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 give 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 3, 2003 can be claimed either on
your 2002 or your 2003 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 February 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 an RRSP, time is money! However, because
we can carry over our unused contributions for an indefinite period,
some of us have a very large contribution room. Decide how much
effort you want to make towards your 2002 contribution and what
you would like to contribute in 2003. Be reasonable, do not invest
every dollar of your surplus cash or borrow too much through an
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 an 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 RRSP's 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.
Written by: Phil Marcus, CFP
National Manager Financial Planning
SISIP Financial Services, Ottawa
