With the RRSP deadline days away, it is time to contribute again. Year after year we do the same thing – and we get the same result.
People cannot save enough to retire and if you do not have a defined benefit plan – read government and teachers – you are screwed!! I had a friend who maxed out his RRSP for 30 years – accumulated over a million bucks – and figures that will pay him out about $55,000 per year. Not even close to a teacher whose pension is also indexed for inflation. Now most of us never max out our RRSP and that is the problem.
What to do? Banks and other wealth managers want to increase the limits for RRSP contributions but that won’t solve anything. My solution is to get a SELF DIRECTED RRSP. If you have $60,000 saved, lend it to yourself as a second mortgage and then buy a $260,000 studio condo (probably the cheapest and easiest form of real estate investment for the average person). In 25 years, the condo will be paid off through renting it out and with just 4% annual appreciation; you will have an asset worth $700,000! Do it twice and you can retire!! Naysayers will tell you that interest rates, condo fees, and taxes will go up over time. So will rents to offset these expenses.
Even real estate agents have trouble figuring this out! We have a couple of agents who borrowed big to invest in the stock market and guess what? The returns from their investments cannot pay off their loans! If only they had stuck to what they know best. Most people can accumulate three properties in their working life besides their principal residence, and they can retire. Seems simple to me but what do I know??