To truly appreciate the role that inflation plays in your ability to build assets and achieve financial freedom one has to consider the role of its dance partner: purchasing power. You can't have one without the other!
It is that time of year again when attention turns to RRSPs and tax planning. This year's contribution deadline is March 3rd, 2014 if you want to deduct the contribution against your 2013 income tax return.
The purpose for making an RRSP contribution, from a financial strategy perspective, is to build savings and assets over time so that you can replace earned employment income with passive or investment income for your retirement years. In other words you can sleep in and still have the lifestyle you want without going to work!
In our previous article, we looked at how seniors generally wish to invest their money to feel safe while in reality their expenses rise throughout their retirement years as the cost of various services, such as hydro and property taxes, typically increase annually. ( See graph at bottom )
Your choices are to either decrease your spending or deplete your savings or some combination of the two in order to make ends meet. The challenge is to make sure you don't run out of money before you run of time!
