Why does it make sense to make RRSP a year-round priority?
It’s tax time! And we know all you are hearing right now is RRSP benefits and how much you should contribute in it to save your taxes.
Then, another situation crops up. You want to invest $5000 in a RRSP but you don’t have the cash available. Hence, we always recommend to make RRSP a year-round priority and not just contributing in it altogether at the end of the financial year.
In fact, changing the strategy of your RRSP contribution to a more balanced, year-round approach can benefit you both financially and psychologically. Let’s see how.
More time means more money
When it comes to RRSP contribution, waiting till the end of the year means forfeiting a year’s worth of tax-free growth. By making regular RRSP contribution throughout the year, you can increase the amount of time for your savings to grow inside your RRSP.
You may think that this difference isn’t very significant. But then, think again and definitely, in the long term. Over a lifetime, this procrastination can cost you badly. By regular contributions over the year, you can end up with a few thousands more at the time of your retirement.
In simpler terms, it could mean the difference between going on a cruise and paddling on a canoe. And this is not because you picked some superior investments or timed the market correctly, but because you made a habit of contributing regularly to your RRSP. Simple!
No worries and less headaches
The best way to make regular contribution to your RRSP is to set up a monthly contribution plan. For example, let us say you plan to make a contribution of $5,000 to your RRSP this year.
Instead of waiting till the last minute, you may choose to contribute $416 every month through your monthly contribution plan. This will ensure you don’t run short of cash at the end of the year. Simply set it, and forget about it – complete peace of mind!
The Bottom line
As far as making contributions to your RRSP is concerned, leaving it till the last minute won’t be feasible for the development of a meaningful financial plan. Planning your contributions in advance, and making a regular savings habit can ensure your meeting of your savings goals.
Although most of us realize the importance of sticking to an investment plan, it is very easy to get overwhelmed by our daily expenses. How much can you really save every month? A budget is therefore necessary to provide you with an accurate figure.
Talk to our advisor about opening or setting up a regular investment plan with RRSP
Also, we can help you set up a regular investment plan with RRSP based on your expenses, liabilities, and budget. Take the step today for a better tomorrow. Tax time is not too far away!