Starting an RRSP – it’s never too early or too late
Incorporating a Registered Retirement Savings Plan (RRSP) into your financial plan is an important first step in the retirement planning process, and one that will ideally happen years before you’re ready to retire. A question that is often asked by new investors is when is the right time to start contributing to an RRSP? Regardless of your stage of life, starting a retirement savings plan as early as possible should be one of your top priorities.
An RRSP is a long term investment. Your RRSP contributions accumulate on a tax-free basis within the plan, so the sooner and longer you contribute, the more your investment will grow. Investing a fixed amount of money at regular intervals is an excellent way to start, even if your contributions are small at first. Regular contributions also make market volatility less of a concern, since the effect of any market ups and downs will be minimized.
Top 4 RRSP strategies to maximize your investment
- Start contributing to an RRSP as early as possible and invest the maximum amount you can afford each year. If you don’t make the maximum contribution based on your contribution room limit in the current year, remember, you can carry forward your unused RRSP contribution room to future years. Furthermore, if you make an RRSP contribution but don’t use the deduction in the current year, you can carry forward the deduction and benefit from the tax deduction in the future.
- Instead of making a single contribution each year just before the annual RRSP deadline, set up automatic monthly contributions. You won’t have to rush to come up with the money at the last minute, and you’ll benefit from tax-deferred growth on your contributions throughout the entire year.
- If you receive a tax refund from the Canada Revenue Agency (CRA), consider it a contribution towards your future financial security and deposit it into your RRSP immediately so that the money starts working for you.
- Balance your investments by including a range of investment types in your RRSP portfolio, taking advantage of plans that offer guarantees, balanced with growth.
Whether your retirement is still many years away or just around the corner, it’s always a good decision to start contributing to your RRSP. Contact your advisor to learn more about the various RRSP plans available from Assurancia.
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