Evelyn Jacks: Take control of what you can control

With Canada's economic growth a modest 2% and inflation about 2%, it is hard to grow new wealth in today's fragile world. One sure solution is keeping firm control of the costs that will erode your wealth. That means monitoring investment fees and limiting the amount of income taxes you pay, two things in an otherwise unpredictable environment that you can control.

Let's talk about tax efficiencies first. Consider investing any new money in the order in which it will most boost your after-tax results, choosing the biggest booster first. For example, a contribution to an RRSP would take precedence over a contribution to a Tax-Free Savings Plan (TSFA).

If you have taxable income, are age eligible and have RRSP contribution room, the RRSP will provide a win for you because of the tax savings it generates. Thanks to your ability to deduct the amount of your RRSP contribution from your taxable income, you will pay less income taxes ó and generate extra dollars for investing ó by the amount of your marginal tax rate. For example, if you are in a 30% marginal tax bracket, every $1,000 invested in the RRSP takes $300 off your income taxes.

If you don't have RRSP contribution room or don't qualify to contribute to an RRSP, a TFSA is the next best choice because income earned in your TSFA account is not subject to taxes. However, TFSA contributions are not tax deductible the way RRSP contributions are and they are limited to $5,000 annually. You also need to be a resident of Canada to contribute. But, if you have available TFSA room, a TSFA is a great place to park savings and earn tax-free investment income.

What's next in your tax-efficient investing plan, once you have topped up your RRSP and TFSA? Now, you should consider non-registered accounts and the tax implications of various types of investment returns. How much of your non-registered portfolio should be generating interest, dividends or capital gains to get the after-tax results you need?

Given recent public pension reforms, you should also consider how long you intend to work. If you work past the age of 60, you can increase future income by continuing to contribute to the Canada Pension Plan. By July 2013, you'll also be able to postpone taking your Old Age Security for up to five years, thereby increasing pension benefits later. These are important opportunities that should be carefully considered when you are planning your retirement.

Let's turn now to the fees you pay for having your money managed. How much do you pay each year to invest your money? Should you pay an investment-management fee based on a percentage of your capital, or a cost per transaction? Are there savings to be had? Depending on how much money you have invested, you can sometimes negotiate lower investment-management fees. And investment-management fees are tax-deductible, unlike the fees changed for mutual funds and transaction costs. Either way, you'll want to factor in exactly how much more of a return you will need over a defined period of time to offset the fees.

Then, weigh the costs of the advice against the value of the advice. If the good advice received and the consistent process for sound decision-making helps you get better results, it will be worth it.

It's Your Money. Your Life. When returns on investments are low and unpredictable, investors must manage risks more closely. The returns needed to cover the effects of inflation, taxes and fees must be part of your planning. Whether you invest on your own or within a collaborative professional team, be sure these factors are considered in constructing ó and reconstructing ó your investment portfolio.