Each year Canadians rush in droves to their financial institutions to top up their RRSPs (registered retirement savings plans) before the official February deadline comes, and by doing so many of them don’t realize that this practice could end up costing them dearly. How so, you may wonder. Well, no doubt opinions differ on the best way to save up for your retirement, but one thing seems evidently clear to me and to many experts in this field (not that I’m one of them), and this is that making the maximum contribution as early as you can is almost always the best way to go.
The majority of people fail to do this though, and instead they rush to their financial institutions in the last few days before the February deadline. This is a big mistake, and if you’re guilty of making it I may suggest that you consider the merits of topping up your RRSP account as early as possible. You don’t have to come up with the lump sum all at once, but try to at least contribute on a regular basis as much as you can; after all, you’re worth it, so pay yourself first!
One good strategy is to evenly space out your contributions in such a way so as to reach the maximum contribution size well before the February deadline.
As Gordon Powers from MSN Finance puts it:
When you invest this way (waiting till the last moment), you’re always playing catch up, effectively remaining one year behind in receiving those tax refunds, and subsequently getting a lower overall return on a lower RRSP balance.
That’s why contributing to your RRSP year round makes so much sense. For starters, you aren’t faced with the problem of coming up with a large lump sum right before the deadline. More importantly, regular contributions force you to save, to “pay yourself first” — something that most of us have a hard time doing.
Now get back to work! What do you think you are, retired already!? 🙂