A journey worth planning - RBC Royal Bank

Let your RBC Advisor be your guideNo matter where you are in your journey, your RBC Advisor can help you build and adapt your plan. They can also help you:

1 IFIC and Pollara Strategic Insights Investor Survey, 2020, based on Canadian mutual fund investors surveyed.2 DALBAR, 2020, based on a survey of North American investors who have financial advisors.3 Based on a relationship of 15 years or more. Source: The Gamma Factor and the Value of Financial Advice, Claude Montmarquette, Natalie Viennot-

Briot, 2016

A journey worth planningFrom your first dollar saved, to planning a retirement paycheque, your investment journey could include several short- and long-term goals, and changing priorities along the way. For example, with the challenges and disruption of the past year, many Canadians likely altered their financial goals.

However, no matter how much things change, a good plan and sound advice remain fundamental in helping you achieve your goals. This quarter, we look at important planning considerations at different stages of your investment journey, and how RBC can help you stay on track.

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Spring 2021 edition

Investment UPDATE

28263 (04/2021)

3.9X Investors working with an advisor have been shown tohave almost 4 times the assetsof investors who don’t.3

of investors said they’re more confident in their advisors after a period of market volatility.2

86%

Stick to your plan –even when the journey gets difficult

of mutual fund investors say they have better saving and investment habits because of their advisor.1

82%Build good saving habits

of mutual fund investors with an advisor are satisfied with the advice they received.1

96%With advice you can count on

Grow your wealth

Contact your RBC Advisor today to discuss how they can help you reach your investment destination,

or call us at 1-800-463-3863.

TIP! Pay yourself first Make regularly investing effortless by setting up automatic contributions to coincide with your pay day.

TIP! Don’t forget your government pensionThe average retiree receives $614.21 monthly from the Canada Pension Plan (CPP). The maximum available in 2021 is $1,203.75 per month.Source: canada.ca as of October, 2020

TIP! Why income split? A couple with an annual income of $50,000 each, will typically pay less tax than if one of you earned $100,000.

As you build your wealth, you’ll likely need to balance multiple goals and changing priorities. You’ll also want to revisit your plan regularly to align it with your current and future needs.

How much will be enough?The following looks at common goals, using 4% annual returns, to help get you thinking about how much could be enough.4

When it comes to retirement, a good tax plan can make all the difference to your lifestyle. Here are two tax-saving strategies for your retirement:

Withdraw assets in the right orderEveryone’s tax situation is different, but a good rule-of-thumb is to make mandatory withdrawals first, like those from your RRIF5, followed by the most tax-efficient, which could include TFSA5 withdrawals or selling non-registered assets. Talk to your tax advisor to determine what’s best for you.

Split income with your partnerBalancing your retirement income with your partner’s can help you pay less tax. Consider the following:

• Split pension income – Regular pension income can be split between partners by as much as 50%.

• Spousal RRSPs – Splitting your RRSP5 contribution room between your RRSP and your partner’s Spousal RRSP can balance how much each of you has available to withdraw in retirement.

Setting up a plan, starting early and saving regularly using a Pre-Authorized Contribution (PAC) are all vital to getting your journey started in the right direction.

A journey worth planning

Getting started

Building your wealth

Building your wealth

4 For illustrative purposes only. Not a prediction of future performance of any fund. Actual results may vary substantially.

5 RRIF: Registered Retirement Income Fund, TFSA: Tax-Free Savings Account, RRSP: Registered Retirement Savings Plan

2 Investment Update I Spring 2021

The value of starting earlyIn this example, we can see the impact of investing $500 a month, starting at age 25 versus age 45. Annual returns are 4%.4

Retirement planning

How long will a $500,000 portfolio last? (Assuming 4% annual returns4)

For many, the ultimate long-term savings goal is their retirement nest egg. To determine how much will be enough, start by looking at how much income you’ll need and how long your money could last.

If you take a yearly income of:

$36,000 20 years

30 years$24,000

$19,600

Your portfolio will reach $0 in:

$5,000

$201/month

Emergency fund

2 yearsTimeline:

Savings required:

Short-term goal:

$25,000

$378/month

Down payment on a house

5 yearsTimeline:

Savings required:

Medium-term goal:

My Advisor

Book a virtual one-on-one with an RBC Advisor Discuss your plan, goals, portfolio and top up your registered accounts.

Optimize your investingYou can now set-up, adjust and grow your regular investing plan, and make lump-sum contributions.

See your complete financial pictureMonitor and track your cash flow, goals and investments – even those held at different financial institutions.

Contact your RBC Advisor today to see

how they can help you on your financial

journey.

