense ratio.

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Q: Tell us about your blog – how do you pick the people you interview?

A: My blog, Passionate Bibliophile, was born in 2016. I started the blog to help Canadians, especially millennials and healthcare workers, learn more about investing. I pick the people I interview when I know I can learn more from them. Granted, my subscribers and readers get to learn as well, but that’s bonus points for me.

Q: What personal finance/investing lessons have you learned in the pandemic?

A: The biggest lesson I have learned during this pandemic is – my fellow millennials, I hope you are reading this – is that we are punished for saving and rewarded for investing. Make sure you are investing your money, not saving. There is only one wrinkle: Have three to six months of savings for an emergency fund.

Q: How has your perspective on finances been shaped by the fact that you’re a health care worker (thanks for your hard work, btw)?

A: As a nurse, most of the clients I look after are above 70. Many have reminded me having a healthy body and healthy mind is of more importance than money.

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Q: What have you been doing with your own investments lately – are you trading stocks, buying GameStop, getting into crypto?

A: Oh boy, a lot. Last year, I sold all my TD e-Series index funds after buying them on a dollar-cost averaging basis for 10 years. It was a good run. What’s more, I sold all my SNC-Lavalin and Dollarama shares recently. It was a bad run. I added some Galaxy Digital Holdings shares to my portfolio a couple of months ago. Perhaps most remarkably, after COVID-19 happened last March and all the money-printing that took place, I got into Bitcoin and went down the rabbit hole. No, I did not buy GameStop.


Today’s financial tool

This is useful – a list of mistakes that newcomers to do-it-yourself investing sometimes make. Bottom line: “You are responsible for your own mistakes.”


The money-free zone

The website Cover Me is a showcase for nuggets like the Black Pumas cover of the Rodriguez song Sugar Man and Joshua Henry’s cover of Stand Up, by the O’Jays (look for both under The Best Cover Songs of January 2021).


ICYMI: What I’ve been writing about


New Globe and Mail newsletter

Given what the pandemic has done to government finances, the Tax & Spend newsletter is going to be essential reading in the years to come. I just subscribed.


More Rob Carrick and money coverage

Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.

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Even more coverage from Rob Carrick:

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

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