Top 10 RRSP Strategies

  Top 10 RRSP Strategies

                                            It's that time of year again; Tax time. 

With the March 2nd deadline for RRSP contributions quickly approaching, your financial advisors here at Continuum have developed the following strategies to help you maximize your RRSP.

1. Contribute early: Make your RRSP contributions as early as possible. Early in life, and early in the calendar year; both make a positive difference.

2. Contribute the maximum: Take advantage of compounding and get the maximum tax break by contributing the limit. In respect to 2015, you can invest up to 18% of your 2014 income, to a maximum of $24,270 (less your pension adjustment or past service pension adjustments for 2014).

Note: Don't forget you can "carry forward" any unused contribution room to subsequent years (until age 71).

3. Invest monthly: While it may be easier said than done, finding even the smallest amount to invest into your RRSP every month can make a huge difference. Make a plan, and have the money automatically deducted from your account each month. You may also choose to belong to a Group RRSP, making your RRSP contributions through a payroll deduction via your employer.

Note: If your financial situation should change, adjust your monthly contributions accordingly.

4. Contribute to a spousal RRSP: A spousal RRSP allows the spouse with the higher income to contribute to an RRSP owned by the lower-income spouse. The spouse with the higher income takes the immediate tax-deduction, but the money will be be taxed in the other spouses hands (usually at a lower rate) when it is withdrawn.

5. Resist the 'Dip': While it can be tempting, you must consider the consequences before dipping into your RRSP. 

• You cannot re-contribute your withdrawn amount
• Withdrawals can erode your potential lifetime limit
• Withdrawals attract tax at your marginal tax rate
• You cannot replace the tax-deferred growth that you lose when you make a withdrawal

Note: While we don't encourage dipping into your RRSP, special circumstances allow you to access your money without consequence. For example: The Home Buyer's Plan and The Life Long Learning Plan.

6. Diversify: To achieve long-term growth you should diversify your investment portfolio. By diversifying your portfolio, you protect yourself against the day-to-day fluctuations in any one category. Don't limit yourself-avoid inflation and maximize your purchasing power.

7. Consolidate your investments: This is a good strategy if you don't want to spend a great deal of time managing several plans. While you should still keep a diversified portfolio, you can usually combine your investments under one RRSP umbrella. By doing this you will get one consolidated statement, making it easier to track your plan.

8. Designate a beneficiary: While this can sometimes be difficult, it is important to designate a beneficiary for your assets in the event of your death. Without one, your account will go through your estate and could be subject to probate and other fees.
Note: Think carefully when designating your beneficiary, as different rules apply depending on if it is a spouse or another party. (This strategy does not apply in Quebec)

9. Get extra Help: We are here to help you make the right long-term investment decisions. Together we should review your plan at least once a year to make sure that it is still on track with your long-term goals.

10. Have a plan: To sum it up, maximizing and managing your RRSP comes down to having an effective plan. It is important to know that investing alone is not a plan. Map out your long term goals and don't just invest and forget. Manage your portfolio and help yourself maximize your financial future.

If you have any questions or concerns, don't hesitate to call us at the office.