RRSP’s: If you are like most people, you don’t think about RRSP’s until January, February, or even March 1, which is often the final day an RRSP contribution can be made in order to be claimed on your prior year’s tax return.
Although contributing by the annual deadline can still offer significant tax savings, there is a more beneficial approach. Setting up an automatic RRSP contribution from your bank account offers a variety of benefits over a once per year lump-sum contribution, such as:
- No last minute ‘tax-planning’ and rushing to meet the contribution deadline
- You don’t have to think about it; the amount is withdrawn automatically from your account every month, week, etc.
- Dollar-cost averaging (investing
technique that aims to reduce investment risk by purchasing the same dollar amount in the same investment over a period of time)
- You can avoid the temptation of taking an ‘RRSP loan’ that banks offer every year
One word of caution: be aware of your RRSP contribution limit (you can find this on your most recent Notice of Assessment from CRA) so that you don’t inadvertently over-contribute.