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It’s Getting to be RRSP Season!

9 January 2013

We know, we’re still nearly two months away from that dreaded March 1, 2013 deadline. Once that day hits, you can no longer contribute to your RRSP and still claim that money on your income taxes. Of course you can make smaller contributions throughout the year to get you up to that maximum mark and save yourself as much money as possible; or you can simply find a way to scrounge up all that cash at once when it comes closer to the date. According to a study done by BMO recently, nearly half of Canadians fall into this latter group.

Looking at the chart above, you can see that just under half of Canadians – 49 per cent – seem to panic as that February 28th date looms closer; and so they make a lump sum payment. There’s nothing wrong with that, as the government will let you contribute whenever you want (before the deadline,) but it may be a problem for Canadians Not only do 54 per cent wish that they could  be making smaller payments throughout the year; but coming up with that lump sum can be difficult!

Marlena Pospiech, senior manager at BMO Wealth Planning Group, says that the February rush is something she’s seen too many times. And she knows just how hard it can be on people.

“If they haven’t saved regularly it could be really hard,” she says. “Especially coming out of the holiday season and if they racked up a lot of debt over that time.”

But, she also wants to be very clear that Canadians should not discouraged if they haven’t been dutiful all year in setting aside money in their RRSP. Any time you’re saving, every penny will do a little more, and Ms. Pospiech doesn’t want people to forget that.

“Any little bit helps because of the tax-deferred compound growth,” she says. “It makes their money work a lot harder for them rather than just having it sitting.”

So what are those Canadians to do that want to be faithful all year, but aren’t sure how to go about it? Ms. Popsiech says that getting a financial advisor to help can take a great burden off people’s shoulders. This way, the advisor can set everything up, tell you when contributions need to be made, and even arrange automatic withdrawals.

Once it’s set up, the person can contribute all year without worrying about it too much. Especially when we start getting into this crazy season. She also suggests using inheritance, money from a promotion, or any other additional funds towards an RRSP. Because the easiest way to contribute to your RRSP, is when you don’t actually realize you’re doing so.

Have you been making RRSP contributions. or are you just now beginning to panic? Or, do you forego RRSPs altogether and use some other form of investment for your future?

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