A Tale of Two RRSP Investors

A couple of years ago, my husband and I finally caught up with our RRSP allowed contribution limit. Ever since, we’ve made sure our annual contributions are maxed. My husband figured this would be one instance where it’s ok to be maxed out (as opposed to our credit cards after my little visits to Pottery Barn).

So, about two weeks ago, we received in the mail our annual RRSP statements and were very happy to see that our nest egg is growing nicely.

Just this last weekend, our real estate agent came for a visit (she still hadn’t seen what we did with the house we bought with her help this summer). She is a nice lady, an Aussie, with style and an accent to go with it. She is also a bit tired of the real estate business and is thinking of retirement. But, here’s the pickle — there isn’t enough money in her RRSP to make that leap.

Then there is my new next door neighbor, a retired lawyer and professor at Osgoode Hall Law School at York University. His problem is of a different kind. As per his own admission, there is simply too much money in his RRSP! His father taught him about saving, and not only about saving money. Let’s just say that his house looks like a bad combination of a warehouse and a museum, and he’s sick and tired of it.

I thought about these two retirees on the opposite side of the RRSP spectrum and decided to “use” their stories for today’s column. It seems to me they both fell victim to rather vicious pro/con RRSP mantras that usually pop up around this time of year.

Without going into too much detail, it seems that the reason why my real estate agent doesn’t have enough hard cash to retire was advice that it might be a better idea to pay off her house first, then her cottage, and then her condo in Florida… before investing in her RRSP. On the other hand, my neighbor appears to have been scared into putting as much money as humanly possible into his retirement plan.

So, who’s better off? My real estate agent, whose high net worth is due to her real estate assets, but who is not liquid enough to retire? Or my neighbor, who has a nice, fat RRSP, although he probably won’t even have time to enjoy it in its entirety?

The answer, of course, must be somewhere in the golden middle. Remember, the financial industry needs aggressive marketing campaigns just like any other industry. And fear campaigns, such as “unless you contribute to your RRSP you’re doomed to die a pauper” are probably the worst you’ll see. By the same token, the fact remains that RRSPs are perhaps one of the best ways to sleep well at night and not to worry about your financial situation once you stop working.