Contribute today and relax tomorrow!

It’s the time of year when we all start to think of RRSP’s: to contribute or not to contribute, what are the benefits, how much can I afford to put in this year, should I get an RRSP loan?  Lots of questions, and I’ll try to share some thoughts to help you consider your best options.

Here are some helpful RRSP tips for both beginners and seasoned investors:

Start saving early!

The earlier you begin saving, the sooner you’ll reach your financial goals, and the more comfortable you’ll be when you hit retirement. Imagine putting aside $50 a paycheque? If you start saving $100 a month when you’re 25, you’ll end up with almost $120,000 in 40 years (assuming a 4% annual rate of return). Nice gift to yourself! Think of it this way: it’s less than 4 dollars a day - two toonies. 

if you start saving later, you’ll need to save even more to have $120,000 by the time you turn 65:

Know how much you can contribute

In order to contribute to an RRSP, you need to have earned income (eg., income from employment, a pension, or a rental property). Your limit is 18% of your earned income for the preceding year up to an annual maximum - $26,230 for 2018. You can find your limit on your latest notice of assessment or notice of reassessment, or by logging into your Canada Revenue Agency (CRA) account online, or by calling CRA at 1.800.267.6999.

RRSP contribution = tax refund

Contributing to an RRSP can result in a tax refund. Many are tempted to use that refund for a trip, to invest in some small home renovations, etc. While that feels good, should also consider re-contributing that money back into your RRSP, or to pay down debt. Savings add up faster when you have no debt. If you want to get a tax refund this year, you need to make an RRSP contribution by March 1, 2019. 

Buy low-cost investments

If you want someone to manage your money for you, you’ll be charged a fee. The fees you pay for owning a mutual fund can often be high but there are low-cost alternatives. Term investments are a great place to start, providing you piece of mind, security or for the seasoned, n opportunity to diversify and balance.

Make contributions regularly

The best way to save is to make regular contributions. If you automatically put away money every week or month, you’re less likely to spend it. Contributing to an RRSP fund regularly means you won’t need to get an RRSP loan. $200 a month is an easier pill to swallow than a $2,400. hit all at once.

Consider an RRSP loan

In an ideal world, you’ll make regular contributions to your RRSP. But if you can’t, you may want to consider getting an RRSP loan. Before getting a loan, you should look at the interest rate on the loan, nd determine if you can afford to make the loan payments. If you’re in a lower tax bracket, getting a loan might not be worthwhile. Most financial institutions will offer you a loan that needs to be paid back within a year or a catch-up loan that needs to be paid back within five to 10 years. If you do decide to get a loan, you should consider using your tax refund to pay off your loan quicker. Get rid of debt!

Saving is never easy, but your future self will thank you for making the sacrifice today. Please call me if I can help you plan for the best future possible.
 

RRSP’s aren’t just for retirement

Did you know that the federal government allows you to make tax-free withdrawals to buy a home by using the Home Buyer’s Plan, or to improve your education by using the Lifelong Learning Plan?

This money needs to be repaid back to your RRSP over a certain period of time or those withdrawals will be considered taxable income. Keep in mind that withdrawing money from your RRSP means your money won’t have as much time to compound and you may need to save even more for retirement.

Need more information?  Still unsure where to start?  Let me help you make the best tailored decision for your financial position.

Sincerely,

Kim

Get in touch with Kim:
Call or Text: 604 989.5609
Email: kstarnes@sunshineccu.net