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Plan now — and avoid next year’s RRSP scramble

If you’re like a great many Canadians, making an RRSP contribution by the March 1 deadline feels like a mad dash to the finish line.

Take the stress off yourself and avoid the RRSP scramble next year — and the year after, and the year after…. With just a little planning and a few simple steps today, you’ll never have to worry about the RRSP deadline again.

Decide how much

The first step is to figure out how much you will contribute. Take a look at what you contributed last year. Was it enough to at least reduce your taxes owing to zero? Consider your long-term retirement savings plan. How long do you have to save and how much do you need to contribute each year to achieve your retirement savings goal?

Make it manageable

Whatever sum you come up with, divide it by 12 for your monthly contribution. Now, instead of having to find, say, $6,000 in March, you only have to worry about finding $500 a month — or, better yet, $230 on payday every two weeks.

Make it automatic

The best way to guarantee you follow through is to set up an automatic savings plan that transfers money from your bank account into your RRSP account. That way, you don’t have to make the decision to contribute each month, and you’ll never forget. You simply choose the frequency of withdrawals, the amount to be moved and the date of the transaction. After a few months you may not even notice the “missing money.”

Avoid over contributing

Being proactive is great — but don’t contribute more than you’re allowed, or you’ll pay a penalty. You can contribute up to 18% of your previous year’s income, to a maximum of $26,500 for the 2019 tax year, plus any contribution room you didn’t use in previous years. These amounts are documented on your latest Notice of Assessment, and on the CRA’s My Account website.

Reap the benefits

Not only does contributing through the year bring you peace of mind, it also gives your deposits extra time to enjoy compound growth. That means, with the same total contribution amount, your nest egg with monthly contributions will be higher than if you make annual deposits. Another benefit of contributing early is that you have time to formulate a carefully planned RRSP investment strategy.

Find a destination

Ready to get started, but not sure how you want to invest your money? Don’t let that stop the momentum. Call your advisor today. He or she will work with you to develop an RRSP investment plan that’s right for you.