Make the Most of Your RRSP

3 minute read

No matter what’s happening in the markets, an RRSP is still one of the best ways to save money for retirement. You get income tax benefits plus the magic of compound interest working for you. Here’s how to make the most of your Registered Retirement Savings Plan.

Save automatically 

The difference between retirement success and failure isn’t how much money you make, or how smart you are, but how well you conquer the all-too-human tendencies to procrastinate and under-save. Ask us to automatically route smaller, regular contributions from your chequing account to your RRSP. You’ll get the advantage of dollar cost averaging, you’ll probably save more, and there’s no more scrambling at RRSP season.

Save the max
Contributing your maximum is essential to taking full advantage of your RRSP. If you don’t have the money, consider an RRSP loan or using a line of credit. You’ll pay interest, but the compounding growth of your money over the long term may far offset the interest costs. Another smart move — use your tax refund to pay down the amount you borrowed. Check the Notice of Assessment sent to you by the Canada Revenue Agency to find your unused contribution room.

Save sooner
Knowing when you should contribute to your RRSP can benefit you financially. Make your contribution at the beginning of the year for the following tax year instead of leaving it to when the RRSP deadline is looming. You’ll benefit from up to 14 extra months of tax-deferred compounded growth.

Save in a Spousal RRSP
If you’re the family’s higher income earner, you can invest some or all of your contributions in a Spousal RRSP and claim the tax deduction. This helps split your investments between spouses or common-law partners, and offers more tax planning opportunities throughout life to help reduce your combined tax bite and means more cash to live on.

Name a beneficiary
If you don’t name a beneficiary, your RRSP will be considered part of your estate and be subject to probate, taxes, and other fees. In some cases that can reduce its value by almost 50%. If you name your spouse or common-law partner, [PA1] your RRSP transfers to them tax-deferred.

Start early
It’s practically ‘the’ universal law of saving — start early. You’ll get time and compounding working for you. And that can make a big difference to how much you need to save. A person making $50,000 who wants a retirement income of $40,000 needs to put aside about 8% of their salary each year if they’re starting to save at age 25, but 22% if they’re starting at age 50. 

Get advice
For a first glance at your retirement savings needs, try using this interactive Retirement Savings Calculator. Then, whether you’re new to investing, or a seasoned veteran, it’s always a good idea to get professional advice. Visit your local Kindred branch and talk to a member of our Wealth and Investment Team who can provide you with an expert’s insight and help you make informed decisions about your RRSP.

*Mutual funds are offered through Qtrade Asset Management (a tradename of Credential Asset Management Inc). Mutual funds and other securities are offered through Qtrade Advisor, a division of Credential Qtrade Securities Inc. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.

Paul Arsenault

Paul Aresenault, CFP®, PFP®, RIS, CKA® is Director, Wealth and Investments
Branch Compliance Manager, Qtrade Asset Management Inc.

Paul has a wealth of experience helping members achieve their goals as a CERTIFIED FINANCIAL PLANNER® professional. He coaches Kindred’s Financial Planning Team and acts as our compliance manager for Qtrade Asset Management Inc. In addition, Paul is passionate about sharing his knowledge around RDSPs with members and organizations.

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