Medicus and RRSPs: a perfect pair for your financial future                            

Medicus and RRSPs: a perfect pair for your financial future

Reflections from Simone Reitzes, Managing Director, Medicus Pension Plan

One question I hear from physicians is “Can I save for retirement through a pension plan and an RRSP?” With the March 3 RRSP contribution deadline just around the corner, now is the perfect time to explore this question.

It can be beneficial to have both types of plans – a pension and RRSPs – to ensure a well-diversified retirement savings strategy.

Speaking of diversifying…

When you’re investing, you typically diversify to protect against market ups and downs. It’s a good tactic! Saving for retirement works the same way. Diversifying how you’ll receive income once you’re retired means you can be better prepared for life’s twists and turns.

• Pensions like Medicus are all about predictability. You’ll know exactly how much money is coming in every month, for as long as you live.
• RRSPs offer flexibility because you can withdraw different amounts as you need them. After age 71, you can roll your RRSP into another savings plan (like a RRIF) and continue to make withdrawals.

While there are different approaches to how you use pension, RRSP, and even your TFSA and personal savings to cover retirement expenses, I like to think of it this way: use your predictable pension income to cover fixed expenses, like your home, car, insurance, groceries, and other monthly bills. Then, use your RRSP, TFSA, and personal savings to cover those “extras” like travelling, gifts, and new hobbies… however you’ll spend your retirement years.

A couple of things to keep in mind

If you’re considering using a mix of pension income from Medicus and RRSPs to fund your future, keep in mind:

Contribution limits.

Both pensions and RRSPs are tax-efficient ways to save, which means the government sets contribution limits each year for both.

If you participate in Medicus, you will use up most of your available contribution room each year. But the good news is, if you haven’t maxed out your RRSP contributions in previous years, you may still have leftover contribution room, enabling you to save through both vehicles at the same time.

Tax benefits.

Though they’re both tax-efficient, pensions and RRSPs work differently.

• Contributions you make to Medicus are tax-deductible to your corporation.
• Contributions you make to an RRSP result in a personal tax deduction for you.

Medicus and RRSPs: A perfect pair for financial wellbeing, too.

Just like pensions and RRSPs work beautifully together to create a well-diversified strategy, they also work together in support of your financial wellbeing. I encourage you take a moment to map out your ideal retirement and understand the many tools available to help you get there.

Registered savings in a pension or RRSP are just one piece of the puzzle and are a great way to complement your other savings, like a TFSA or savings in your professional corporation.

Ways to learn more

• Join our webinar on Monday, February 10 at 7:30 PM ET to learn how RRSPs and Medicus can work together
• Visit our website to book a one-on-one discovery meeting with one of our specialists and have your questions answered

 In case you missed it
Last month, I shared my “Top 5 list” of how Medicus is uniquely positioned to serve Canada’s physicians. Read it here…