Visit rbc.com/myadvisor

Investment advice that is digitally enabled through the MyAdvisor platform.

Your portfolio will remain at $500,000, since your annual returns and income are similar

Short- and medium-term goals

Long-term goals

Amount invested by age 65 Portfolio value at age 65

$580,532

$240,000$181,920

Start at age 45 Start at age 25

$120,000

The early investor’s portfolio grew to

2.4 times the total invested.

Financial planning services and investment advice are provided by Royal Mutual Funds Inc. (RMFI). Mutual Funds are sold by RMFI. There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Please read the Fund Facts/prospectus before investing. Mutual fund securities are not insured by the Canada Deposit Insurance Corporation. For funds other than money market funds, unit values change frequently. For money market funds, there can be no assurances that a fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in a fund will be returned to you. Past performance may not be repeated. RMFI, RBC Global Asset Management Inc. (RBC GAM), Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.Investment and economic outlook information contained in this report has been compiled by RBC GAM from various sources and reflects our view on March 31, 2021. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions.All opinions and estimates contained in this report constitute our judgment as of the indicated date of the information, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates and market conditions are subject to change. The material in this newsletter is intended as a general source of information only, and should not be construed as offering specific tax, legal, financial or investment advice. Every effort has been made to ensure that the material is correct at

time of publication, but we cannot guarantee its accuracy or completeness. Interest rates, market conditions, tax rulings and other investment factors are subject to rapid change. You should consult with your tax advisor, accountant and/or legal advisor before taking any action based upon the information contained in this newsletter. FSC FPO® / ™ Trademark(s) of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal Bank of Canada. © Royal Bank of Canada, 2021.

§ Containing COVID-19 has been critical to the economic recovery, which is now underway and has much more room to grow supported by significant monetary and fiscal stimulus.

§ There is concern that inflation could run too hot as economies reopen. Our view is that inflation will move higher but remain at low levels relative to history.

§ Risks to the growth outlook include the distribution of vaccines and their efficacy against new variants and the possibility of another virus wave.

§ Our base case scenario is quite constructive as economic forecasts were mostly upgraded from last quarter and remain above consensus.

§ Longer-term bond yields have surged as investors’ expectations of faster inflation and better economic growth are offsetting the impact of central-bank efforts to hold rates down.

§ Part of the increase was due to real, or after-inflation, interest rates rising from unsustainably low levels. Real rates could rise even higher but increases are limited by structural changes in the economy.

§ The recent surge in global yields has dampened the acute valuation risk that existed in the bond market and we think that bond prices could find near-term support at current levels.

§ Global equities rose to new highs as the pace of COVID-19 vaccinations progressed, virus counts declined and earnings exceeded expectations.

§ We recognize there is froth in some areas of the market and that valuations are elevated, but our modelling suggests the possibility that price-to-earnings ratios could rise even further as fears of the crisis fade and interest rates return to normal levels.

§ The economic recovery has stoked a rotation out of traditional U.S. large-cap leadership into other more economically sensitive areas of the market, driving rallies in small and mid-cap stocks, financials and industrials, and value stocks overall.

§ Although the advantage of stocks over bonds has diminished somewhat as a result of rising yields, equities continue to offer an attractive risk premium versus fixed income. As a result, we are maintaining our overweight position in stocks and underweight in bonds.

On October 3, 2019, the Canadian Securities Administrators finalized the new Client Focused Reforms (CFR) regulations - these rule changes come into effect starting on June 30, 2021.

Client Focused Reforms are intended to improve outcomes for you as a client, and ensure you understand what you can expect from your RBC dealer(s) when you purchase products and services from them. The goal of CFR is to clarify the terms of a client’s relationship with your RBC investment dealer(s) and ensure that dealer(s) are making recommendations that are in your best interests. Its intent is also to deepen our understanding of you as a client, so we may be asking more questions about your assets and objectives at your next visit.

As a result, we are providing enhanced disclosures relating to the existing and reasonably foreseeable material conflicts of interest that may affect your interests as our client, including how we address material conflicts of interest in the best interest of our clients. To find out more, please see the disclosures at www.rbc.com/rmfidisclosures.

Keeping you informed is our top priority. RBC is committed to providing you all of the information and key resources so you are able to make informed decisions that are best for you and your investment plans. As always, please contact an RBC advisor with any questions about these disclosures, or how they may relate to your investment plan.

Client focused reforms

Connect with us

§ Book a phone or virtual appointment through MyAdvisor or RBC Online Banking

§ Call us toll-free at 1-800-463-3863

§ Visit us at rbcroyalbank.com/investing

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For more investment insights please visit: rbcgam.com/insights

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