It's RRSP time again!
By Pierre S. Goulet, CFP, FMA, FCSI
Practice Manager - Financial Planning & Insurance, SISIP Financial Services
January and February are typically the time of year when many Canadians make
their Registered Retirement Savings Plans (RRSPs) contributions.
The first sixty days of each new year gives us the time to top-up
contributions, borrow to make contributions if we haven't done so
throughout the year, or to start a new contribution plan.
All contributions made up to March 2, 2009 can be claimed either on your
2008 or your 2009 tax return.
1. Don't wait until the last minute
You work hard for twelve-months of the year to earn your money. Don't wait until the
deadline to seek out your investment options. It's easier to invest in small doses. Try making your investment decisions throughout the year, when you will have
more time to reflect on these decisions, and you can avoid the February rush.
2. How much to contribute?
When contributing to a RRSP, time is money! However, because we can carry over our unused contributions for an indefinite period, some of us have a lot of contribution room. Decide how much effort you want to make towards your 2008 contribution and what you would like to contribute in 2009. Be reasonable, do not invest every dollar of your surplus cash or borrow too much through a RRSP loan. This could cause you financial difficulties and prevent you from properly planning future contributions.
If you do not have surplus cash and you do not want to borrow, it is better to simply focus on the year ahead and start a monthly contribution plan into a RRSP. Doing so will put you ahead of the game at this time next year.
3. Whose RRSP to contribute to?
Generally, the purpose of a RRSP is to build savings that will provide a source of income at retirement. If you have a pension plan and your spouse does not, you may wish to make spousal RRSP contributions. Such contributions are still deducted from the income of the contributor, but help build a retirement income for the spouse with no pension plan.
4. Determine your risk tolerance and RRSP investment choice
An understanding of your objectives and risk tolerance is key to your investment success. Good advice can really pay off. Let a financial planner assist you in determining your risk tolerance level and the appropriate investment vehicle.
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