The following is a handy last-minute checklist of things to remember during RRSP season.
Find Out How Much Contribution Room You Have
One quick way to find out is to look at your Notice of Assessment received from the Canada Revenue Agency last year. Pay particular attention to any RRSP contribution room you may have from previous years. Obviously, you'll want to tackle unused contribution room now if you can; with an estimated $176-billion in unused contribution room outstanding, I expect many of us have unused contribution room.
Explore Your Contribution Options
There are many different ways to structure your contribution. When making your contribution this year, think about how you're making it. Whatever you decide, the trick is to think about how you'll be making your contribution ahead of time so as not to make it an undue strain on your February finances.
Take Advantage of Foreign Content
Every RRSP investor should review the foreign content in his or her RRSP portfolio. If you haven't yet brought your foreign content up to the maximum limit, you may want to consider an increase. Other considerations include incorporating the 100 percent RRSP eligible foreign mutual funds into your RRSP, which allow investors to go beyond the foreign content restriction imposed by Canada Revenue Agency (CRA). If you are unfamiliar with these funds, I would be happy to speak to you about these opportunities for your registered plans.
Don't "Park" Your Money
Speaking of last-minute contributions, waiting until late February to contribute can often mean waiting even longer to decide where to put that contribution. While late is better than never, once you've made the deadline, don't let your money sit around. If you don't have a specific investment in mind when you contribute, don't worry - there are plenty of short-term investments available. But, make a commitment to find a place for your money as soon as you can. In real life, there is no such thing as "Free Parking". The growth you stand to lose by keeping your contribution in cash can be quite significant.
Think About Withdrawals
If you're nearing retirement, you'll want to think about how to time your RRSP withdrawals. For those turning 69 this year, you need to choose a maturity option for your RRSP before December 31. In most cases this will be a RRIF. For those planning on withdrawing money before age 69, think about when to withdraw it. RRSP withdrawals must be included on the current year's taxable income. When you take money out can make a big difference to the overall tax you pay.
Have a Plan for Your Refund
When your refund comes in May or June, incorporate it into your financial plan. That may mean contributing to your RRSP, subject to your overall limit, but it doesn't have to. Refunds are great for paying down credit card debt, lump-sum mortgage payments, making other investments, or accomplishing some other financial goal.
Get Some Help!
The most important tip I can give. Your RRSP is one of the fundamental pillars of your overall financial plan; as such, it deserves professional attention. Your Investment Advisor is someone you should trust, and preferably one skilled in constructing retirement plans. Consult with him or her when making your contribution. When it comes to retirement a little professional help can go a long way.
For a complimentary copy of our Retirement Savings Guide, contact my office.
The information contained herein is considered accurate at the time of printing. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only. Clients are advised to seek advice regarding their particular circumstances from their personal tax advisor. In addition, legislation in this area is continually changing. Before taking any action, you should seek legal advice to ensure that your planning is appropriate to your personal circumstances and that it is effective in the jurisdiction in which you reside.
Daniel Saikaley, CA CFP EPC - Investment Advisor, CIBC Wood Gundy
50 O'Connor St., Suite 800, Ottawa ON K1P 6L2 - Ph. 613.783.4674
email:daniel.saikaley@cibc.ca. Also, visit my website: www.danielsaikaley.com and click on This Month's Featured Solution.
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